Germany should stick to fixed carbon price until new EU ETS takes full effect – energy industry

Germany should alter its current plans for a national carbon price for transport and heating fuel emissions and stick to a fixed price until the new EU Emissions Trading System (ETS) for these fuels becomes fully operational in 2027, said energy industry association BDEW. The association called for a transition from the national to the EU system in a manner “as smooth and seamless as possible.”

The EU ETS, which puts a price on climate change-inducing CO2 emissions, has been a key driver of decarbonisation in energy and industry for years, and the EU is setting up a similar scheme called ETS II for the transport and buildings sectors. This will take full effect in 2027, although it could still be postponed by one year to 2028 in case of exceptionally high gas or oil prices in 2026 "to ensure a smooth implementation."

Germany has had a national carbon pricing system for these sectors since 2021, with a fixed price that increases each year, and it wants to switch to the emissions trading scheme by 2026. Under current plans, Germany would switch from fixed price to auctions with a price corridor of 55-65 euros per allowance in 2026, resulting in a one-year trading period before the EU system starts.

“Such a short trading phase offers no advantage for the transition from national to European emissions trading,” said BDEW head Kerstin Andreae. “On the contrary, it requires a great deal of financial and human resources.”

Germany's plans were agreed before the EU decided to introduce the ETS II, and the government must now regulate the transition and translate EU reforms into national legislation. It agreed a draft reform for the relevant national laws on 9 October. Researchers have warned that price jumps could happen once Germany switches from its national system to the European one.