The latest cabinet decision of 12 August 2026 stabilises the national CO2 price in Germany until the end of 2027 within a corridor of 55 to 65 euros per tonne. This determination temporarily provides planning certainty for owners and investors regarding ancillary costs and the allocation of CO2 costs between tenants and landlords.
From 2028, however, a significant change is on the horizon: the building sector will be integrated into the European Emissions Trading System (ETS 2). This means a stronger market-driven approach to CO2 pricing, with no permanent guaranteed price cap currently in place. For long-term real estate investors, this presents a relevant risk that must already be considered in business plans and valuations.
Rising Costs and Their Impact on Property Values
The potential scale of future CO2 prices can be seen from international examples. In 2025, these were 134 euros in Sweden, 126 euros in Switzerland, 124 euros in Norway, and 100 euros in Denmark per tonne of CO2e. An approximation of the German CO2 price to these levels from 2028 would mean an additional burden on ancillary costs. For the real estate sector, this is highly relevant, as higher ancillary costs affect the scope for net cold rents as well as general marketability. The total monthly burden on tenants is the decisive factor here. Rising heating and CO2 costs could make it more difficult to implement higher cold rents on the market. From 2028, it is likely to become increasingly challenging to rent out energy-inefficient buildings, both in the residential and non-residential sectors, and to achieve adequate returns.
The proposed 'Biotreppe' (bio-step) in the Building Modernisation Act (GModG), which obliges fossil heating systems to gradually use climate-neutral fuels, does not offer an automatic solution to this problem. Organisations such as the ZIA and the DGNB have expressed concerns regarding the availability of the required fuel quotas from energy suppliers. This carries the risk of potential supply gaps. From an investor's perspective, it is therefore not sufficient to focus solely on legal transition periods. The crucial factor is the future overall cost structure of a building and its competitiveness compared to more energy-efficient properties.
Long-term Strategies and Risk Management
For investors, it remains essential to realistically integrate CO2 costs beyond 2027 into business plans and valuations. Sole reliance on the current price cap provides only short-term security. The long-term direction is set by the EU Green Deal and the EPBD, which demand a significant reduction in emissions in the building stock. At the same time, national legislation in Germany is partly seen as critical, as necessary measures and associated challenges are being postponed in the short term.
The required renovation rate of 1.9 per cent, as indicated by BuVEG, has not been achieved in Germany for years, and in the past four years, it was below 1.0 per cent. Further postponement of necessary investments increases the risk that owners will face multiple burdens simultaneously in the future: higher CO2 prices, rising operating costs, increased renovation needs, and a weakened market position for inefficient properties. Dr Michael Heigl, Director ESG & Impact Economics at Wüest Partner, therefore recommends not considering the current CO2 price of 55 to 65 euros per tonne as the central assumption for long-term decisions. Instead, scenarios should be developed that also account for significantly higher prices from 2028 and adequately reflect their impact on ancillary costs, rents, marketability, investment requirements, and property values.
