CO2 tax

CO2 Levy - The CO2 levy is a government-imposed surcharge on fossil fuels such as natural gas and heating oil that has been in effect in Germany since January 2021 and is intended to factor the costs of climate change into heating bills. Since 2023, CO2 costs for rented buildings have been split between landlords and tenants according to a legally defined tiered model.

How the CO2 tax works

The CO2 tax was introduced as part of the Fuel Emissions Trading Act (BEHG) and specifically increases the cost of consuming fossil fuels. The price is calculated per ton of CO2 emitted and added to the fuel price. Since its introduction, the CO2 price has risen in stages: from an initial 25 euros per ton in 2021, to 30 euros (2022), 30 euros (2023), 45 euros (2024) to 55 euros per ton in 2025. Further increases are planned to make the switch to climate-friendly heating systems more economically attractive.

For property owners and tenants, the CO2 tax is directly reflected in heating costs. For an average single-family home with gas heating and an annual consumption of around 20,000 kilowatt-hours, the additional costs resulting from the CO2 tax in 2025 will amount to approximately 220 to 250 euros per year. For heating oil, the burden is slightly higher due to the higher CO2 emissions per kilowatt-hour.

Until the end of 2022, tenants bore the full cost of the CO2 levy through their heating bills. With the entry into force of the Carbon Dioxide Cost Allocation Act (CO2KostAufG) on January 1, 2023, the legislature introduced a tiered model that allocates costs between landlords and tenants based on the building’s energy efficiency.

The 10-Tier Cost-Sharing Model

The CO2KostAufG provides for a 10-tier model that uses annual CO2 emissions per square meter of living space as a benchmark. The poorer a building’s energy efficiency, the higher the share the landlord must bear. The logic behind this: The landlord has the power to reduce CO2 emissions through energy-efficient renovations, while the tenant can only influence their own heating habits.

For highly efficient buildings with emissions below 12 kilograms of CO2 per square meter per year, the tenant bears the full CO2 costs. As emissions rise, the landlord’s share gradually increases: For emissions of 12 to 17 kilograms, the landlord covers ten percent; for 17 to 22 kilograms, twenty percent, and so on. For particularly inefficient buildings with emissions exceeding 52 kilograms of CO2 per square meter per year, the landlord must bear 95 percent of the CO2 costs. The landlord is obligated to calculate the allocation as part of the annual heating cost statement and to deduct their own share accordingly.

CO2 Cost Allocation Based on Energy Consumption (10-Step Model, § 5 CO2KostAufG)

CO2 Emissions (kg/m²·year)	Tenant Share	Landlord Share	Typical Building Category
Under 12	100%	0%	New construction KfW 40/55, heat pump
12-17	90%	10%	Renovated older building, good insulation
17-22	80%	20%	Partially renovated existing building
22-27	70%	30%	Older building with new heating system
27-32	60%	40%	Older building, average standard
32-37	50%	50%	Poor existing stock
37-42	40%	60%	Energy efficiency class F
42-47	30%	70%	Energy efficiency class G
47-52	20%	80%	Poorest condition
Over 52	5%	95%	Requires renovation

Calculation example: Older building in Nuremberg-Gostenhof, gas heating, 35 kg CO2/m²·year → Landlord’s share 60%. With 500 m² of living space and CO2 costs of €1,500/year, the landlord pays €900.

Practical tip for Nuremberg and Franconia

The Nuremberg metropolitan region has a significant stock of post-war older buildings, many of which are still heated with gas or oil and have low energy efficiency ratings. Landlords in neighborhoods such as Gostenhof, Südstadt, Schweinau, or even in the Wilhelminian-style districts of Fürth should be fully aware of their buildings’ CO2 emissions, as poor energy ratings can quickly drive their own share of costs to several hundred euros per apartment per year. We recommend using the data from the energy performance certificate as a guide and, for unrenovated properties, assessing the cost-effectiveness of energy-efficient modernization. The City of Nuremberg and the Federal Office for Economic Affairs and Export Control (BAFA) offer subsidy programs for heating system replacement and building insulation that can significantly reduce the landlord’s share of CO2 costs in the long term.

Frequently Asked Questions About the CO2 Tax

Does the CO2 tax also apply to heat pumps and district heating?

The CO2 tax applies only to fossil fuels, i.e., natural gas, heating oil, liquefied petroleum gas, and coal. Those who heat with an electric heat pump, a pellet heating system, or solar thermal energy are not subject to the CO2 tax. For district heating, it depends on the sources used to generate the heat-if natural gas is used as fuel, the CO2 levy is factored into the district heating price on a pro-rata basis.

As a landlord, how do I find out my CO2 share?

The fuel supplier lists the CO2 costs on the invoice. Landlords must then calculate the specific CO2 emissions in kilograms per square meter based on energy consumption and the heated living area and apply the corresponding level of the 10-level model. Many property management companies and heating cost billing firms now perform this calculation automatically. We recommend carefully reviewing the classification on the first bill.

Can the landlord pass on the CO2 costs to the rent?

The CO2 levy is not a recoverable operating cost item within the meaning of the Operating Costs Ordinance. The landlord’s share of the CO2 costs may not be passed on to the tenant either through the heating cost bill or via a rent increase. Only the tenant’s share, determined according to the tiered model, may be included in the heating bill and borne by the tenant. A violation of this rule may be contested by the tenant.

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