Now the chancellor as well. “We should be very open to a revision or at least to a postponement,” Friedrich Merz (CDU) explained before the meeting of the 27 heads of state and government of the EU on Thursday. He was talking about the Emissions Trading System: Since 2005 the European Emissions Trading System (EU ETS) has been the Union’s most important instrument in climate protection.
Originally the emissions trading was to be moved into a second phase starting in 2027. The industry has been lobbying against this for weeks. Apparently with success: now the federal government is also in favor of a loosening.
Under the current “EU ETS,” industrial companies need a permit to emit greenhouse gases—in the form of a certificate. These certificates were initially issued to companies for free and then traded under the so-called “Cap & Trade” principle: A cap sets the total number of greenhouse gas emissions that may be released. If a company invests in climate protection, it uses fewer certificates, so it can offer the freed certificates on the market—“Trade.” Those who need more, for instance because demand rises, must buy certificates.
Economists warn against weakening
Originally it was planned to extend the Emissions Trading System from 2026 to also cover buildings, transport as well as smaller industrial plants. This would make fossil heating or fueling more expensive, which would make climate-friendly alternatives more attractive. Moreover, in this “EU ETS 2” the certificates should no longer be issued for free as before. In autumn 2025 the EU adopted a new climate target: by 2040 the greenhouse gas emissions of the 27 member states should be reduced by 90 percent below the 1990 level. However, only 37 percent of that has been achieved yet.
Nevertheless, parts of the industry took to the barricades against expanding the emissions trading system. And this week the EU Parliament voted to introduce the “EU ETS 2” system only in 2028—one year later than planned. For it to actually happen, Council and Commission would still need to agree. Now the Chancellor—following Commission President Ursula von der Leyen—signals that this could happen.
An easing/softening would jeopardize the effective and cost-efficient achievement of the climate targets.
Götz Reichert, Centre for European Policy Network
Economists warn against weakening the instrument. “The price should rise to at least 80 euros per ton,” argues Sonja Peterson, climate economist at the Kiel Institute for the World Economy. This would help avoid shifting the costs of climate policy into the future. Götz Reichert of the Centre for European Policy Network regards the introduction of the “EU ETS 2” system as indispensable: “Its weakening would jeopardize the effective and cost-efficient achievement of the climate targets.”
Over the Fuel Emissions Trading Ordinance (BEHV) there has already been a certificate trading for heating gas and petrol in the Federal Republic since 2021. However, the price there is too low: currently certificates are auctioned for 55 to 65 euros per ton of carbon dioxide, which raises heating gas by only about 1.1 to 1.3 cents per kilowatt-hour – not enough to generate a steering effect away from natural gas.
European greenhouse gas certificates currently cost just under 90 euros; this needs to be aligned, argues economist Peterson: “It is important that the revenues from CO₂ pricing are specifically used to support poorer households in the transformation.”
Originally Olaf Scholz’s (SPD) cabinet had planned such a burden-sharing arrangement; the money for it was to come from the Climate and Transformation Fund. However, the traffic-light coalition collapsed before this offset was drafted into law.
Not only in Brussels is climate protection under pressure, but also in Berlin: This week the draft for the “Grid Package” from the Federal Ministry for Economic Affairs and Climate Action became known. “What Katherina Reiche intends to do is a frontal assault on the energy transition,” said the Green party energy policy spokesman Andreas Audretsch.
Expansion of Wind and Solar „Choked“
For example, the bill contains a “capacity limit.” Audretsch, who is also deputy parliamentary group leader: “That is technical language for the expansion of wind and solar being throttled.” In addition, those who invest in renewables would, under the draft, additionally pay for the grid expansion in the future. Instead of slowing the expansion, Audretsch calls for accelerating it.
Figures from the German Institute for Economic Research (DIW) support him: the dynamics of expansion are not sufficient to reach the legally mandated expansion targets by 2030. By the end of 2025, for example, photovoltaics had reached only roughly half of the target: 117 of 215 gigawatts.
