Germany’s Big Shift: How the New EU Emissions Trading System Will Impact You

Germany is making a major move in its climate strategy, replacing its national emissions trading system (nEHS) with the European Union’s new Emissions Trading System 2 (ETS-2). This transition, set to begin in 2027, is expected to have wide-reaching effects on businesses, households, and the broader economy.

What’s Changing?

Since 2021, Germany has been regulating CO₂ emissions through the Fuel Emissions Trading Act (BEHG), setting carbon prices that have progressively increased—rising to €55 per tonne in 2025. However, with ETS-2, a new EU-wide framework will take over, primarily targeting the transport and building sectors.

This shift aligns with the EU’s ambitious climate target of cutting greenhouse gas emissions by 55% by 2030 compared to 1990 levels. The reform is supported by key political parties, including CDU/CSU, SPD, the Greens, and FDP, which see emissions trading as an effective method to curb carbon emissions.

Impact on Consumers and Businesses

The adoption of ETS-2 will bring significant cost implications:

Higher Energy Prices: The new carbon pricing system will affect petrol, diesel, and heating oil costs, potentially making energy expenses steeper for both individuals and businesses.
Price Volatility: Forecasts indicate that emission allowance prices could jump dramatically, ranging from €70 to €260 per tonne by 2030. Such fluctuations could drive further increases in fuel prices.
Financial Burden on Households: Consumers, especially lower-income groups, may struggle with rising energy costs. To counterbalance this, a portion of the revenue from ETS-2 will go toward the Social Climate Fund (SCF), designed to assist those most affected.

Where Does the Money Go?

In the current national system, funds generated from carbon pricing are funneled into Germany’s Climate and Transformation Fund, supporting green energy initiatives. Under ETS-2, revenue allocation will be split:

SCF Contributions: Some funds will support vulnerable consumers, helping ease financial pressures caused by higher carbon pricing.
National Climate Investments: The German government will decide how to use remaining funds, sparking debates on whether they should be redirected toward energy efficiency programs or infrastructure improvements.

How Can Consumers and Businesses Prepare?

To mitigate the impact of ETS-2, several support measures are under discussion:

Energy-Efficiency Incentives: Encouraging home insulation, solar panel installations, and sustainable transport solutions could help reduce reliance on fossil fuels.
Social Tickets for Public Transport: Lower-income households may receive subsidies for public transportation to offset rising fuel prices.
Business Adaptation Strategies: Companies should explore cleaner energy alternatives and invest in carbon-reduction technologies to manage future costs.

While the transition to ETS-2 marks a crucial step toward Germany’s and the EU’s climate goals, it also raises concerns about affordability and fairness. Policymakers must ensure that while emissions decrease, the financial burden on households and businesses is kept in check through well-targeted support mechanisms.