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The EU emissions trading system for buildings and road transport (ETS 2) will replace Germany's current national carbon pricing scheme in 2027.
Since Germany accounts for a quarter of the ETS 2 emissions, accelerating emission reductions in its building and transport sectors will be crucial for keeping prices in check across Europe.
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Ensuring a smooth transition to the ETS 2 and establishing safeguards against CO₂ price volatility is essential to reinforce incentives to move away from fossil fuels.
The ‘Climate Action Programme’ that the next government is mandated to enact provides an opportunity to adjust the national carbon price corridor and establish a minimum German national carbon price of EUR 90/t CO2 . This minimum price is critical for investment certainty.
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A carbon price provides important incentives for decarbonisation but needs to be part of a broader policy mix.
Consumers’ ability to adapt behaviour in response to a carbon price – for example by switching to more climate-friendly means of transport – depends on existing infrastructure, purchasing power and savings. Accompanying measures supporting the accessibility and affordability of clean mobility and heating solutions are thus essential for a successful ETS 2.
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The ETS 2 will generate revenues that can be invested in supporting households in the transition.
In Germany, for example, at an average price of EUR 110/t CO2 , carbon pricing could generate around 130 billion euros in state revenue between 2027 and 2032. This revenue should be used to offset higher fossil fuel costs and support investments in clean heating and mobility through targeted financial support to households and a socially staggered “climate bonus” (Klimageld) for all citizens.
This content is also available in: German
The carbon price for buildings and road transport
A concept for the transition from national to EU emissions trading
Preface
We find ourselves at the beginning of a new phase in climate policy. Considerable progress has been made with decarbonising the power sector in recent decades thanks to a combination of different instruments. These include in particular the introduction of various support schemes to safeguard investments in renewable energies, as well as increasingly effective carbon pricing via the European Emissions Trading System (ETS 1).
Unfortunately, such successes are rare within the buildings and road transport sectors. Yet, a new instrument for these sectors will come into force in 2027 at the European level: a second EU Emissions Trading System (ETS 2). As the expected level of carbon prices remain uncertain, policymakers must prepare the ground for its launch. This also raises the question of which role emissions trading is to play in relation to other instruments.
The study was first published in 2023 and has been updated in parts to reflect recent policy changes. It addresses the special situation in Germany, where a carbon pricing system for the buildings and transport sector already exists and makes a proposal for the transition from this system to the ETS 2. However, several insights are applicable to other member states, too. Therefore, we also hope to contribute to the European-wide debate about preparing a sound transition to the ETS 2.
This is a translated and slightly adapted version of the original German publication.
Key findings
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The carbon price for buildings and road transport
A concept for the transition from national to EU emissions trading
All figures in this publication
Projected shortfall on ESR targets
Figure 1 from The carbon price for buildings and road transport on page 10
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Carbon price path in the BEHG according to Federal Government plans
Figure 2 from The carbon price for buildings and road transport on page 11
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