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German National Emissions Trading System

Compare ETS
ETS Status
in force
Jurisdictions
Germany
Start of operation (year)
2021
Sectoral coverage
Transport
Buildings
Allocation
Fixed price until 2025, auctioning thereafter; price corridor foreseen for 2026
Cap
291.1 MtCO2 (2022)
GHGs covered
CO2 only
Average auction price (2022)
Fixed price: EUR 30.00 (USD 31.58)
Total revenue since beginning
EUR 13.6 billion (USD 14.32 billion)
Total revenue (2022)
EUR 6.4 billion (USD 6.74 billion)
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General Information

Germany launched its national ETS for heating and transport fuels in 2021. With the introduction of the ETS, a wide range of sectors in Germany are now subject to a carbon price.

The national ETS complements the EU ETS by covering all fuel emissions not covered by the bloc’s system. It is phased in gradually, with an increasing fixed price per tonne of CO2 from 2021 to 2025. In 2026, auctions with minimum and maximum prices will be introduced. All main fuel types (gasoline, diesel, heating oil, natural and liquid gases) were covered from the outset, while other fuels will gradually be phased in by 2024. During the fixed price and price corridor phases, the cap is flexible.

The national ETS was established through the 2019 “Fuel Emissions Trading Act” 2019, which was amended in 2022. It forms part of the “Climate Action Program 2030”, a package of measures adopted by the German Federal Cabinet to reach Germany’s 2030 climate targets and aim for climate neutrality by 2045.

2022 marked the second year of operation of the German ETS. According to an evaluation report published in November, the system has been successfully implemented. As of October, 1,700 regulated entities and 500 intermediaries had opened a registry account. The first compliance period covering 2021 concluded in September, with a compliance rate of 98% in terms of surrendered allowances.

In November, the German Parliament adopted an amendment to the “Fuel Emissions Trading Act” to suspend the planned increase of the CO2price in 2023 in response to the energy crisis. The price increase of EUR 5 (USD 5.26) per tonne to reach EUR 35 (USD 36.84), which was due to take effect from January 2023, will now come into force from January 2024. The follow-up increases planned for 2024 and 2025 will also be postponed by one year. The postponement will not affect the start of the auctioning phase in 2026.

The amendment also delayed including fuels from waste incinerators in the ETS for one year, until January 2024.  The inclusion of GHG emissions from the combustion of coal started as planned from January 2023.

Transport
Buildings

Emissions & Targets

728.7

BY 2030: 65% below 1990 GHG levels (Climate Change Act)

BY 2050: GHG neutrality (Climate Change Act)

EUR 30 (USD 31.58)

Size & Phases

291.10MtCO2e
CO2 only

PHASE ONE: 10 years (2021-2030)

PHASE ONE (2021-2030): 

The cap is set in line with Germany’s reduction targets for the non-EU ETS sectors as defined by the “European Effort Sharing Regulation” (ESR). Given the recent revision of the ESR as part of the “Fit for 55” package, the German government will set a revised cap for the national ETS that decreases yearly in accordance with reduction targets.

During the fixed-price period from 2021 to 2025, and as long as a price corridor is deemed necessary, the cap is flexible. If emissions (and therefore the demand for allowances) within the German ETS exceed the cap, additional allowances will be available for compliance entities.

As soon as the price determination is left to the market solely, the cap will be binding without using the aforementioned flexibility provisions.

The German ETS covers all fuel distributors and suppliers. It applies to all fuels used in the transport sector and for the production of heat, e.g., fuel oil, LPG, natural gas, coal, gasoline, and diesel.

 

Biomass used as fuel in the transport sector and for heating purposes generally also falls under the scope of the system. However, emissions from biogenic fuels that meet the sustainability criteria as set out in national Regulations transposing the “European Renewable Energy Directives 2029/28/EC” and “2018/2001” do not face compliance obligations.

 

The system started with a limited scope in 2021 and 2022, including fuel oil, LPG, natural gas, gasoline, and diesel. Coal has been added in 2023. Fuels from waste incineration will be covered from 2024 onwards.

 

Provisions have been put in place to avoid double compliance burdens for installations covered by the EU ETS. Emissions that arise from a fuel delivered to and used in an EU ETS installation have to be reported by the EU ETS installation in any case. These emissions may be deducted from the reported emissions of the fuel distributor under the German ETS if: (a) evidence can be provided that the emissions have been reported by the receiving EU ETS installation; and (b) no CO2 price has been passed through. If such evidence cannot be provided and if CO2 costs were passed through from the supplier under the system to the EU ETS installation, the supplier is obligated to report and to surrender allowances to cover the emissions. In that case, the EU ETS installation receives full compensation for the price that has been passed through.

Upstream

1,700 (2022)

Allowance Allocation & Revenue

PHASE ONE (2021-2030):
Fixed price phase (2021-2025): Allowances will be sold for a fixed price. The price increase for 2023 has been suspended and further increases have been postponed by one year as a response to the energy crisis. The new price schedule is as follows:

  • 2021: EUR 25 (USD 26.33)
  • 2022: EUR 30 (USD 31.59)
  • 2023: EUR 30 (USD 31.59)
  • 2024: EUR 35 (USD 36.86)
  • 2025: EUR 45 (USD 47.39)

Generally, the yearly fixed price only applies to allowances acquired in the respective calendar year. However, up to 10% of allowances needed for compliance obligations for year X can be acquired until the end of September of year X+1 at the fixed price of year X.

Auctioning phase (from 2026): The auctioning phase will start as planned in 2026, and a price corridor with a minimum price of EUR 55 (USD 57.92) and a maximum price of EUR 65 (USD 68.45) per tCO2 will apply in 2026.

CARBON LEAKAGE RULES: The German ETS is accompanied by a compensation mechanism to avoid carbon leakage for emissions-intensive trade-exposed sectors. Regulations were released in July 2021 and will have retroactive effect. The carbon leakage rules apply to companies from emission-intensive sectors that face international competition. Industries eligible for compensation are those on the carbon leakage list of the EU ETS Phase 4. Therefore, firms from the same industrial sector regulated under the German ETS and EU ETS should be treated equally.

Furthermore, additional sectors/sub-sectors may qualify upon request if they meet thresholds for emissions and trade intensity. In contrast to the EU ETS, the German ETS does not use free allocation, but compensation based on sectoral fuel benchmarks and fixed compensation levels.

EUR 13.6 billion (USD 14.32 billion) since the beginning of the program

EUR 6.4 billion (USD 6.74 billion) in 2022

All revenues from the national ETS go into the Government’s “Climate and Transformation Fund” (KTF). The fund is used to support measures under the climate protection program such as GHG reduction programs, e.g. incentivizing climate-friendly transport and energy-efficient buildings, and direct assistance to industry or households, e.g., as a way to re-finance renewable energy subsidies and reduce the “Renewable Energy Surcharge” on electricity. 

Flexibility & Linking

While banking is not allowed during the fixed price phase, up to 10% of allowances of year x can be acquired at the price of year x until September of year x+1. Banking will be allowed in the auctioning phase.

No offsets are allowed in Phase One.

Compliance

One calendar year. Entities have until the end of September to surrender allowances to cover the reported emissions of the previous year.

REPORTING FREQUENCY: 

Annual self-reporting in the form of an emissions report based on electronic templates to be submitted by the end of July.

From 2023 onwards, the emissions report must be based on a previously approved monitoring plan. Due to a high level of standardization of the permitted reporting methods during the first two years, the monitoring plan requirement was waived for 2021 and 2022.

Emissions data are recorded in a national registry and will be publicly available.

VERIFICATION: Verification of the annual emissions by accredited independent third-party verifiers is mandatory from 2023 onwards. As with the monitoring plan requirement, the verification requirement was waived for the years 2021 and 2022.

During the fixed-price phase, entities must pay an excess emissions penalty for each tCO2 emitted for which no allowance has been surrendered, set at two times the fixed price. Payment of the penalty doesn’t release the entity from the obligation to surrender allowances to cover the emissions; entities remain obliged to purchase and surrender the outstanding allowances.

After the fixed-price phase, entities must pay an excess emissions penalty of EUR 100/tCO2 (USD 105.30) for each tCO2 emitted for which no allowance was surrendered. This amount will increase annually in line with the European consumer price index.

For other instances of non-compliance, e.g., misreporting, or late reporting, entities can be fined.

Market Regulation

MARKET PARTICIPATION: Trading accounts can be held by any domestic or international natural or legal person. Compliance entities can buy allowances directly from the trading platform or via financial intermediaries.  

MARKET TYPES:
Primary: EEX is the German ETS’s auction platform. During the fixed-price phase, allowances are issued at the predetermined price. Auctioning will only start in 2026.

Secondary: Allowances can be purchased on the secondary market throughout the year.

LEGAL STATUS OF ALLOWANCES: Allowances do not have the status of financial instruments or derivates according to the “German Banking Act” or the “Securities Trading Act”.

Additional allowances exceeding the cap can be acquired by entities in the fixed-price phase.

In 2026, auctions of allowances will contain a price corridor of a minimum price per tonne of CO2 of EUR 55 (USD 57.92) and a maximum price of EUR 65 (USD 68.45).

Other Information

German Federal Ministry for Economic Affairs and Climate Action (BMWK): Authority responsible for establishing the regulatory framework of the national ETS.

German Emissions Trading Authority (DEHSt) at the German Environment Agency (UBA): Implementing authority, e.g., responsible for the registry and receiving emission reports.

The German government published its first evaluation report in December 2022. It analyzes the program implementation, impacts, and assesses the inclusion of waste from 2024.

The next evaluation report will be published in 2024. From 2024 onwards, the German ETS will be evaluated every four years.

Fuel Emissions Trading Act
Emissions Reporting Regulation 2022
Fuel Emissions Trading Regulation
Carbon Leakage Regulation

 

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