Average German household spends 0.4% of net income on national CO2 price for heating and transport – analysis

The average household in Germany spends about 0.4 percent of its net income for the country’s national emissions pricing system for the transport and heating sectors, an analysis by the Federal Environment Agency (UBA) of 2024 data has found. Poorer households are proportionally more burdened by the scheme, even though they cause considerably fewer emissions than more affluent groups in society.

Landlords often have to cover part of the costs related to carbon pricing borne by their tenants. Without taking this cost-sharing into account, the poorest ten percent spent 0.7 percent of their household income for the CO2 levy, while the richest ten percent spent 0.25 percent. The average person in a household faced monthly costs of 8.4 euros, while household members in the lowest decile paid around 4 euros on average. Members of households in the richest decile paid 13 euros per month for their transport and heating emissions.  

The national emissions trading system for transport and buildings emissions was introduced in 2021 to cover sectors not yet included in the European Emissions Trading System (ETS). Total costs for households resulting from emissions from fossil heating systems and diesel and petrol cars amounted to 8.5 billion euros in the analysed year. The proceeds are currently used to fund decarbonisation projects in the housing and transport sectors.

The absolute financial burden increases with household income, as the ten percent of richest households consume about three times as much fossil energy as the poorest ten percent – and 1.6 times as much as the 6th income decile, meaning the upper boundary of middle-income households.

“This effect is especially accentuated for transport fuel, while heating fuel consumption much less increases with income,” the UBA found. While richer households on average have larger homes and are more likely to own them, they also have better energy efficiency than the homes of their poorer counterparts, who often live in small, badly insulated rental flats. However, more affluent households on average own more cars and drive longer distances, especially for work-related commuting.  

Redistribution mechanisms help to compensate for much of the disparity, the agency said. “Support schemes such as heating cost coverage or the housing benefit reform help to ease the burden especially among the lower income deciles and compensate the regressive effects of CO2 pricing.” The lowest ten percent would “significantly” benefit from heating allowances, while other support mechanisms help bring the real average burden closer to 0.4 percent of net income across most income groups. However, the UBA noted that this relative burden remains higher for low-income households, who generally spend a much higher share of their income and can only compensate additional burdens by reducing consumption.

Germany is set to freeze its national CO2 price in 2027 after an increase to as much as 65 euros per tonne in 2026, a response to the EU postponing its emissions trading system expansion to also cover the heating and transport sectors. Officials in Germany have said that the national system better prepares the country for the upcoming European scheme and have urged the EU to ensure that potential price spikes do not place disproportionate burdens on certain groups.