The German Chamber of Commerce and Industry (IHK) has advocated for an Emissions Trading System (ETS) as a central steering instrument for the energy transition for many years. The advantage: An ETS makes it possible to achieve climate protection effectively through price signals and to avoid emissions where it is economically least costly. In short: emissions are capped through the certificate trading system, enabling climate neutrality purely via market mechanisms. Broad subsidies and regulations can then be done away with.

How emissions trading works

The state or the EU sets a cap on the allowable total volume of greenhouse gas emissions. Certificates are issued or auctioned, each granting the right to emit one tonne of CO₂. These certificates can also be traded between companies: those who reduce their emissions more efficiently than required can sell surplus certificates on the market. Those who emit more must purchase pollution rights.

With the aim of achieving climate neutrality, the number of issued certificates decreases each year. This makes supply scarcer and certificate prices rise, thereby creating financial incentives to invest in expensive energy efficiency measures and climate-friendly processes. Of course, the prerequisite is that an appropriate avoidance technology exists. Regulatory requirements are replaced by a market-based mechanism.

National and European systems

CO₂ emissions are currently priced through two systems depending on the sector: The EU launched the European Emissions Trading System (EU-ETS 1) in 2005. It applies across the entire EU and in Norway, Iceland, and Liechtenstein, covering emissions from energy-intensive industries (iron, steel, lime, cement, and chemicals), power plants, and increasingly also air and sea transportation.

The national emissions trading system in Germany has been closing the gap left by the EU-ETS since 2021: it addresses the sectors of heating and transportation. For its initial years, policy dictated the prices here to moderately increase CO₂ costs in the heating and transportation sectors.

In 2025, the price for one tonne of CO₂ was 55 Euros. Since the beginning of 2026, there has been a price corridor of 55 to 65 Euros to ensure a smooth transition into a Europe-wide trading system. Starting in 2028, the national emissions trading system is expected to merge into the European Emissions Trading System for buildings and transportation (EU-ETS 2), where certificates will be traded EU-wide.

Overall, the EU-ETS 1 and the national emissions trading system currently encompass about 85 percent of Germany's greenhouse gas emissions. The remaining emissions, mainly from agriculture and other land and forest uses, are not yet subject to CO₂ pricing.

Reform in progress

The existing ETS 1 for industry and power plants is very ambitious. According to current planning, no new certificates will be issued after 2039. From then on, companies can only trade among themselves, which is likely to lead to a significant price increase.

To avoid overwhelming businesses and associated losses in industrial production, the EU Commission is working on reforming the ETS: Among other measures, it plans to extend emissions trading pathways and allow excess emissions compared to the status quo due to the competitive situation of the industry.

For the transition to climate neutrality, companies need time since new infrastructures for electricity, hydrogen, and CO₂ are developing slowly, and national CO₂ costs burden international competitiveness. Details of the reform are expected to be released in summer 2026.

Download as PDF (only available in German)