Berlin The dispute over the draft of the Building Energy Act (GEG) takes a surprising turn: while the traffic light coalition partners are bickering about the design of the heating law, there are more and more voices in favor of emissions trading for the heating sector. This demand comes not only from the FDP, but also from economists and some climate experts.
CO2 pricing and emissions trading are thus moving into the focus of the debate about the right path to climate neutrality. The Handelsblatt provides an overview of how the system works and the arguments of supporters and skeptics.
The Liberals are in favor of relying on the effect of a CO2 price instead of trying to force the heating transition in the building sector with bans and subsidies. “The prospect of rising CO2 prices in emissions trading is the best incentive for people to reduce emissions when heating and driving,” said Lukas Köhler, Vice President of the FDP parliamentary group, to the Handelsblatt. “In combination with the climate money as a real financial relief, we can achieve our climate goals in a guaranteed, cost-effective and socially responsible manner.”
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The FDP parliamentary group is therefore calling for “ending small-scale climate protection policy and instead continuing the success story of emissions trading,” said Köhler. “If we introduce national emissions trading for transport and buildings as early as 2024, as proposed by the FDP, we can save ourselves a lot of regulations and unnecessary technology bans.”
What does the requirement mean for the GEG?
The FDP is thus continuing its frontal attack on the GEG. From the point of view of the liberals, the law is too rigid and not open to technology. Only on Tuesday did the FDP parliamentary group ensure that the GEG draft would not be presented to the Bundestag this week as originally planned.
The law is intended to prescribe that from 2024 only heating systems that are operated with at least 65 percent renewable energy may be installed. Pure gas and oil boilers should no longer be newly installed. Existing heating systems that have not exceeded a certain minimum age may continue to be operated. The conversion to new heating systems should be promoted.
What do economists say?
CO2 price instead of ban – these demands also support economists. Christoph Schmidt, President of the economic research institute RWI in Essen, says: “After it became apparent how much the previous draft of the traffic light for the heating law overstretched the limits of what is feasible, a restart seems sensible.”
Instead, Schmidt recommends relying on “tightened national emissions trading as the core of climate policy, i.e. on higher CO2 prices, supplemented, of course, especially in the heating sector by supporting funding programs”. Price signals are demonstrably powerful and efficient instruments that politicians should trust more in the energy transition.
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“However, it is essential that politicians are credibly and permanently tied to high CO2 prices,” said Schmidt. Whether the population supports higher CO2 prices will depend on political communication, but also on the use of the income.
“If the users expect the CO2 price to rise high enough, the specifications in the amended GEG are ultimately irrelevant.”
(Photo: imago images/Political Moments)
Climate economists share this reasoning. “If users expect the CO2 price to rise high enough, the specifications in the amended GEG are ultimately irrelevant,” writes Ottmar Edenhofer, Director of the Potsdam Institute for Climate Impact Research (PIK), in a guest commentary for the Handelsblatt.
“My recommendation would be to take a deep breath, take a step back and start the heating transition again,” Edenhofer had already said. “Letting the national emissions trading with emission caps work immediately is smarter than the prohibition and bid policy.”
With the Fuel Emissions Trading Act (BEHG), the federal government already has all the legal options in hand. The BEHG, which has been in force since 2021, covers the heat and transport sectors and sets a price for every tonne of CO2 emitted.
Why is the FDP plan met with skepticism?
Felix Matthes, research coordinator, does not consider the “CO2 price only” solution to be expedient. Behind this is “a highly dangerous bet on ideal-typical and ultimately under-complex assumptions of economic textbooks,” said Matthes.
That is why this approach is not seriously pursued anywhere internationally. “The mix of regulatory law and CO2 pricing contributes to the continuity of the necessary adjustment processes in the limited period of the transformation,” he said.
The Greens also think it is wrong to rely solely on CO2 pricing. Irene Mihalic, parliamentary director of the Greens parliamentary group, said with regard to the CO2 price that this could also be discussed in the parliamentary deliberations on the GEG.
“Anyone who really wants to change something in the law now has to go through the parliamentary process,” she said. However, Mihalic also made it clear that she does not believe in relying solely on the price of CO2: “It is already clear today that heating with fossil fuels will simply become enormously expensive in a few years.” That is why it is important that the changeover on climate-friendly and also cheap heating.
How does the CO2 price work?
The CO2 price ensures a continuous increase in the prices for heating and in the transport sector. This creates an incentive for consumers to switch to climate-friendly technologies, such as electric heat pumps or electric cars.
The CO2 price for the heat and transport sectors set in the BEHG, which was passed in 2019, is currently 30 euros per tonne. Next year it will be 35 euros, in 2025 the value will be 45 euros.
At the start of CO2 pricing in the heat and transport sectors in 2021, it was 25 euros. From 2026, fixed CO2 pricing is to transition to emissions trading with a price corridor of 55 to 65 euros. The FDP would like to bring forward the transition to emissions trading to 2024.
Where is the money going?
The income from BEHG and from European emissions trading (ETS), which applies to the industry and energy sectors, goes to the federal climate and transformation fund. Last year, revenues amounted to 13 billion euros.
The money will be used, among other things, for funding programs for energy-efficient building refurbishment, for the ramp-up of electromobility and for the expansion of renewable energies.
Are CO2 savings rewarded?
If you follow the pure doctrine of CO2 pricing, the income will be returned directly to the citizens in the form of climate money. However, this is currently not the case. The idea behind the climate money: It is paid per capita, everyone receives the same amount.
Conversely, this means that those who use fossil fuels sparingly make a deal. On the other hand, if you heat a lot, drive a lot and fly around the world, you get less back than you paid before.
However, low-income households that live in poorly renovated apartments and at the same time have to commute to work in inefficient cars could be disadvantaged. Compensatory measures are indispensable here.
What is the relationship between the price of CO2 and emissions trading?
The European emissions trading system (ETS), which has been in force since 2005, covers the areas of industry and energy. Industrial plants above a certain size and power plants have to buy a certificate for every tonne of CO2 that is emitted. The prices in the ETS are significantly higher than the BEHG prices. They are currently hovering around values of 80 euros per ton. They are expected to rise sharply in the coming years because the EU wants to reduce the number of certificates available.
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