CO2 pricing alone is not enough for the heating transition

23.06.2025

Source: E & M powernews

The German Renewable Energy Federation (BEE) presents a position paper that aims to embed the CO2 price in the heating sector in a mix of subsidies, market and rules.

The German Renewable Energy Federation (BEE) published a new position paper on CO2 pricing in the heating sector on June 19, 2025. In it, the association calls for the price for CO2 emissions not to be viewed in isolation, but to be implemented as part of a comprehensive mix of instruments. This is the only way to effectively shape the heating transition and achieve the climate targets by 2045.

According to the BEE, the transformation of the heating sector requires a triad of market incentives, funding programs and regulatory requirements. The president of the association, Simone Peter, explains: "The defossilization of the heating sector is progressing comparatively slowly. The CO2 price is important, but is not enough on its own to sufficiently stimulate investment in renewable heating technologies."

Stimulating a stable market ramp-up

In the position paper, the association names key technologies such as heat pumps, solar thermal energy, geothermal energy, bioenergy and power-to-heat as necessary components of the future energy mix in the heating sector. These would have to be made available depending on regional and individual circumstances. This would require a stable market ramp-up, which would need to be flanked by additional political support.

According to BEE, CO2 pricing can be an effective market-based control instrument. However, it must be designed in such a way that it does not overburden the various stakeholder groups - from plant manufacturers and planners to end customers. According to Peter, the difficult-to-predict price trend in particular poses risks for investment security and technological continuity. She warns of possible structural disruptions in industry and the economy as well as delays in technological development.

Adapt laws quickly

In addition to a CO2 price, the BEE believes that binding legal regulations are still necessary. These include, for example, the Building Energy Act (GEG) and the Heat Planning Act. According to the association, the announced Geothermal Acceleration Act and clear prospects for bioenergy are also essential in order to drive forward the transformation in the heating sector.

The BEE is also calling for additional financial incentives. These include investment grants and temporary tax write-offs. From the industry's perspective, the upcoming amendments to the law must be ambitious. Peter appeals not to lose sight of the target of a 65% share of renewable energies in the heating sector.

Climate money should compensate socially

Another point in the position paper is social acceptance. In order to socially cushion price increases due to CO2 pricing, the BEE is in favor of a so-called climate money. This would provide targeted relief for consumers. Peter is calling for reliable, sufficient and technology-neutral funding for the heating transition - both in the building sector and in heating networks.

According to BEE, the aim of the position paper is to provide impetus for the ongoing legislative processes at federal level. According to the association, the federal government must see the heating sector as a central field of action in the energy transition and create ambitious framework conditions.

The BEE position paper on the heating transition is available online.

Author: Susanne Harmsen