1. What is the CO2 price and why does it rise every year?
The CO2 price is a levy on every tonne of carbon dioxide emitted when fossil fuels are burned. Since 1 January 2021, this pricing has been legally anchored in Germany under the Fuel Emissions Trading Act (BEHG). Heating oil, natural gas, petrol, and diesel all fall under it. The price started at 25 euros per tonne CO2 in 2021 and has been rising in defined steps ever since, with a clear political goal: consumers and businesses should receive a growing price signal that gradually makes fossil energy less attractive and alternatives more attractive.
The background is the German Climate Protection Act, which sets binding sectoral targets for CO2 reductions by 2030 and climate neutrality by 2045. The buildings sector, where heating oil counts as a fuel above all, has fallen behind its sectoral targets. CO2 pricing is one of the few truly effective instruments for steering private-sector decisions in line with climate goals without resorting to prohibitions. The steering effect is based on the assumption that a rising price triggers investments in alternative heating systems, energy retrofits, and consumption reduction.
In practice it works like this: distributors of heating oil, that is wholesalers and importers, must purchase a certificate for every tonne of CO2 contained in the fuels they sell. These costs are passed through fully to the end price, so the CO2 price is included in the gross price per litre. As a heating oil buyer, you do not pay the CO2 levy separately, but automatically when you refuel. That is the political intent: the price signal arrives directly, the consumer can see it as real additional cost on his heating oil bill, and can respond to it by switching to a heat pump, insulating, or reducing consumption. For more conceptual context, see our glossary entry on the CO2 levy.
A second, often overlooked function: the CO2 price generates revenue for the federal government. BEHG revenue stood at around 11 billion euros in 2024, with a rising trend. By the Climate Protection Act, these revenues are intended to be used for climate-policy measures, such as the German BAFA heat pump subsidy, modernisation of rail transport, or indeed the pay-out of the social climate dividend. In practice, however, the funds flow into the general budget, which is politically contested.
Why does the price rise every year? Because otherwise the steering effect does not work. A constant price at 25 euros per tonne might be noticeable for an average household but too small to truly influence investment decisions. A rising price, by contrast, creates planning security for everyone who wants to invest in alternative heating: they know that heating oil costs will structurally rise through 2030, and can build that into their amortisation calculations. That certainty is worth more than the current price level.
2. BEHG/nEHS price path through 2027 plus ETS-2 start from 2028
The legally fixed price path under BEHG/nEHS sets defined values for the years 2024 to 2026, and a fixed political corridor of 55 to 65 euros per tonne for 2027 (Union/SPD agreement, November 2025, third BEHG amendment). Early ETS-2 auctions begin in January 2027, but the EU-wide ETS-2 only becomes the applicable pricing mechanism for reporting year 2028 onwards, in which prices arise through market allocation. Both logics have different properties that matter for long-term planning.
Values for 2024 to 2027 are fixed under BEHG/nEHS law (2027 held in a 55-65 EUR/t political corridor, Union/SPD agreement November 2025). EU ETS-2 becomes the applicable pricing mechanism from 2028; its price level is not yet established. The 2030 figure is an independent energy-institute estimate. Political adjustments are possible. As of 23 July 2026.
BEHG/nEHS fixed-price logic 2021 to 2027
Through 2027, the CO2 price under BEHG/nEHS is set as a fixed price or a narrow political corridor per tonne. This provides planning security. You know exactly that this year 65 euros per tonne CO2 applies, that it was 55 euros in 2025, 45 euros in 2024, and that 2027 stays within the 55 to 65 euro corridor too. This step structure is transparent and politically broadly supported. For households with oil heating this means: every year a predictable additional cost step in the tank fill, at least through 2027.
The price path was originally planned more aggressively, with 55 euros already in 2025 and a temporary suspension of some steps due to the energy crisis and inflation. In the reform of autumn 2023, the path was stretched so that the jump to 65 euros only comes in 2026. In November 2025, Union and SPD agreed via the third BEHG amendment to keep the national system in place through reporting year 2027 rather than move early into EU ETS-2, with the CO2 price fixed within a corridor of 55 to 65 euros per tonne for that year.
ETS-2 start from 2028
Early ETS-2 auctions begin in January 2027, but the national BEHG/nEHS fixed-price logic remains the sole mechanism applied to heating oil, gas, and other fossil fuels in the buildings and transport sectors through reporting year 2027. Only from reporting year 2028 does the EU-wide ETS-2 (Emissions Trading System 2) become the applicable pricing mechanism, with the first surrender obligation due 31 May 2029. In ETS-2, CO2 certificates are traded, and the price arises through supply and demand on the EU-wide market. This has two important consequences once it takes over.
First: the price fluctuates. Instead of a predictable fixed price, you have a market price that can swing depending on demand, weather, politics, and industrial activity. In European Commission modelling, early ETS-2 price forecasts for the years from 2028 ranged between 45 and 80 euros per tonne, with a probability peak around 55 euros. That could mean relief compared with the 55 to 65 euro national corridor in place through 2027, if the market lands below the stabiliser threshold.
Second: a stabiliser mechanism is foreseen. If the ETS-2 price rises sharply (currently perceived politically as problematic), the European Commission can release additional certificates to dampen the price. If the price falls too low, the certificate volume is to be tightened. The precise thresholds are under discussion, common assumptions are 45 euros at the lower end and 80 euros at the upper, not as a hard cap but as a market-calming mechanism.
Third, and this is the strategic bottom line: over 5 to 10 years a structurally rising price is to be expected, because the EU total budget of CO2 certificates falls each year by a fixed linear reduction factor. Most independent energy institutes (Agora Energiewende, DIW, Öko-Institut) expect 80 to 120 euros per tonne by 2030, again with high variability. As of 23 July 2026 this is an estimate. Anyone planning long-term should assume 100 euros per tonne in 2030 as a midpoint.
The EU background story is the Fit-for-55 package, with which the EU aims to achieve a 55 percent reduction in greenhouse gases by 2030 versus 1990. ETS-2 is one of the core instruments. A deeper introduction to pass-through, that is how Brent and CO2 prices flow through to consumer end prices, can be found in our glossary entry on the pass-through effect.
What does the CO2 price concretely cost you per year?
Calculate in 60 seconds how much extra cost the CO2 price adds to your tank fill, and compare with alternatives. The energy cost calculator shows it scenario-specific.
Calculate in 60 seconds3. Example calculation: 3,000-L tank extra cost 2024-2030
To make the price path tangible, here is the concrete calculation for a standard tank fill. A typical single-family home with oil heating uses 2,500 to 3,500 litres of heating oil per year, depending on building size, insulation standard, and occupant behaviour. We take 3,000 litres as a midpoint, since this is a common reference size in the heating-oil sector and is realistic for a terraced house or mid-sized single-family home with three to four people.
The calculation formula is simple: surcharge per litre = CO2 price per tonne times 2.65 kilograms CO2 per litre divided by 1,000. The emission factor of 2.65 kg CO2 per litre heating oil is the value officially set by the German Federal Environment Agency and the BEHG federal regulation, and applies to light heating oil EL (extra light).
| Year | CO2 price EUR/t | Surcharge EUR/L | 3,000-L tank EUR |
|---|---|---|---|
| 2024 | 45 EUR | 0.1193 | 358 EUR |
| 2025 | 55 EUR | 0.1458 | 437 EUR |
| 2026 | 65 EUR | 0.1722 | 517 EUR |
| 2027 | 65 EUR | 0.1722 | 517 EUR |
| 2028 | ETS-2 market | n/a | n/a |
| 2030 | ~100 EUR | 0.2650 | 795 EUR |
* Values for 2024 to 2027 are fixed under BEHG/nEHS law; 2027 sits in a 55-65 EUR/t political corridor and is shown here at its current level of 65 EUR/t (Union/SPD agreement, November 2025). Values from 2028 onwards, once EU ETS-2 applies, are estimates based on modelling and independent energy institutes. Political adjustments possible at any time.
Persona: the Schmidt family (3 people, terraced house, built 1992)
The Schmidts have been heating with oil for 17 years, use 3,000 litres on average per year, and the tank holds 4,000 litres. They top up once a year, typically in late summer when prices are seasonally lower. If they consider the CO2 component over several consecutive years, this is what the cost-staircase looks like compared with 2024 as the base year.
Extra-cost staircase per tank fill (vs. 2024)
The Schmidt family pays around 2,624 euros for the CO2 price component in the years with an already-fixed or reliably estimated price (2024 to 2027, plus a 2030 estimate), on top of whatever the EU ETS-2 adds once its price for 2028 and 2029 is set. That is without considering general Brent price swings, without inflation, and without further energy-tax adjustments. If the ETS-2 price from 2028 surprises to the upside (for example a geopolitical shock), the total can be considerably higher. If it surprises to the downside (for example with an effective stabiliser), correspondingly lower. To bridge to the current heating oil price: at a real heating-oil price per litre of around 1.05 euros in July 2026, the CO2 burden of 17 cents accounts for about 16 percent of the gross price.
4. Climate dividend reimbursement (status 23 July 2026)
The German climate dividend (Klimageld) is a political idea that has resurfaced since 2021: the revenues from CO2 pricing are to be returned to all citizens as a per-capita lump sum, as a social offset for rising heating and fuel costs. The 2021 coalition agreement explicitly envisaged the climate dividend. As of 23 July 2026, however, it has not yet been paid out. That is an honest note, and one that matters for the financial planning of every household.
What was planned?
The original idea was simple: the revenues from BEHG (around 11 billion euros in 2024) would be divided by the population and paid out as a flat amount to everyone. Mathematically, in 2024 that would have been about 130 euros per person per year. A family of three would have received around 390 euros, which would have offset the typical CO2 burden of an oil-heated household with 3,000 litres of consumption (358 euros in 2024) fairly precisely. The social logic was: anyone who heats less or drives less profits net, anyone using above-average amounts of fossil energy pays net more.
Current status
As of 23 July 2026, there is still no pay-out mechanism. The technical hurdle from the beginning was the pay-out via the tax identification number, which is not lodged with all banks. Several proposals were discussed: pay-out via the Federal Central Tax Office, pay-out via the family-allowance system, pay-out via social insurance. None has been implemented. Politically, the climate dividend has mostly been postponed over the last two years because the federal government channelled BEHG revenues into the Climate and Transformation Fund (KTF), where they are used for funding programmes such as the BAFA heat pump subsidy, rather than flowing directly back to households.
Possible amounts in discussion
Concrete numbers vary depending on the discussion basis. Early calculations (2022) assumed around 100 euros per person per year, based on the BEHG revenues at the time. More recent calculations (2025) are between 150 and 300 euros per person, depending on whether only BEHG revenue or also other CO2 pricing revenues are included. A serious point forecast is not possible as of 23 July 2026, because the pay-out logic is politically open.
Political obstacles and outlook
Three obstacles continue to stand in the way of a pay-out. First: missing pay-out infrastructure. A per-capita mechanism with nearly 84 million recipients needs a central bank-data file that does not exist in this form. Second: competing use of funds. BEHG revenues are earmarked in the Climate and Transformation Fund, and a redirection would cut funding programmes. Third: social-policy distributional fights. A per-capita lump sum is progressive (lower incomes profit net), but politically controversial in the detail. Some reform proposals would limit the climate dividend to lower incomes, others would extend it to everyone.
What is coming next? Realistic prospects as of 23 July 2026: a full per-capita pay-out is unlikely before 2028. More likely are target-group-specific pay-outs (such as heating cost allowances for those in need), as already implemented as one-off payments in the winters of 2022 and 2023. Anyone planning around the climate dividend should treat it as a bonus, not as a safety cushion. Plan your heating costs as if the CO2 price flows net to your burden. An in-depth conceptual treatment of the CO2 levy as a steering instrument can be found in the glossary.
5. Avoidance strategies
The most effective response to a rising CO2 price is not complaint but substitution. Anyone who does not want to pay the CO2 price can reduce or replace fossil energy. Here are the five most practical strategies for households with oil heating, in descending order of impact.
- Switch to a heat pump (impact: up to 100 % CO2 avoidance) The most effective single measure. An air-water heat pump produces 3 to 4 times more heat per kilowatt-hour of electricity used than an oil or gas heating system. The CO2 burden of the heating system drops by 70 to 90 percent (electricity has its own CO2 component, which continues to fall with the growing renewables share). With the current German BAFA heat pump subsidy of up to 70 percent grant, this often pays back economically within 8 to 12 years. Details on the subsidy can be found on our Heat Pump Subsidy 2026 Calculator sub-page. For a typical 3,000-litre household this means an avoided CO2 burden of 517 euros in 2026, cumulatively more than 10,000 euros over a 20-year system life just in CO2 avoidance.
- Energy retrofit (impact: 30-60 % consumption reduction) Insulation of exterior walls, roof insulation, window replacement, and basement-ceiling insulation can lower the heating energy requirement by 30 to 60 percent. At 3,000 litres annual consumption, that is 900 to 1,800 litres saved, and hence 155 to 310 euros less CO2 burden per year (as of 2026). Over 20 years cumulatively, that is several thousand euros. A retrofit is investment-intensive, however, with costs of 100 to 500 euros per square metre of living area depending on depth. A comprehensive energy retrofit can be funded under the KfW BEG-WG programme. The economic bottom line is often only reached after 15 to 25 years, but is stable thereafter.
- Hybrid solutions (impact: 50-70 % CO2 avoidance) A hybrid system of heat pump plus gas or oil peak-load covers 70 to 90 percent of the heat load via the heat pump, with the fossil peak-load only kicking in during extreme cold. This typically reduces heating-oil consumption by 60 to 80 percent. As of 23 July 2026, however, pure hybrid systems are only partially eligible for funding, because BAFA since the 2024 reform prefers a complete swap. Hybrid concepts can nonetheless make sense for buildings with problematic heat loads, poor insulation, or high flow temperatures, where a pure heat pump would not run efficiently.
- Consumption reduction through behaviour and control (impact: 10-25 %) Without investment there are substantial reduction potentials. Lowering the thermostat by one degree means about 6 percent less energy consumption. Hydraulic balancing of the heating system saves 5 to 15 percent. Smart heating control with zoning and presence detection can bring a further 10 to 20 percent. Combined, 15 to 25 percent consumption reduction is realistic, which on 3,000 litres of base consumption means 80 to 130 euros lower CO2 burden per year (as of 2026). These measures are the lowest-threshold response: no big investment, immediate effect.
- Solar hybrid or solar thermal (impact: 20-40 % CO2 avoidance) Solar thermal can supply hot water and heating support, with a typical coverage rate of 20 to 40 percent of heat demand. Investment is around 6,000 to 12,000 euros for a standard system, payback 10 to 15 years. Combining it with a heat pump makes sense from an energy point of view, but is often economically hard to justify, because the heat pump itself is already highly efficient. For households that cannot or do not yet want to switch to a heat pump, solar thermal as a transition solution is a valid reduction strategy.
Realistic bottom line: a combination of behavioural adjustment (10-25 percent reduction) and a medium-term switch to a heat pump (5-10 year horizon) is the economically and ecologically best path for most households. Add retrofit when bigger measures are due anyway (façade renewal, roof renovation, window replacement). Anyone planning in this order is well prepared for the rising CO2 price path. 30 to 60 percent CO2 avoidance over 5 to 10 years is realistically achievable for a standard house with old oil heating. For further reading on the CO2 levy and the political background, see the glossary.
Model your avoidance path with concrete numbers
The energy cost calculator shows how CO2 price burden, Brent shock, and subsidy stack interact. In 60 seconds with your own consumption values.
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