On 31 January 2025, the German Parliament adopted a law outlining the transition from the national Emissions Trading System (nETS) to the EU-wide ETS 2, a new ETS for fuels set to start in 2027.
The European Union adopted the EU ETS 2 in 2023. This new system is designed to cover fuels used in buildings, road transport, and small industries not included in the existing EU ETS. The system is expected to be operational from 2027, although its implementation could be postponed to 2028 in the event of exceptionally high energy prices.
According to the law adopted by the Parliament, Germany’s nETS will end on 31 December 2026 for most sectors, with the EU ETS 2 set to begin on 1 January 2027. Prior to the transition, Germany’s nETS will maintain a fixed price per tonne of CO2 from 2021 to 2025, followed by a price corridor in 2026.
There are slight differences in coverage between the German nETS and the EU ETS 2. Consequently, the German law includes provisions to use the EU ETS 2 “opt-in” option, allowing Member States to extend coverage beyond the mandatory sectors. In addition to fuels covered by the EU ETS 2, Germany will opt-in fuels used in agriculture and rail transport, which are currently covered by the national ETS. However, the law does not extend the opt-in option to waste incineration, which will remain under the nETS after 2026, unless new provisions are introduced at the EU level by then.
Germany’s transition follows a similar path to Austria, which recently passed measures to phase out its national ETS and transition to the EU ETS 2. Similarly to Austria, Germany aims to prevent regulatory overlap while maintaining flexibility for additional sectoral coverage.
