Update: Germany adopts higher prices under national ETS starting in 2021

On 8 October 2020 Germany adopted a revision of the Fuel Emissions Trading Act increasing prices per tCO₂ under its national ETS covering fuels used in the building and transport sectors starting in 2021. The adoption comes after the German federal cabinet on 20 May 2020 agreed on the revision and the revised bill was approved by parliament thereafter. The revised law supersedes the original version of the Act from 20 December 2019.

As the price increases will affect consumers by making transport and heating fuel prices more expensive, the German federal cabinet decided to use the additional revenue that will be raised through selling and auctioning allowances at the increased prices to lower electricity rates for consumers. This will be done by reducing the apportionment under the Renewable Energy Sources Regulation on electricity bills from 2021 and by deducting transportation costs for commuters from income taxes. These changes are still subject to parliamentary hearings before they can be adopted.

The price increases apply to the fixed prices at which allowances will be allocated from 2021 to 2025 and the price corridor for auctioning allowances starting 2026. A potential price corridor for the time after 2026 will be decided upon in 2025. The changes to the prices and the compensation measure for ratepayers result from negotiations between the two German federal legislative bodies shortly after the adoption of the legislation in December 2019 (see ICAP’s factsheet on the German National Emissions Trading System for more). Compared to the original version, the fixed prices and price corridor laid out in the updated legislation are increased as follows:

• 2021: from EUR 10/tCO₂ (USD 11) to EUR 25/tCO₂ (USD 28)
• 2022: from EUR 20/tCO₂ (USD 22) to EUR 30/tCO₂ (USD 34)
• 2023: from EUR 25/tCO₂ (USD 28) to EUR 35/tCO₂ (USD 39)
• 2024: from EUR 30/tCO₂ (USD 34) to EUR 45/tCO₂ (USD 50)
• 2025: from EUR 35/tCO₂ (USD 39) to EUR 55/tCO₂ (USD 62)
• 2026: from a price corridor between EUR 35/tCO₂ (USD 39) and EUR 60/tCO₂ (USD 67) to a price corridor between EUR 55/tCO₂ and EUR 65/tCO₂ (USD 73).

The updated prices mean that transport fuel prices for consumers increase by EUR 0.07 per liter of gasoline, EUR 0.08 per liter of diesel, EUR 0.08 per liter of heating oil, and EUR 0.05 per kWh of natural gas in 2021.

The Fuel Emissions Trading Act that was initially laid out in the Climate Protection Program 2030 introduced key design features for Germany’s national ETS. Over the course of 2020, regulations laying down further details for the implementation of the national ETS are being drafted. This includes cap setting; the sale and auctioning of allowances; monitoring, reporting, verification, and accreditation of emissions; compensation for carbon leakage; overlaps with the EU ETS; cases of hardship; and the registry system.