CO₂ Pricing in Germany: Significance and Consequences for Companies

Germany's national CO₂ pricing system for transport and heating has been reshaping cost structures for companies and consumers since January 2021. After a fixed-price phase that brought the carbon price from €25 to €55 per ton by 2025, the system entered an auction phase in 2026. Understanding how these costs flow through supply chains—and what regulatory changes are ahead—is essential for any company operating in Germany.

The Background of CO₂ Pricing in Germany

Germany's CO₂ pricing framework operates on two levels. The first is the EU Emissions Trading System (EU ETS), active since 2005 as the European Union's central climate protection instrument. The EU ETS covers emissions from power generation, energy-intensive industries, and aviation.

The second level is Germany's national Emissions Trading System (nEHS), introduced in January 2021 under the Fuel Emissions Trading Act (BEHG). This standalone national system closes the gap left by the EU ETS by covering the transport and heating sectors. It operates upstream: fuel distributors, not end users, are the obligated parties. They pass the additional CO₂ costs on through fuel prices—which means every company or consumer using fossil fuels ultimately bears a share of the cost.

This cost-pass-through mechanism affects all three emission scopes. While Scope 1 covers a company's own direct emissions, the nEHS indirectly prices Scope 2 emissions (purchased energy) and Scope 3 emissions (value and supply chains). Companies with energy-intensive supply chains or logistics therefore face higher costs across the board—not only at the point of their own fuel consumption.

Revenue from the nEHS flows into Germany's Climate and Transformation Fund (KTF), which finances the energy transition: building renovation programs, renewable energy support, e-mobility infrastructure, and relief measures for households and industry. The nEHS is rooted in Germany's Climate Protection Program 2030, adopted in 2019 to create economic incentives for energy efficiency and the expanded use of renewable energy.

Germany is not alone in pricing carbon. According to the World Bank State and Trends of Carbon Pricing 2025, 80 carbon pricing instruments are now in operation worldwide, covering approximately 28% of global greenhouse gas emissions—up from just 7% a decade ago.

What Does CO₂ Pricing Mean for Your Company?

The nEHS ran through a fixed-price phase from 2021 to 2025 with the following price schedule: 2021: €25/t CO₂ · 2022: €30/t · 2023: €30/t · 2024: €45/t · 2025: €55/t.

In 2026, the system transitions to an auction phase. CO₂ certificates are auctioned within a price corridor of €55–65 per ton. If demand during the auctions exceeds the available supply, additional certificates can be purchased at a ceiling price of €68 per ton. This shift from a predictable fixed price to a market-determined system means planning CO₂ costs becomes more complex for businesses.

These costs reach companies through higher fuel prices. At the 2025 level of €55/t, the additional CO₂ charge amounts to approximately +1.0 cent per kilowatt hour of natural gas, around +14.7 cents per liter of diesel, and approximately +15.3 cents per liter of heating oil. In 2026, the final costs depend on auction outcomes within the €55–68 range.

For energy-intensive operations, the cumulative effect is significant. A company consuming 5 gigawatt hours of natural gas per year paid around €30,000 in additional CO₂ costs in 2021 and approximately €65,000 in 2025. At the upper end of the 2026 auction corridor, costs could rise further still.

The additional costs spread across the entire supply and production chain. Both end consumers and companies face price surcharges for fossil fuels, and suppliers pass their own CO₂ cost increases on to customers. Companies that cannot quickly shift away from fossil fuels face compounding cost pressure as prices rise and the transition to EU ETS 2 brings further changes from 2028.

Carbon Leakage and CBAM: Supply Chain Implications

Two regulatory mechanisms directly shape how CO₂ pricing affects companies with international supply chains or operations.

The first is carbon leakage protection. Companies in internationally competitive sectors that face a particularly high CO₂ cost burden can apply for compensation under Germany's Carbon Leakage Ordinance (BECV). This mechanism prevents energy-intensive production from relocating abroad solely to avoid the carbon price—and ensures that domestic companies are not systematically disadvantaged in g