Anticipated Notable Increases in Emission Costs for Tenants and Landlords in EU, Starting From 2027
Get ready for a financial shock! The extension of the EU Emissions Trading System (ETS-2) to cover transport and building sectors from 2027 could Take a Heavy Toll on Tenants and Landlords Heating Apartments and Homes with Natural Gas or Oil, warns Purpose Green. In a chilling report, they predict a possible tripling of CO2 costs for average properties in Hamburg, taking the annual burden from the current €431 to a staggering €784. Extreme cases could even reach whopping €3,135!
Right now, CO2 costs in Germany are nationally regulated, with one tonne setting you back €55, set to rise to between €55 and €65 next year. As the new ETS-2 takes effect in 2027, the price per tonne of CO2 will be decided by the ever-changing market. If emissions surge, so will the price. Purpose Green points eyes at current studies, forecasting costs of €100 to €250 per tonne by 2030. Should CO2 emissions not decrease significantly, the price could even hit a shocking €400 by 2040! In a 250-euro-per-tonne scenario, CO2 costs for 650 average-sized Hamburg properties (165 sqm each, emitting 7.84 tonnes of CO2 a year) could rocket to €1,960. In an extreme scenario with a €400-euro price, this could escalate to an eye-watering €3,135!
In rented properties, energy efficiency of the apartment establishes who foots the bill for CO2 costs. If the property is energy-inefficient, landlords must cover 95%, while tenants bear the cost if the property is energy-efficient.
For instance, consider a multi-family house in Augsburg with six apartments currently emitting 121 tonnes of CO2, translating to costs of €6,655 next year. If the costs double to €100 per tonne, this amount soars to €12,101, and at €250 per tonne, it climbs to a terrifying €30,252. In this scenario, the majority of these costs would be borne by the owner due to poor energy efficiency.
Purpose Green examined around 4,000 properties listed on the Immowelt portal in the 30 largest German cities for their study, taking into account living space, energy source, and energy demand.
Key Takeaways:- Higher energy costs: Prepare for a spike in energy costs, which might be passed onto tenants via inflated heating bills, potentially straining tenant budgets.- Price volatility: Unstable carbon allowance prices could lead to price swings in energy costs, making it difficult for landlords to budget and leaving them at the mercy of the market.- CO2 price floor: The German government may introduce a national CO2 price floor to prevent drops in prices while transitioning to ETS-2, maintaining stable costs for landlords but likely keeping energy costs elevated for tenants.- Efficiency investments: Landlords might make the upfront investment in energy-efficient solutions to reduce their carbon footprint and the number of carbon allowances they require, potentially offering lower long-term energy costs.- Support policies: Governments are implored to devise support policies for low-income households to ease their financial burden as energy costs rise.
Looking ahead, expect short-term pain with increasing energy costs straining budgets for both tenants and landlords. As the system settles, energy efficiency investments could reduce costs over the medium-term. In the long run, the transition to more efficient heating systems could lead to lower emissions and eventually lower costs if carbon prices stabilize or decline. The secret lies in effective management of the transition by landlords and governments, investing in efficiency and implementing appropriate support policies.
- To mitigate potential financial burdens, landlords and property managers should consider investments in energy-efficient solutions, as these could reduce their carbon footprint and long-term energy costs.
- Environmental-science studies predict a dramatic rise in CO2 costs for buildings, with the price potentially reaching €100 to €250 per tonne by 2030 and €400 by 2040, a trend that could have significant implications for both tenants and landlords.
- As climate-change concerns escalate and policies shift, such as the expansion of the EU Emissions Trading System, science and financial theories will play crucial roles in shaping community policy and employment policy within the real estate sector.
