Most people in Germany clueless how new EU carbon price will affect heating costs – survey

Many people in Germany have no idea that the planned expansion of EU carbon pricing could significantly push up their fossil fuel heating costs, in some scenarios by well over 1,000 euros per year, a survey by heat pump company Aira has found. While a large majority could not adequately predict cost increases, nearly a quarter of respondents had not even heard of the upcoming reform, the company said.

The European emissions trading system’s reform to the ETS2 means that costs for the fossil heating and transport fuels gas and oil will rise across Europe from 2027. The exact increase cannot yet be determined, as prices are formed by the market according to the availability of emissions allowances, which limit how much CO2 can be emitted per year. More allowances are available if the switch to climate-friendly technologies happens fast, and fewer if the roll-out of electric vehicles, heat pumps, and other low-carbon solutions takes time, meaning higher prices for each sold allowance.

Emitting one tonne of CO2 currently is fixed at a price of 55 euros under the existing ETS and costs could climp up to 65 euros in 2026. The company said that if a relatively high price of 200 to 300 euros per tonne of CO2 is assumed for 2030, this meant additional annual costs of up to 1,400 euros for a gas-heated single-family home, which would come close to the price increase during the energy crisis in 2022. “The majority of the population is ill-prepared for this development,” the company said. A vast majority of respondents expected a much more moderate cost increase in this scenario.

The survey found that nine percent of respondents already had taken measures to reduce their carbon emissions, including new heating systems, energy efficient retrofitting or consumption reduction, another 19 percent plan to do so in the near future. About one third of those surveyed said they would like to prepare for the new pricing scheme but felt they lacked the ability to so due to practical, social, or financial constraints. “Especially people with lower income more often are ready to act but feel constrained,” Aira said, adding that the exact costs ultimately would depend on a range of political decisions. The country's budding coalition government so far has not provided details on how it plans to manage decarbonisation in the heating sector.

The expanded carbon pricing scheme is intended to be a central pillar of European decarbonisation efforts. Aspiring German chancellor Friedrich Merz said that he expects a noticeable price increase in the ETS 2, stressing that this would be the intended effect to reduce emissions. However, a so-called climate bonus compensation payment where citizens receive money made through the pricing scheme back, that was proposed during election campaign, was not included in the prospective coalition government’s treaty of Merz’s conservative Christian Democrats (CDU) and the Social Democrats (SPD). 

Germany's largest car club ADAC in a report by public broadcaster ZDF has said that it expects fuel prices to rise significantly faster in the wake of the pricing reform. Prices at the pump could climb by 19 cents per litre of gasoline, while only rising 3 cents in 2026 under the existing scheme. ADAC head Christian Reinicke said the government should assist less affluent citizens financially and create more incentives for switching to low-carbon vehicles.