EU's new emissions trading scheme ETS2 unlikely to drive price rise in Germany – researchers

Agreeing to weaken the new EU emissions trading system for transport and buildings (ETS2) would mean that its full implementation by 2027 will initially have little effect on the carbon price in Germany, several researchers told news magazine Der Spiegel.

The European Commission has made proposals that would weaken the system and keep the carbon price in check even in the market-based system due to opposition by several member states where governments worry about potential price jumps for people fuelling their cars or heating their homes.  

“The current political debate will significantly depress the price,” said Jakob Graichen from the think tank Öko-Institut. “If it is clear that the state will intervene immediately when prices are high, then there is no need to buy expensive emission rights; instead, you can wait until the bubble bursts,” he told Spiegel.

The EU has decided to expand its emissions trading system, one of its key climate policy instruments in the energy and industry sectors, to also push CO2 reduction in the transport and building sectors. The new ETS 2 is set to take full effect in 2027.

Germany already has a national carbon price for transport and buildings in place, meaning the effects of shifting to the new EU ETS 2 will be limited. Currently, the fixed price is 55 euros per tonne of CO2, which adds around 16 cents to the price for one litre of petrol.

Think tank Agora Energiewende expects that the CO₂ price in Germany is unlikely to rise significantly with the transition to the European system. “It is even possible that the price will fall slightly,” said project manager Murielle Gagnebin.