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Energy Efficiency

CO2 Price Agreement to Relieve Millions of Tenants

Ministries in Germany’s new coalition government have reached an agreement to ensure fairness in the share of CO2 costs between property owners and tenants. The 10-stage model will come into effect in January 2023.

Agreement reached on residential and non-residential building CO2 surcharge share

An agreement on the fair sharing of the CO2 surcharge in residential and non-residential buildings between landlords and tenants has been agreed on in discussions between the Federal Ministry for Economic Affairs and Climate Action (BMWK), the Federal Ministry for Housing, Urban Development and Building (BMWSB), and the Federal Ministry of Justice and Consumer Protection (BMJ). The 10-stage model will come into effect in January 2023.

CO2 emissions levy to promote energy-efficient building renovations

Germany has levied a price for CO2 emissions since 2021, with a current price of EUR 30 per ton of CO2 emitted when burning heating and for motor fuel. This will rise incrementally to EUR 55 per ton of CO2 emissions in 2025. The surcharge was introduced to motivate property owners to implement energy-efficient building renovations and promote efficient energy use among building tenants. The new agreement will see a new distribution based on the tiered model for residential buildings introduced as part of the new coalition government mandate.

Agreement creates fair distribution of costs between landlords and tenants

The phased model will provide relief for millions of tenants who alone have borne the additional cost of the CO2 levy on oil and gas consumption. The new model foresees a fairer distribution of costs between landlords and tenants that also incentivizes property owners to invest in energy-efficient building renovations as part of broader climate policy goals. According to a spokesperson for the three ministries, future CO2 cost distribution will be based on building “climate friendliness” levels, with landlords responsible for 90 percent of emission costs where properties are found to have a poor energy balance as the result of poor insulation measures. The reallocation of costs also extends to commercial real estate properties. The number of different case constellations will see a flat-rate 50-50 cost split between building owners and tenants with the ten-step model being introduced at some point in the future.

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