German legislators disagree on who should bear the burden of CO2 heating price

Conservative parliamentarians and members of the Bundesrat have announced their opposition to government plans for tenants and landlords to share the burden of extra heating costs caused by the new CO2 price . The housing committee of the Bundesrat (state chamber) demanded that the effects on investments in the building stock should be critically examined. Both the federal parliament and the Bundesrat need to pass the amendment proposed by the cabinet.

Ever since the government introduced the new CO2 price in the heating and transport sectors in January 2021, the rising costs for heating homes and apartments has been a bone of contention between Social Democrats (SPD) and Conservatives (CDU/CSU), who together form the governing coalition. Environment minister Svenja Schulze (SPD) argued that tenants have no say in whether the house they live in is made more energy-efficient or the heating switched to a low-carbon alternative, and therefore shouldn’t pay the full CO2 price in their heating bill. The Conservatives said that landlords were not responsible for tenants' electricity and heat consumption. After the cabinet finally reached the compromise last week that tenants and landlords should each pay half of the extra CO2 costs each, criticism from conservative MPs, business and landlord associations was so loud that chancellor Angela Merkel signalled the possibility of new negotiations on the subject, according to German news agency dpa.

The German government sees a price on greenhouse gas emissions in the transport and heating sectors as a key tool for reaching its climate targets. At the same time, it says it aims to ensure the system is socially fair. For example, it does not want to put an extra high burden on low-income households, which spend a higher share of their budget on transport and heating fuels. So adjustments have been made such as a lowering of the renewables levy, which consumers pay with their power bill in order to finance renewables support. It is now capped at 6.5 cents per kilowatt hour (ct/kWh) for 2021, making electricity cheaper than it would be otherwise. This is financed by revenues from the carbon price and other federal budget funds.

The national emissions trading system began on 1 January with a fixed price of 25 euros per tonne of CO2, which translates into a price increase of around 7 cents per litre of petrol, 8 cents per litre of diesel, 8 cents per litre of heating oil and 0.6 cents more per kilowatt hour of natural gas.