Merz urges EU to stick to 2028 start of carbon price for heating and transport

German chancellor Friedrich Merz has urged the European Commission to resist calls to further delay the EU’s new carbon price on petrol, diesel and heating fuels, which is due to start in 2028, according to a letter seen by news magazine Der Spiegel. “I reject further changes,” Merz wrote in the letter addressed to Commission president Ursula von der Leyen. “I am counting on the European Commission to stay the course on emissions trading and thereby give European companies and households planning certainty.”

The new emissions trading system for road transport and buildings, known as ETS2, will put a Europe-wide price on CO2 emissions from burning fossil fuels in cars and heating systems. It was originally meant to start in 2027, but EU countries agreed to push it back by a year as part of a deal on the bloc’s 2040 climate target, amid fears of steep energy price rises that would hit low-income households hardest. With fossil energy prices rising again as a result of the Iran war, pressure for a further delay is growing among EU member states.

Business daily Handelsblatt noted Merz’s letter marked the first time that Germany is taking a clear public stand on the issue, by backing opposition against postponing or substantially changing the EU’s carbon trading schemes. 

Germany has had its own carbon price on transport and heating fuels since 2021, which is set at between 55 and 65 euros per tonne of CO2 this year and will be frozen at that level in 2027 to bridge the gap until ETS2 replaces it. Spiegel noted that Merz’s push is likely driven less by climate concerns than by fears that German companies would face a lasting competitive disadvantage if the EU scheme slipped further, since many other member states have no national carbon price on these fuels.

Merz also defended the EU’s existing emissions trading system for power plants and heavy industry (ETS1), calling it “a well-functioning, market-based system that we must not call into question”. Companies in energy and industry had built their business models on the expectation of reliable CO2 price signals, he wrote. This marks a change in tone from February, when Merz said the EU should be “very open” to revising or postponing the ETS if it undermined industrial competitiveness.

In place since 2005, the ETS1 has helped cut emissions from the sectors it covers by more than half, according to the Commission. A group of countries around Poland and Italy has called for it to be weakened to avoid driving up the cost of power from gas and coal plants, but Merz pointed instead to existing “electricity price compensation” schemes that shield industry from higher power costs.

The Commission proposed a reform of the ETS1 in July, which would slow the reduction of the emissions cap after 2030 and extend free allowances for industry, tying them to investments in decarbonisation. The European Parliament and member states are currently negotiating the proposal, which climate groups have criticised for weakening the market’s incentive to cut emissions.