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CO2 pricing

Heating with oil and gas will get noticeably more expensive in 2021, whilst heating with electricity will get cheaper. The reason: There is finally an environmental charge for CO2.

It’s been a long and rocky road to get here. The first draft of the climate package presented by the government in November 2019 fell far short of expectations.

„With legislation such as this, the federal government will not be able to achieve the climate goals it has set itself for 2030.“

Professor Edenhofer - Economics professor and director of the Potsdam Institute for Climate Impact Research (PIK)

Patrick Graichen, head of the think tank Agora Energiewende, gave the following comments: “This climate package is appallingly lacking in force and courage. The CO2 pricing, in particular, is a bad joke. The annual rise in the CO2 price is so homoeopathic that it is barely higher than inflation. It will simply not be possible to achieve the climate goals by 2030.” Graichen went on to propose a starting price for CO2 at 50 euros per tonne.

After intensive debate, the government made improvements to the package. The climate package has now been agreed and national emissions trading starts in 2021 with a CO2 price of 25 euros per tonne. This equates to an increase of 8 cents per litre of heating oil and 0.5 cents per kilowatt hour of natural gas. In subsequent years, the price of CO2 will rise to 55 euros per tonne in 2025. Starting from 2026, the price will be determined based on an auction system where a price range of 55 to 65 euros per tonne of CO2 has been agreed.

These additional costs are to be paid by the energy distributor, i.e. the gas providers and heating oil retailers. It is expected that the agreed price rises will ultimately be passed on to the consumer. Exactly what this will mean has been calculated by the Consumer Association of North Rhine-Westphalia:

Oil heating

Living space 2021 2022 2023 2024 2025
100 qm 118,70 € 142,44 € 166,18 € 213,66 € 261,15 €
150 qm 178,05 € 213,66 € 249,28 € 320,50 € 391,72 €

Gas heating

Living space 2021 2022 2023 2024 2025
100 qm 90,14 € 108,17 € 126,20 € 162,26 € 198,13 €
150 qm 135,21 € 162,26 € 189,30 € 243,38 € 297,47 €

Annual extra costs resulting from CO2 pricing. Calculations are based on using 200 kW of energy for heating per square metre each year. Source: Consumer Association of North Rhine-Westphalia.

Summary: Anyone still using oil or gas for heating in 2025 will need to reckon with an additional 300 to 400 euros on their energy bill to heat the average single-family home.

And that’s just the start. Once the auction system kicks in from 2025, experts expect further price rises since many climate experts consider the currently agreed upper limit of 65 euros per tonne insufficient to cover the full extent of the environmental damage caused.

(Foto: European Union 2019)

Brussels has already acknowledged that the heating and transport sectors can and must be decarbonised through the use of electricity from renewable sources. President of the European Commission Ursula von der Leyen is a strong advocate in this area. At the end of 2020, she called for an EU-wide CO2 reduction target of 55% compared to 1990 to be achieved by 2030. The subsequent estimate by the EU Commission expects that by 2030, it would be possible to have 40% of the heating and cooling sector powered by electricity. The buildings sector, currently responsible for 40% of energy demand and 36% of greenhouse gas emissions, has by far the largest decarbonisation potential.

„Global warming is continuing and will only increase if we continue to burn fossil fuels.“

Ursula von der Leyen - President of the European Commission

Observers expect further efforts at the EU level to further disincentivise the currently widespread use of oil and gas heating systems. Decarbonisation through electrification – just like the ecological transformation in the transport sector – away from combustion engines and towards electric mobility.

Federal Minister of Economics Peter Altmaier comments: “Up to now, it is the end consumer who has been financing the renewable energy law through a renewable energy contribution that makes up part of their energy bill. In the future, money from the national budget will be used to reduce this contribution, thus lessening the financial burden on consumers.”

Users of infrared heating will benefit in several ways from the ecologically motivated developments at the national and international levels: Whereas older heating systems (oil and gas) will become increasingly unattractive and more expensive, the cost of heating using electricity from renewable sources will reduce.

Those looking for environmentally friendly zero-carbon alternatives for heating their home will find heat pumps and efficient infrared heating systems of interest. Many years of experience show that both of these technologies can provide pleasant and affordable heating for the home.

Even before the introduction of CO2 pricing in 2021, Welltherm infrared heaters with powerful ESHC(+) technology came out very much ahead of fossil fuels, and even ahead of air-water heat pumps, over a realistic usage period of 20 years, thus making them significantly more affordable than any other home heating system. You can read more about this in our post looking at a heating cost comparison for new builds.

Just how incredibly affordable the cost of heating your home can be is demonstrated by Anne and Florian R. in their single-family home built in 2018. Thanks to a PV system and efficient Welltherm infrared heating, they pay less than 100 euros a month for their total energy consumption for electricity, hot water and electrical heating. You can read the report in full here along with the evidence of their cost savings.

Summary: The Welltherm heating system is affordable and environmentally friendly. The political framework now in place makes using this technology advantageous for years to come.