Germany’s cabinet keeps 2027 CO2 price corridor at €55–65 per tonne

Cabinet extends the existing price range

Germany’s cabinet has approved a bill that would keep the national carbon price within a corridor of €55–65 per tonne of carbon dioxide in 2027, t-online reported. The same range applies in 2026. The decision prevents the price attached to gasoline, diesel, heating oil and natural gas from rising beyond the existing ceiling next year.

Germany introduced its national fuel emissions trading system in 2021 as a bridge to broader European carbon pricing. Companies placing fossil fuels on the German market, including energy suppliers and filling-station operators, must buy certificates from the German Emissions Trading Authority. Each certificate covers one tonne of CO2, and suppliers can pass the resulting cost through to households and businesses.

In 2026 and 2027, certificate prices are to be determined by supply and demand for the first time, but within the statutory corridor. The €65 ceiling limits sudden cost increases while exposing market participants to a trading mechanism closer to the future European system. The government’s bill still needs to complete the legislative process.

ETS 2 transition moves to 2028

The reform follows a change in the European timetable. The EU’s second emissions trading system, known as ETS 2, was intended to extend carbon pricing to buildings and road transport in 2027. EU member states agreed at the end of 2025 to postpone its launch by one year, according to t-online. Germany’s national system is therefore expected to remain in place until the European mechanism takes over in 2028.

Germany already exposes consumers and small and medium-sized companies to carbon costs on heating and transport fuels. France, Poland and several other European countries have no comparable national system, meaning their consumers are expected to encounter these costs directly when ETS 2 begins. The EU intends to prevent the initial price from moving above €50 per tonne, while a market stability reserve can release additional certificates if prices rise too sharply.

The actual ETS 2 price will depend on demand for certificates when the system starts. For Germany, an initial level near €50 per tonne could temporarily make fossil fuels cheaper than under the national corridor. The longer-term direction remains uncertain: t-online cited forecasts of about €100–130 per tonne from 2030 and more than €300 per tonne by 2040. These estimates are forecasts rather than fixed price levels.

Industry gains short-term visibility

Holding the corridor at €55–65 gives fuel distributors, heating suppliers, transport operators and energy-intensive users a defined upper limit for 2027. It does not remove the carbon cost, but it limits one source of volatility in fuel and heating budgets during the additional transition year. For suppliers, certificate procurement and customer pricing will still respond to demand within the corridor.

Carbon-pricing revenue flows into Germany’s Climate and Transformation Fund, which finances measures including heating-system replacement and energy-efficient building renovation. The government led by Chancellor Friedrich Merz does not plan to introduce the previously discussed per-capita climate payment. Instead, the fund is intended to support lower energy costs, including a reduction of electricity tax to the European minimum; the initial relief covered industry rather than consumers, t-online reported.

Emissions targets maintain pressure beyond 2027

EU greenhouse gas emissions fell by 50% between 2005 and 2024, with much of the reduction in industry and power generation, sectors covered by emissions trading for two decades. Germany’s emissions have declined by 48.2% since 1990. The EU aims to reduce emissions by 62% from 2005 levels by 2030, equivalent to 55% compared with 1990.

Buildings and transport remain central to achieving that target. The 2027 price cap provides near-term protection against a larger carbon-cost jump, but the move to ETS 2 will expose Germany and other EU markets to a common certificate price from 2028. Fuel suppliers, logistics companies, building owners and industrial buyers will therefore need to treat the fixed corridor as a temporary planning boundary rather than a permanent cost ceiling.