On 12 August 2026, Germany’s federal cabinet approved the revised draft of the Third Act Amending the Fuel Emissions Trading Act as a governmental bill, following interministerial coordination and consultation with Germany’s federal states and associations. The bill can now proceed to the parliamentary process but has not yet become law. If enacted, the draft will extend the national carbon price corridor of EUR 55 to EUR 65 (approximately USD 64 to USD 75) per emissions certificate through 2027.
The draft maintains the 2026 price corridor in 2027, reflects the postponement of the European Union Emissions Trading System 2 (EU ETS 2) surrender phase to 2028, extends auction rules through 2027, and amends compensation provisions for double-counted fuel emissions.
Price corridor to remain at 2026 levels in 2027
Germany’s national fuel emissions trading system currently applies a price corridor of EUR 55 to EUR 65 per emissions certificate for 2026. Under the rules currently in force, the 2027 price will instead be linked to the volume weighted average auction price in the EU ETS 1.
The draft instead proposes to replace this provision with the 2026 price corridor of EUR 55 to EUR 65 to continue in 2027, in line with an agreement reached by Germany’s governing coalition on 12 May 2026. The draft aims to provide companies with planning certainty amid continued pressure on energy and raw material markets.
National system transition moves to 2028
Under the law adopted on 31 January 2025, Germany’s national system was scheduled to transition to EU ETS 2 in 2027. The August draft reflects the postponement of the EU ETS 2 surrender phase to 2028 under Regulation (EU) 2026/667 of 11 March 2026.
From 1 January 2028, reporting and surrender obligations under the Fuel Emissions Trading Act will no longer apply to fuel emissions covered by EU ETS 2. The draft will also authorize the federal government, by ordinance, to reduce the national system’s annual emissions quantity by the corresponding amount of emissions no longer covered by the national system.
Auction rules continue through 2027
The draft extends the auction rules in the Fuel Emissions Trading Ordinance through 2027. The total auction quantity for 2027 will be determined by reducing the number of emissions allowances by 40 million to account for the additional amount sold above the cap in 2026. The competent authority will publish the total quantity by 31 December 2026.
For 2027 auctions, bids will be permitted only for delivery to a compliance account (e.g. to entities with surrender obligation). The sum of bids per compliance account in an auction will be limited to 20% of the quantity offered in that auction.
If the total auction quantity for 2027 is fully sold, additional certificates will be offered at EUR 73 (approximately USD 85) each. If that will not be enough, additional 2027 certificates at EUR 75 (approximately USD 87) will be made available solely to entities with surrender obligations, up to 10% of the certificates acquired by then in the preceding calendar year.
Double-counting compensation rules change
The draft also changes the compensation rules for double-counted fuel emissions. For 2027, only fuel quantities placed on the market and used at an installation covered by emissions trading during the reporting year will qualify for compensation. The draft further simplifies the evidence requirements for fuel quantities stored between 2021 and 2026.
Compensation under the national system will no longer apply from the 2028 reporting year. The draft estimates that these changes will reduce annual compliance costs for businesses by approximately EUR 794,000 (approximately USD 922,000) and annual public administration costs by approximately EUR 2.18 million (approximately USD 2.53 million) from 2028, compared with previous estimates for the national system.
The cabinet approved the revised draft on 12 August 2026. The draft has not yet been enacted. If enacted, the Act will enter into force on the day after its promulgation.
