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The move will make emission-free alternatives for heating and transportation more attractive. The increased costs for consumers are to be cushioned with billions in relief.
Companies that market gasoline, diesel, heating oil and natural gas will have to buy pollution rights.
Trading will start in 2021 with a fixed CO₂ price of 25 euro per metric tonne, instead of the originally planned ten euro. The price for certificates will then gradually increase through 2025 to 55 euro per tonne. From 2026, the price will be determined through auctions, with a price range of 55 to 65 euro per tonne of CO₂ specified for 2026.
Ministers have stressed that the aim is not to bolster state coffers but to ensure switching to climate-friendly alternatives makes sense financially.
To compensate for the higher costs, the government will use the new income in full to lower the price of electricity, promote green power and increase the commuter allowance for people with longer journeys.
Discussions on how the additional costs should be divided between tenants and landlords is ongoing.