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Market analysis··2 min read

Redirection of ETS Revenues: Concerns for the Heating Transition in the Building Sector

The German Property Federation (ZIA) criticises the planned misappropriation of revenues from the European Emissions Trading Scheme (ETS), which were previously allocated to the Climate and Transformation Fund (KTF).

AI generatedRedirection of ETS Revenues: Concerns for the Heating Transition in the Building Sector – AI-generated illustrative image
Redirection of ETS Revenues: Concerns for the Heating Transition in the Building Sector. Illustrative image generated using artificial intelligence (AI). The image does not depict a real property, person or event and is not a documentary photograph. Labelled in accordance with Article 50(4) of the EU AI Act.

The ZIA criticises the draft economic and financial plan for the 'Climate and Transformation Fund' (KTF) special fund, which was approved by the Federal Cabinet. This draft foresees a partial redirection of revenues from the European Emissions Trading Scheme (ETS). Instead of fully allocating the funds to the KTF, EUR 2.7 billion, which is more than half of the revenues, are to be used to finance the core budget. In this scenario, EUR 2.51 billion would remain in the KTF.

Aygül Özkan, Chief Executive of the ZIA, describes this approach as a contradiction to the principle of directly using revenues from carbon pricing for climate protection and transformation. Such a measure would not only jeopardise the acceptance of the instruments but also weaken climate protection. The full integration of revenues into the KTF has until now been an established principle intended to ensure targeted use for climate policy objectives.

Particular concern in the real estate sector exists regarding the Federal Funding for Efficient Buildings (BEG), whose financing is largely provided by the KTF. The ZIA sees a medium-term risk of a reduction or deterioration of conditions for building subsidies due to the planned reallocations. Given the increased requirements for the energy-efficient modernisation of buildings through the Building Modernisation Act (GModG) and the European Energy Performance of Buildings Directive (EPBD), reliable and sufficient funding is essential. Without this support, renovation measures in the building sector could be delayed or entirely omitted.

Innovations are also affected by cuts. Funds for 'Serial Renovation and Market Activation in Heat Supply' for the year 2027 are almost halved, from approximately EUR 22.65 million (2026) to EUR 12.0 million. The 'Promotion of Measures for Energy-Efficient Urban Redevelopment' is also significantly reduced from EUR 38.5 million to EUR 24.25 million. Such cuts, according to Özkan, jeopardise the economic market ramp-up of climate protection measures in existing properties, particularly in district concepts and scalable solutions. Furthermore, the ZIA criticises the subsidisation of electric cars with EUR 253 million, while at the same time EUR 82 million is being saved on the expansion of charging infrastructure.

For stakeholders in the real estate sector, where investment decisions are made and implemented long-term, planning certainty is a central factor. Despite the planned funding volume of almost EUR 10 billion for the BEG until 2030, the design and financing of funding after this period remain open. Any short-term change in the funding landscape undermines trust in the reliability of political frameworks. The ZIA calls on the members of the German Bundestag to make improvements to the KTF financial plan during the parliamentary process to ensure reliable and innovation-friendly frameworks for climate targets in the building sector.

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