Germany splits carbon tax for heating between landlords and tenants

The German government has found a compromise on splitting the CO2-price in heating between landlords and tenants in a bid to drive renovation and heating system change. [Shutterstock/gerd-harder]

Tenants living in well-insulated homes in Germany will have to shoulder the lion’s share of their CO2 costs for heating, while the burden in inefficient buildings will fall on landlords, reports Clean Energy Wire.

The less CO2 a building emits, the higher the proportion tenants should pay, according to a tiered model agreed by the ministries of justice, buildings and the economy.

The German government said the split is socially fair and will boost emissions reductions in the building sector, which is lagging behind in the country’s energy transition.

“Landlords have an incentive to invest in energy-efficient renovations. Tenants remain motivated to reduce their own energy consumption,” said buildings minister Klara Geywitz.

The new system will ensure that an outdated heating system and leaky windows will translate into higher CO2 costs for landlords because tenants have less options to reduce consumption in this scenario, said Robert Habeck, Germany’s economy and climate minister.

“Conversely, a landlord who has renovated the building well in terms of energy efficiency can also apportion the costs” because it now falls on the tenants to save energy, he added.

On average, the splitting mechanism will save tenants between €12 and €72 per year, according to price comparison website verivox, reported Tagesspiegel.

Consumer advocacy groups welcomed the agreement but criticised it because it will only start applying as of next year.

Since the beginning of 2021, Germany has applied a carbon price in the building sector for CO2 emissions caused by the combustion of fossil fuels in order to make the switch to climate-friendly alternatives more attractive.

A tonne of emissions currently costs €30, leading to additional heating costs of €130 to €190 per year in an average flat, but the price is set to rise to €55 by 2025.

As long as the distribution of costs remains an unsolved issue, landlords can pass them on in full to tenants, which is highly controversial in a country where a relatively high proportion of people do not own their home.

The move has been criticised by environmental NGO Environment Action Germany (DUH), which said the split was a win for landlords.

“What seems fair at first sight is a cleverly packaged proposal to continue to leave the main burden of the CO2 price on the tenants,” tweeted Elisabeth Staudt of DUH.

While heating costs are soaring, landlords continue to charge the CO2 price on their tenants.

“Especially in view of the current crisis situation, it is incomprehensible why tenants still have to wait until the beginning of 2023 for relief,” highlighted Barbara Metz, director of DUH.

According to her, landlords should carry the full burden of CO2 pricing, as they are the ones who have the ability to conduct renovations and heating system change to lower the CO2 emissions of buildings.

“Particularly absurd: even tenants in the worst [CO2-emission performing] building classes have to contribute to the CO2 price,” she added.

The German model to price CO2 in heating may have ramifications in the EU as well, where the European Commission has proposed an EU-wide carbon price on heating and road transport fuels.

The German government supports the Commission’s proposal but raised doubts about creating a social climate fund (SCF) to alleviate the burden on the poorest citizens, noting that the move would require renegotiating the EU’s long-term budget.

EU's proposed social climate fund comes under fire from all sides

At a meeting in Brussels on Monday (20 December), EU environment ministers criticised the European Commission’s proposal for a social climate fund that would support vulnerable households through the energy transition. Their motives, however, diverged widely.

[Edited by Frédéric Simon. Additional reporting from Clean Energy Wire’s Sören Amelang]

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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 893858.





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