_ J.C. Kofner, Economist, MIWI Institute. Munich, February 7, 2025.
The CDU/CSU, together with the votes of the Greens and SPD in the Bundestag, has approved a significant increase in the CO₂ levy. This will result in massive price hikes in the transport and heating sectors over the next two years, thereby substantially fueling overall economic inflation. Calculations indicate that the price of one liter of gasoline or diesel will reach €2.15, while the inflation rate will rise by a staggering 8.2%. The middle class and wage earners will be particularly affected, facing an increasing financial burden.
Political Background of the CO₂ Levy
On January 31, 2025, the Bundestag, with a majority comprising the CDU/CSU, the Greens, and the SPD, decided to integrate the CO₂ levy—previously regulated under the National Fuel Emissions Trading Act (BEHG)—into the European Emissions Trading System II (ETS II). The CO₂ levy was originally introduced in 2021 by the CDU/CSU-led government, underscoring the Union’s economically and socially detrimental policy stance.
The CO₂ levy applies to fossil fuels in the heating, building, and transport sectors. In 2021, it was set at €25 per ton of CO₂ and is expected to reach €55 per ton by 2025. Under current legislation, the levy will increase to €65 per ton by 2026 and, from 2027 onward, will be regulated through ETS II via the supply and demand of emissions certificates. The ultimate goal is to enforce the complete decarbonization of society by continuously reducing the number of available certificates.
The BEHG and ETS II complement the European Emissions Trading System I (ETS I), which has been in place since 2005 for industry and the energy sector. Until at least 2031, ETS I and ETS II will operate as separate certificate markets, with the European Commission set to decide later on a potential merger.
Economic Impact of the CO₂ Levy
In 2024, ETS I and the BEHG had already imposed a financial burden of €18.4 billion on the German economy, equating to an average cost of €440 per household. The CO₂ levy of €55 per ton in 2025 will result in the following price increases compared to a baseline year without the CO₂ levy:
| Energy Carrier | Price Increase Due to CO₂ Levy (€55/t CO₂) Compared to Baseline Year |
|---|---|
| Gasoline (€-cents/liter) | 16 |
| Diesel (€-cents/liter) | 17 |
| Heating Oil (€-cents/liter) | 18 |
| Heating Oil (€-cents/kWh) | 1.8 |
| Natural Gas (€-cents/kWh) | 1.2 |
| Natural Gas (€-cents/m³) | 12 |
| Waste Incineration (€-cents/kWh) | 2 |
| Waste Incineration (€/ton of waste) | 17.50 |
Leading research institutes predict that the introduction of ETS II will lead to a drastic increase in the CO₂ price.[1] The average forecast from seven studies suggests a price range of €233 to €235 per ton of CO₂. As a result, the following additional price increases can be expected:
| Energy Carrier | Price Increase Due to CO₂ Levy (€235/t CO₂) Compared to Baseline Year |
|---|---|
| Gasoline (€-cents/liter) | 55 |
| Diesel (€-cents/liter) | 62 |
| Heating Oil (€-cents/liter) | 67 |
| Heating Oil (€-cents/kWh) | 7 |
| Natural Gas (€-cents/kWh) | 5 |
| Natural Gas (€-cents/m³) | 46 |
| Waste Incineration (€-cents/kWh) | 7 |
| Waste Incineration (€/ton of waste) | 66.80 |
Here is your translation into sophisticated English while keeping all links and content unchanged:
The Impact on Average Gross Prices of Fossil Fuels Would Be Significant
| Energy Carrier | Average Gross Price (February 2, 2025)[2] | Average Gross Price with an ETS II Price of €235/t CO₂ |
|---|---|---|
| Gasoline (€-cents/liter) | 175 | 214 |
| Diesel (€-cents/liter) | 168 | 213 |
| Heating Oil (€-cents/liter) | 97 | 146 |
| Heating Oil (€-cents/kWh) | 10 | 15 |
| Natural Gas (€-cents/kWh) | 10 | 14 |
| Natural Gas (€-cents/m³) | 100 | 134 |
| Waste Incineration (€/ton of waste) | 142 | 192 |
Inflationary Impact
Using regression analysis (R² = 99.9, standard error = 0.02) based on an economic assessment by the German Council of Economic Experts (SVR) from 2020, the inflationary effect can be estimated. An increase in the CO₂ price from €65 to €235 per ton of CO₂ would raise the Harmonized Index of Consumer Prices (HICP) by 8.2 percentage points year-on-year. Compared to the baseline year 2020, which had no CO₂ levy, the cumulative price-driving effect amounts to 11.5%.
Alternative: Abolishing the CO₂ Levy
The AfD demands the complete and immediate abolition of CO₂ pricing. The elimination of the CO₂ levy under the BEHG/ETS II framework would, ceteris paribus, significantly reduce the average gross prices of fossil fuels for transportation and residential heating:
| Energy Carrier | Average Gross Price Without CO₂ Levy / ETS II |
|---|---|
| Gasoline (€-cents/liter) | 159 |
| Diesel (€-cents/liter) | 151 |
| Heating Oil (€-cents/liter) | 79 |
| Heating Oil (€-cents/kWh) | 8.2 |
| Natural Gas (€-cents/kWh) | 8.8 |
| Natural Gas (€-cents/m³) | 88 |
| Waste Incineration (€/ton of waste) | 125 |
Lower and middle-income households would particularly benefit from the abolition of the CO₂ levy, as heating and transportation constitute a significant portion of their consumer expenditures. Therefore, eliminating the CO₂ levy would be a crucial step toward easing the financial burden on citizens and preserving price stability.
Footnotes:
[1] Pahle M. (2024). Die CO2-Bepreisung im Umbruch. Was ist vom ETS2 zu erwarten, was kann ein Klimageld leisten?. Friedrich-Ebert-Stiftung (FES). URL: https://library.fes.de/pdf-files/a-p-b/21122.pdf | Agora Energiewende (2023) ETS 2: Herausforderungen und Lösungsansätze für einen gerechten Übergang. URL: https://www.agora-energiewende.de/fileadmin/Projekte/2023/2023-26_DE_BEH_ETS_II/A-EW_311_BEH_ETS_II_WEB.pdf | Günther, J. et al. (2023) Economic impacts of ETS II in the EU. Potsdam Institute for Climate Impact Research (PIK). URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4808605 | Rieckels, W. et al. (2023) The economic consequences of ETS II. IfW Kiel. URL: https://www.ifw-kiel.de/fileadmin/Dateiverwaltung/IfW-Publications/fis-import/200f22d3-1461-4366-ab70-c1a83fd7dd7f-KWP_2249.pdf | MCC – Mercator Research Institute on Global Commons and Climate Change (2023) CO₂ pricing and climate neutrality in transport and buildings. URL: https://www.mcc-berlin.net/fileadmin/data/C18_MCC_Publications/2023_MCC_CO2-Bepreisung_Klimaneutralit%C3%A4t_Verkehr_Geb%C3%A4ude.pdf | Abrell, J. et al. (2022) ETS 2 and its impact on social fairness. Klima-Allianz Deutschland. URL: https://www.klima-allianz.de/fileadmin/user_upload/2024/2024-02_KAD_ETS2-KSF-final.pdf | Kopernikus-Projekte (2021) CO₂-Preisentwicklung im europäischen Emissionshandel. URL: https://www.kopernikus-projekte.de/lw_resource/datapool/systemfiles/cbox/1828/live/lw_datei/2021_11_ariadne_hintergrund_co2-preisentwicklung_november21.pdf
[2] Destatis (2025) Energiepreise und Entwicklungen. URL: https://www.dashboard-deutschland.de/energie/energie | HeizOel24 (2025) Heizölpreise in Deutschland. URL: https://www.heizoel24.de/heizoelpreise | Verivox. (2025). Gaspreis für Privathaushalte in Deutschland. URL: https://de.statista.com/statistik/daten/studie/1459097/umfrage/gaspreis-privathaushalte-deutschland-taeglich/ | Energiemarie (2025) Gaspreisvergleich in Deutschland. URL: https://energiemarie.de/gaspreisvergleich | Frese A. (2024) Der Müll wird teurer. Tagesspiegel. URL: https://www.tagesspiegel.de/wirtschaft/der-mull-wird-teurer-8150218.html