Germany to freeze national CO2 price in 2027 as EU delays emissions trading

Germany will raise the national price on CO2 emissions in the transport and heating sector in 2026 as planned and keep it at that level in 2027, according to a report in newspaper WirtschaftsWoche. The decision follows the EU deal to delay the full introduction of the emissions trading system for road transport and buildings (ETS2) by one year to 2028.

The price for emitting one tonne of carbon dioxide in these sectors will change from the fixed price of 55 euros in 2025 to an auction system with a price corridor from 55 to a maximum of 65 euros in the following year, as previously planned. Those conditions would be kept throughout 2027, members of the coalition parties, the conservative Christian Democrats (CDU) and the Social Democrats (SPD), said according to the article.

CDU climate MP Andreas Jung said freezing the price in 2027 would bring consumers “planning security and reliability,” easing the transition into the EU-wide pricing scheme in 2028. SPD climate expert Esra Limbacher said the German government would have preferred an EU-wide solution already in 2027 but accepted the compromise found with other EU states to postpone the scheme’s expansion.

Germany decided to put a price on greenhouse gas emissions in the transport and building sectors from 2021 as a key instrument to help reach its climate targets. It started with a fixed price, which increased every year before allowances are auctioned from 2026 onwards. The EU ETS 2 will replace the national system. As part of a deal on an emissions reduction target for the European Union for 2040, countries agreed to delay the ETS 2 start to 2028, so the German system will now run one year longer.

Brigitte Knopf, head of think tank KlimaSozial and one of Germany's chief climate policy advisors until August 2025, in a social media post said capping the price at 65 euros in 2027 could spell trouble for the government’s forthcoming Climate Action Programme. Current government emissions projections assumed a steady rise to about 80 euros that year, which would provide more incentive to phase out fossil fuels. “How will it be ensured that other instruments are strengthened to compensate for the lower price?,” Knopf asked.

Moreover, the lower price could mean that Germany’s Climate and Transformation Fund will lack up to three billion euros, Knopf added. The fund is fed with revenues from emissions trading. “This back and forth on prices and earning is poison for investment security,” she argued. “A national minimum price that increases constantly would be a better solution,” Knopf added.  

CDU energy policy expert Andreas Lenz told newspaper Handelsblatt that the postponed ETS2 would mean “a massive disadvantage in competition” for German companies. Industrial companies that had assumed Germany would initially lead on carbon pricing, but then have the same conditions as other countries through the ETS 2, now face a changed playing field. “The calculation is no longer valid,” he argued.