German liberals delay plans to cut CO2 price for tenants

A debate has erupted in Germany's traffic-light coalition over plans to split the cost of the CO2 tax on heating between tenants and landlords.

A man warms himself on the sofa
A man warms himself on the sofa. Photo: picture alliance/dpa | Patrick Pleul

According to reports in Handelsblatt, the pro-business Free Democrats (FDP) are currently trying to postpone the change, arguing that landlords shouldn’t face further financial headwinds in the wake of the energy crisis. 

“It is not a question of whether and how the sharing of CO2 costs will come, but when,” Daniel Föst, spokesman on building and housing policy for the FDP parliamentary group, told Handelsblatt. “In the current situation, however, we wonder whether we can burden small private landlords in particular with the additional expense. We are discussing this openly in the coalition right now.”

Largely driven by the centre-left Social Democrats (SPD) and Greens, the traffic-light coalition had planned for the CO2 tax to be divided between tenants and landlords.

READ ALSO: German tenant groups see sharp increase in people who can’t pay utility bills

The green tax, which was introduced by the previous CDU/CSU and SPD government, is currently shouldered entirely by tenants. Currently, the CO2 price is set at €25 for every tonne of carbon emissions, adding additional costs onto heating bills in particular. This is set to be raised by €5 to €30 per tonne in 2023. 

Back in May, the cabinet voted through plans to split this burden between renters and their landlords, with landlords paying a larger share for less energy-efficient rental accommodation.

However, the coalition has struggled to move forward with the plans, which were originally set to come into force on January 1st, 2023. Ministers had intended to produce a draft law for the Bundestag by September, which was then pushed back by a month and looks set to be postponed yet again.

“Delaying laws again and again, as the FDP is currently doing, is not an acceptable political style in a winter of crisis,” Christina-Johanne Schröder, housing policy spokeswoman of the Green parliamentary group in the Bundestag, told Handelsblatt on Wednesday. 

Poor residents ‘doubly affected’ 

The Greens argue that the new cost-sharing model agreed on by the cabinet would particularly help residents who live in poorly insulated, low-quality housing.

“Those who live as tenants in flats with poor windows, doors, insulation and heating often do not have a high income and are thus doubly affected by the price increases for heating energy,” said Schröder. 

According to calculations by Tagesspiegel, the change would save tenants between €12 and €72 per year. The homeowners’ association Haus und Grund estimates that residents of a poorly insulated three-room flat currently pay €140 in CO2 costs per year.

But the FDP says that forcing landlords to shoulder additional costs is inconsistent with the government’s pledge to reduce tax burdens at a time when inflation and energy costs are soaring. 

“We should now, as agreed in the traffic-light coalition, avoid everything that causes unnecessary expense,” Föst stressed.

A man turns up the thermostat on a radiator.

A man turns up the thermostat on a radiator. Photo: picture alliance/dpa | Hauke-Christian Dittrich

Under the plans voted through by the cabinet earlier this year, a ten-stage model for sharing the costs between tenants and landlords is set to apply from next year.

In the case of buildings with very high greenhouse gas emissions per square meter, landlords would pay 90 percent of the CO2 price, while tenants with very low emissions would have to bear the costs alone. This is intended to encourage landlords to carry out energy-saving renovations and offer an incentive for tenants to save energy.

However, with energy prices and other costs soaring in the wake Russia’s invasion of Ukraine, housing industry lobbyists have called on the government to suspend the CO2 tax entirely.

Energy prices are so high that a CO2 price would not have any incentive effect to encourage additional energy-saving behavior or investment in energy-efficient buildings, said Axel Gedaschko, president of the German Housing Association (GdW). 

READ ALSO: Is it legal for German landlords to turn down heat this winter?

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REVEALED: Germany’s planned hardship fund to help with energy bills

The gas and electricity price caps are coming, and the government wants to pay people's energy bills in December - but will that be enough to stop people falling into hardship? Germany's Economics Ministry thinks it won't be and has drafted plans for a new hardship fund. Here's what you need to know.

REVEALED: Germany's planned hardship fund to help with energy bills

When Germany’s traffic light coalition parties – the SPD, Greens and FDP – took office last December, they had no idea that they would be facing an energy crisis on such a major scale.

But with Russia’s invasion of Ukraine sending the gas market into turmoil, the coalition’s big plans have been put on the backburner as they work out how best to support people with rising costs. 

Under the latest set of energy relief measures put forward by the Gas Price Commission, the government will shoulder the cost of people’s energy bills this December. It also plans to introduce a cap on both electricity and gas prices, which will come into force next March and be backdated to January.

READ ALSO: Germany plans to cap energy prices from start of 2023

This multi-billion relief package is likely to soften the blow for many households, but according to a new government document obtained by Bild, ministers are concerned that it won’t be enough to stop many people – and businesses – falling into financial hardship.

To ensure this doesn’t happen, federal and state economists ministers want to set aside billions more for additional aid. 

Here’s who can get hold of the extra cash – and how.

Renters and private home owners

People who rent an apartment in Germany and home owners who live in their properties can access additional help from the state if they can prove they’re over-burdened by their heating and energy costs.

That could be due to an eye-wateringly high back-payment for energy bills demanded by the landlord or due to the fact that they have to purchase expensive fuel such as wood pellets for heating. 

More specifically, people claiming unemployment benefits such as Bürgergeld can get some extra cash from the Jobcenter after their bills are calculated by the landlord. If they’re facing a hefty back-payment, or Nachzahlung, they can get up to three months of Bürgergeld retroactively to help cover the costs. 

In addition, someone who wants to claim Bürgergeld for a single month will be spared from having to prove the amount of money they have in the bank. Under the ordinary rules for Bürgergeld claimants, job seekers must have less than €40,000 in savings.

According to the government’s calculations, this emergency buffer is set to cost around €500 million. Claims for additional support will be handled by the job centres or social offices.

Small- and medium-sized businesses (SMEs)

Small business owners have been among the hardest hit by the energy crisis – but luckily help may be on its way. 

In the document obtained by Bild, ministers say they assume that the gas and electricity price cap will be an adequate level of support for most SMEs. Nevertheless, there could be a few circumstances in which business owners slip through the net:

  • Business owners may already be facing huge hikes in their energy bills before the price caps come into force, for example in the form of a big back-payment for energy costs over several months, or
  • Businesses may find that, due to exceptional circumstances, they’re still unable to pay their bills – even after the price caps are introduced. 

In these two scenarios, SMEs can apply for extra support from the government. 

To be eligible, businesses must either show that their energy costs quadrupled at least three months between January and November 2022, or they’ll have to show that their energy costs have also multiplied in spite of the energy price cap and that their business is highly energy-intensive or costly.

The government expects this support package to cost around €1 billion and says that the details will be worked out after state premiers agree to the proposals.  

READ ALSO: How electricity prices are rising across Germany

Housing companies 

Large landlords could also be in line for some additional government aid under the ministers’ plans. Due to the way the current rental system works, many are paying high bills for heating and energy that they’re not yet able to recoup from tenants in the end-of-year bill.

Housing complexes in Berlin.

Housing complexes in Berlin. Photo: picture alliance/dpa | Monika Skolimowska

To help housing companies that are in this situation, the government wants to offer loans that could help tide them over. Twenty percent of this credit would be secured by the federal states, and the measure is expected to cost around €1.1 billion. 

Hospitals and care homes  

Care facilities and clinics face exorbitant energy bills – even in ordinary times – so this group of institutions will also be given financial aid, the draft said.

This will come in the form of a one-off support payment and ongoing support with gas and electricity bills. Hospitals and care homes will in many cases get their additional costs for energy completely refunded by the state until April 2024. Social agencies and social service providers will also be given subsidies and financial aid to help deal with their increased overheads. 

In addition, cultural sites and facilities like museums and art galleries will get subsidies intended to flatten out the rise in energy costs. In most cases, the energy price cap only applies to 80 percent of a business’ ordinary consumption, but this limit will be dispensed with for cultural institutions. 

However, the government says it still wants to incentive energy-saving measures as well as offering financial support. 

READ ALSO: When will people in Germany get their December gas bill payout?