On 13 July 2022, the federal cabinet adopted amendments to the Fuel Emission Allowance Trading Act. Previous exemptions from carbon pricing for certain fuels are now abolished.
The trade in fuel emissions was previously restricted to carbon emissions from the use of heating oil, natural gas, gasoline and diesel. The system now also covers the burning of coal and waste. This closes crucial gaps in the carbon pricing which are currently still resulting in incentives which damage the climate: both in the use of coal as a fuel, and in waste incineration plants.
Specifically, this affects the increasing use of coal as a fuel in installations which do not take part in EU emissions trading. The possibility to evade these rules is closed by the amendment to the Act from 2023, as carbon pricing will now also cover these installations.
Waste incineration plants have so far largely been excluded from the scope of EU emissions trading, and have therefore not so far paid a carbon price for their fossil emissions. The inclusion of these installations creates a level playing field with all the other power stations producing electricity and heat. At the same time, the carbon pricing for waste incinerators improves the economic situation of the recycling industry, since a preference is given to material recycling over thermal use.
However, before the new rules can take effect, it was first necessary to develop appropriate reporting and procedural rules, so that the inclusion in the emissions trading system has been delayed until 1 January 2023.
Despite the carbon pricing of €35 per tonne which will then apply to coal and waste combustion, it is not likely that this will impact on consumer prices and thus fuel inflation. As in the past, the price of electricity on the exchanges is set by other fossil-fuel power stations, and the electricity price has risen significantly due to the high gas prices and the high carbon price in EU emissions trading, with the electricity-generating waste incinerators profiting from this.
All the revenue from the Fuel Emission Allowance Trading Act will accrue to the Energy and Climate Fund in the federal budget, and will thus return to the citizens. For example, the abolition of the EEG surcharge from 1 July 2022 is being funded from the Energy and Climate Fund. This is providing financial relief to the entire population.
A national carbon pricing system for the heating and transport sectors has existed since 2021. During the introductory phase, the enforceable system was restricted to carbon emissions from the use of fuel for vehicles and for heating. Companies that market heating oil, natural gas, gasoline and diesel have paid a carbon price of €30 per tonne since 1 January 2021, rising to €35 per tonne from 2023. They are required to buy emission allowances for the greenhouse gas emissions caused by these fuels. This takes place via the new national emissions trading scheme based on the Fuel Emission Allowance Trading Act.