The CO₂-tax: What does it mean for your company?

Since January 01, 2021, the CO₂-pricing, also known as "CO₂-price" or "CO₂-tax". The planned annual increase was suspended in 2023. Now the German government is raising the bar considerably: In the eyes of many business owners and consumers, this is an additional burden, as the new tax will cause energy prices to skyrocket, thereby increasing heating costs, among other things. Find out more about the new CO₂-tax and its consequences.

CO₂ also has a price in Germany

At the 2015 UN Climate Change Conference in Paris, the global community decided to limit global warming to well below 2 °C, and if possible to 1.5 °C, in order to protect our livelihoods. To achieve this, we must be greenhouse gas neutral from 2050. Since then, more and more measures have been developed to achieve this goal - both internationally and at European and national level. The European Union wants to reduce greenhouse gas emissions by at least 55% by 2030 (the reference year is 1990). With the so-called EU ETS (European Union Emissions Trading System), there is emissions trading for almost the entire energy industry. The aim is to reduce climate-damaging gases by issuing a limited number of emission allowances as an incentive and trading them freely on the market. However, there has been no such incentive outside of European emissions trading to date. In the 2030 national climate protection program, the German government therefore adopted price incentives in addition to funding programs and regulatory measures.

The transport and heating sectors are particularly important, as they are responsible for around a third of climate-damaging emissions. By 80 %, the CO₂-emissions in the heating segment alone by 2050. The path to achieving this was paved when the Fuel Emissions Trading Act (BEHG) came into force at the end of 2019. Based on this, greenhouse gas emissions now also have a price in Germany. Since 2021, Germany has had its own additional instrument for reducing CO₂-emissions, known as CO₂-tax. The federal government is thus setting clear targets:

• Achieving the minimum targets of the EU Climate Protection Regulation
• Meet national climate protection targets, in particular greenhouse gas neutrality in Germany by 2045
• Improve energy efficiency

How does the CO₂-tax?

The CO₂-tax applies to the transport and building heating sectors. It stipulates that the combustion of fossil fuels such as heating oil, liquid gas, natural gas, coal, petrol and diesel is "taxed" by means of a fixed, gradually increasing price. This is intended to create incentives to consume less energy and switch to more environmentally friendly alternatives.

How does the CO₂-tax now? Companies that place these fuels on the market must purchase so-called "emission rights" in the form of certificates. These certificates are based on a predetermined limit quantity of emissions; their number is reduced from year to year. Who acquires these certificates differs depending on the fuel. In the case of natural gas, for example, it is the municipal utilities that supply the end consumers. Certificates for mineral oil products must be purchased primarily by producers (e.g. refineries) and traders. The costs for these emission allowances are passed on to end consumers, i.e. private customers and companies, with the result that the prices for heating agents and fuels will rise from 2021 onwards.

What comes with the CO₂-tax additional costs for you?

To enable the economy and consumers to gradually adapt to the new system, the CO₂-tax initially at fixed prices. They started 2021 at 25 euros per tonne of CO₂ and will gradually increase until 2025. From 2026, the regulation stipulates that the cost of CO₂tax will initially be market-dependent in a price corridor between 55 euros (minimum) and 65 euros (maximum) per ton of CO₂ and move into a free trading phase from 2027. In 2025, a decision on further pricing will be made at a political level. The cost of fossil fuels will therefore increase gradually. The annual increase in 2023 was suspended due to the rising prices caused by the energy crisis as a result of the Russian attack on Ukraine. As a result of the budget crisis, the German government will be adding a substantial increase from 2024: the CO₂-tax according to the government's complaint of December 13.

Source: Government declaration of December 13, 2023

What does the CO₂-tax and what should you do?

First and foremost, the CO₂-tax two things:

1. Heating and mobility are becoming more expensive.
2. Energy sources, energy use and technologies must be reassessed and made significantly more efficient in order to offset rising costs.

In line with the motto "The cleanest and cheapest energy is energy that is not consumed in the first place", the Federal Ministry for Economic Affairs and Energy is using its campaign Germany does it efficiently on the conservation of resources. The principle of "efficiency before substitution" applies here. For example, if you are already using modern, decentralized efficiency technologies for heating, which work with fossil fuels but are very energy-efficient, there is less need for action. Incidentally, according to GEG24, extensive exemptions and flexible deadlines apply to heating with decentralized technologies in hall buildings above a height of four meters.

Energy efficiency is not only a necessity from an ecological point of view, but is also increasingly important from an economic point of view. This is why you should not hesitate to modernize your heating system or switch to alternative energy sources in the long term. This could also be natural gas in the future - because: The upcoming supply of hydrogen (power-to-gas) and the possibility of producing natural gas synthetically will make this energy source increasingly greener and more renewable. The best way to find out more is to read our further article on Future technologies for heating modernization!

What opportunities does the economy have to reduce CO₂-tax costs?

The good thing about SESTA and the new CO₂tax: the policy provides real incentives to make more energy efficiency, the use of climate-friendly energy sources and the development of innovative products attractive to companies and consumers. In addition, the fixed price regulation until 2026 provides planning security and a sufficiently large time window to react. As a company or consumer, you decide for yourself: Does it make more sense for you to reduce CO₂-tax or to counteract the increase in costs with appropriate measures? Our tip: try to achieve your goals with as little energy as possible and consider using renewable energies in the long term. This will benefit both sides: the climate and your company. Below we give you examples of how you can increase energy efficiency:

• Increased thermal insulation
• The use of energy-efficient technologies
• The use of heat recovery and residual heat
• The use of intelligent control technology
• Switching to energy sources with lower emission values (e.g. natural gas instead of heating oil)
• The integration of solar thermal energy and other renewable energies

How can rising costs be avoided?

• § Section 11 of the SESTA provides companies with financial compensation under a hardship scheme if they are unreasonably affected by rising prices. The prerequisites are
• Fuel costs account for more than 20 % of total operating costs.
• Additional costs incurred by the company as a result of the introduction of SESTA would exceed 20 % of gross value added.

In addition, double charges resulting from the use of fuels in an installation subject to EU emissions trading should be avoided as far as possible.

There are also plans to ease the burden on those companies that are affected by the CO₂-taxation would experience disadvantages. For a number of foreign competitors, CO₂-pricing and the resulting increase in fuel costs. The solution comes in the form of the so-called "Carbon Leakage Ordinance": those who are affected by the CO₂-tax has disadvantages on the international market receives financial compensation. In this way, Germany wants to prevent companies from moving away. However, affected companies must prove that they have an energy management system and are already working on reducing their CO₂-emissions. They must then use the concessions to further reduce their CO₂-emissions.

Will my climate protection measures be funded?

At a national level, the federal government has supported investment in climate protection through a series of comprehensive, partially updated funding programs and grants. These include, for example, the Federal subsidy for efficient buildings (BEG) or the Federal funding for energy efficiency in the economy. You could apply for these programs either as a grant via BAFA or as a loan subsidy via KfW. In addition, costs incurred for energy consulting are also subsidized. We will provide information on the current status of the funding programs as soon as they have been finalized.

What options can companies use if the investment costs are too high?

Anyone who is unable or unwilling to invest but still wants to use modern efficiency technologies to heat production halls and warehouses and thus avoid the additional costs of CO₂-tax is well advised to use HeizWerk. This rental model is economically interesting in two ways - firstly, because there are no investment or depreciation costs for companies. Secondly, because the energy cost savings from the efficiency technologies are usually significantly higher than the rental amount when refurbishing existing systems. With the positive result that companies even have extra money in their coffers after modernization.

Conclusion: Start reducing CO₂-emissions of your company!

Even if the CO₂-tax means that prices are only rising slowly, you shouldn't wait too long. Get an overview of your savings potential and reduce CO₂-emissions and energy consumption. Modernizing heating systems in hall buildings in particular promises great potential savings. You are welcome to calculate with our free CO₂-Calculator and get an initial assessment of where and how you can still reduce!