Germany’s New Fuel Emissions Trading Rules Explained

The German Federal Ministry for Economic Affairs has published a draft regulation for a revised Fuel Emissions Trading Ordinance, now under consultation with industry associations. The regulation is designed to adapt and further develop the national Fuel Emissions Trading System (nEHS) in accordance with the Fuel Emissions Trading Act (BEHG). Central elements of the draft include the introduction of new auction procedures for emissions certificates, the transition to market-based pricing, and measures to reduce administrative complexity.

For 2026, the regulation introduces an auction process for emissions certificates, featuring a price corridor to facilitate the transition to market-based pricing from 2027 onwards. The price corridor for emissions certificates is set between 55 and 65 euros per certificate. The auction will follow a uniform price procedure, meaning all successful bids will be awarded at the same price, determined by the lowest bid at which the total available quantity of certificates is allocated or exceeded.

Special provisions apply if demand exceeds supply at the upper end of the price corridor. If the clearing price reaches 65 euros and demand remains moderate, all bids may be fully allocated. In cases of significant oversubscription, allocation will be proportional. Once the entire volume has been auctioned, certificates may be sold at a fixed price of 70 euros to address excess demand.

Transition to Market-Based Pricing and ETS 2 Integration

From 2027, the price for emissions certificates in the national system will be determined on a market basis. The price will be calculated as a volume-weighted average of certificate auction prices in the European Fuel Emissions Trading System (ETS 2) from the penultimate preceding quarter. The competent authority will publish this price at least two months before the start of each quarter, providing market participants with planning certainty.

Sales of emissions certificates will commence from the third quarter of 2027, with a minimum of one sales date per month to ensure regular market access. This approach aims to facilitate a smooth transition for obligated parties, including those in the waste sector, as the national system is gradually integrated into the European framework.

The integration into ETS 2 marks a significant step, as this system also covers fuel emissions at the European level. The transition is structured to align national pricing mechanisms with the broader European market, supporting harmonization and reducing the risk of market distortions.

Administrative Simplification and Contingency Provisions

The draft regulation also addresses administrative simplification. Adjustments to the national emissions trading register are intended to streamline enforcement and reduce the administrative burden on regulated entities. These measures are expected to benefit operators in the waste-to-energy sector by lowering compliance costs and improving procedural efficiency.

In the event of delays to the start of ETS 2, the regulation provides for the continued operation of the national system in 2027. In such cases, the price for certificates will be based on the average price from the existing plant-based EU Emissions Trading System (ETS 1), ensuring continuity and price orientation.

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