Tenants, landlords in Germany to share CO2 tax for heating

Renters in Germany mostly bear the entire burden from a new CO2 tax for heating systems that use fossil fuels. Upcoming rules are aimed at fairly splitting the costs between owners and tenants.

The federal ministries responsible for economic affairs, housing and justice reached an agreement to amend the rules on carbon dioxide costs for heating in buildings in Germany. The CO2 tax, introduced last year, was so far charged to property owners, but they effectively passed them on to their renters.

The idea is to split costs fairly and promote energy efficiency measures and energy savings. The proposed tiered scheme, to be introduced at the beginning of next year, would apply to residential buildings and those of mixed use. A 50:50 split is envisaged for commercial and other non-residential structures until an appropriate scheme is devised, which may take years.

Heating CO2 costs to almost double by 2025

The current price is EUR 30 per ton of CO2 emitted from the combustion of fossil fuels. It is set to gradually rise by 2025 to EUR 55 per ton. In the existing system, tenants have no ability to lower the building’s contribution to the emissions of the greenhouse gas from heating while the owners can’t control how much fuel is being used. The German government isn’t satisfied with the measure’s effect on progress toward climate goals.

In the existing system, tenants have no ability to lower the building’s contribution to the heating CO2 emissions while the owners can’t control how much fuel is being used

“We are finally creating a fair division of costs between landlords and tenants. It relieves millions of tenants in a targeted manner. At the same time, we are ensuring that CO2 pricing can achieve its intended climate policy effect in the buildings sector. Landlords are given an incentive to invest in energy-related renovations. Tenants remain motivated to reduce their energy consumption,” Minister for Housing, Urban Development and Building Klara Geywitz said.

Residential sector to be divided into ten categories

The worse the energy score of the residential or mixed-use building is, for instance if the heating device is old and windows are in bad shape, the higher the share of costs that the landlord has to bear. The emissions burden is calculated per square meter and divided into ten categories.

Landlords will bear 90% of the cost for apartments with the lowest energy efficiency balance, larger than 52 kilograms of CO2 per square meter. For buildings with the highest standard, with less than 12 kilos of CO2, they won’t have to pay anything through the heating bill.

Tenants now often suffer from high energy costs due to poor insulation and heating, without being able to take countermeasures themselves, Vice-Chancellor and Federal Minister for Economic Affairs and Climate Action Robert Habeck stressed. With the new rules, if the building is renovated, tenants can reduce heating costs by saving energy.

The average heating CO2 tax is currently EUR 130 per year for apartments in unrenovated buildings using gas and EUR 190 per year for heating oil, Tagesspiegel reported and added the new mechanism could save most tenants EUR 12 to EUR 72 per year.