CO2 Levy 2026: What Landlords Actually Pay, Tier by Tier

The German CO₂ levy runs €55 to €65 per tonne of CO₂ in 2026, with an official rate of €60 set for splitting the bill between landlords and tenants. How much of that lands on your portfolio as the landlord's share depends only on how much CO₂ each building emits per square metre of living space, sorted into the statutory ten-tier model under the CO2KostAufG.

For property managers and asset managers, there's more at stake here than a single line item on the utility bill. Your building's tier is reassessed every year, and it decides how much of the CO₂ cost stays in the portfolio as an extra operating expense. Anyone who knows the fuel consumption and the emission factor for a building, together with its living space, can calculate the landlord's share and lower it deliberately, often just by running the heating system better.

Three factors decide in 2026 how high the CO₂ costs for your portfolio turn out, and who ends up paying them.

What does the CO₂ levy cost per tonne and per kilowatt-hour in 2026?

The national CO₂ price under the BEHG no longer sits at a fixed level in 2026; for the first time, it's auctioned within a statutory corridor of €55 to €65 per tonne of CO₂. For splitting costs under the CO2KostAufG, though, the German Emissions Trading Authority (DEHSt) has set its own official figure: €60.00 per tonne for the 2026 calendar year.

For your existing properties, what counts in the end is the price per kilowatt-hour consumed. Natural gas produces around 0.201 kg of CO₂ per kWh, heating oil around 0.266 kg, both based on calorific value. At €60 per tonne, that works out to roughly 1.2 cents per kWh of gas net and 1.6 cents per kWh of heating oil. At the top of the €65 auction corridor, the gross burden climbs to as much as 1.55 cents per kWh of gas and up to 20.7 cents per litre of heating oil.

A worked example with assumed but realistic figures shows what this means for a single property. An apartment building with 12 residential units and 1,000 square metres of living space, heated with gas, burns through 150,000 kWh of natural gas a year. At €60 per tonne, that adds up to roughly €1,809 in CO₂ costs for the whole building and year, or a good €150 per unit. How much of that stays with the landlord is decided only once the building is sorted into the ten-tier model.

Two CO₂ prices, one effect: The €55 to €65 auction corridor determines what energy suppliers pay for their emissions certificates and pass on through the fuel price. For splitting costs under the CO2KostAufG, only the official DEHSt figure of €60 per tonne counts, regardless of where the actual certificate price lands within that corridor.

How will the CO₂ price develop before the EU ETS2 launches?

The EU-wide emissions trading scheme for buildings and transport, EU ETS2, doesn't start until 2028, a year later than originally planned. EU environment ministers agreed the delay in November 2025, and the European Parliament confirmed it on November 13, 2025; until launch, the national BEHG price corridor stays the relevant one.

The delay buys portfolios extra planning time, though it changes nothing about the direction things are heading. Without the delay, the national CO₂ price could already have reached €75 to €85 per tonne by 2027, according to the GdW. For the market phase from 2028 onward, analysts expect CO₂ prices of roughly €90 to €250 per tonne, with extreme scenarios naming figures as high as €300.

For your portfolio, that translates into a simple fact: every tonne of CO₂ you shave off the bill today will likely cost two to four times as much in three to four years. You can use the time until 2028 to move your most expensive buildings out of the top tiers before the price per tonne rises sharply.

How does the CO2KostAufG's ten-tier model split the landlord's share?

The ten-tier model splits the CO₂ costs of residential buildings purely by specific CO₂ output, in kilograms per square metre of living space per year. Construction year and the degree of modernization play no role in the tier itself. The landlord's share ranges from 0 percent for very efficient buildings to 95 percent for buildings with very high emissions.

Back to the example building: 150,000 kWh of natural gas times 0.201 kg of CO₂ per kWh comes to 30,150 kg of CO₂ a year. Divide that by 1,000 square metres of living space and you get 30.15 kg of CO₂ per square metre. That places the building in tier 5, with a landlord's share of 40 percent. Of the roughly €1,809 in CO₂ costs for the year, the landlord pays approximately €724, which works out to about €60 per unit across 12 residential units.

What applies to non-residential buildings and to newly installed gas or oil heating systems?

Non-residential buildings still fall under a flat 50/50 split between landlord and tenant, regardless of actual CO₂ output. The separate tier model for non-residential buildings that the law originally announced for 2025 still hasn't materialized, partly because the non-residential building stock is so varied, and legal advisors currently see no timeline for it either.

A second, independent rule has applied to newly installed heating systems since this year. The Building Modernization Act, which took effect on July 29, 2026, added the new Sections 5a, 5b and 5d to the CO2KostAufG.

GModG legal update: For gas, oil or LPG heating systems newly installed from 2028 or 2029 onward, an additional flat 50/50 split will apply to CO₂ costs and network charges, as well as to bio-fuel shares, independent of the tier model used for existing systems. A new hardship clause under Section 5d relieves small landlords in housing markets that aren't under pressure. Financially, the new rules only take effect on January 1, 2028 for CO₂ costs and network charges, and on January 1, 2029 for bio-fuel shares.

For your current portfolio, that means: as long as you're running an existing gas or oil heating system, the ten-tier model remains the relevant one for splitting costs. Only a new installation from 2028 onward falls under the additional 50/50 rule in Sections 5a, 5b and 5d.

Why do tenants often end up paying more than half the CO₂ costs in practice?

A sample analysis of 80 heating bills by the German Tenants' Association (Deutscher Mieterbund) found that tenants pay around 73 percent of CO₂ costs on average, while landlords pay only about 27 percent. The 50/50 split lawmakers intended rarely happens in practice.

An evaluation report from the Federal Ministry for Economic Affairs, published in April 2026, confirms this imbalance nationwide and recommends basing the tier model on weather-adjusted consumption figures going forward, so that mild or cold winters don't distort a building's tier.

Part of the gap comes down to legal exceptions. Heritage protection status and area protection rules known as Milieuschutz can cut the landlord's share in half or remove it entirely under Section 9 of the CO2KostAufG, if enforcing it would meaningfully restrict an energy retrofit. A mandatory connection and usage obligation can have the same effect. Berlin alone has around 600,000 apartments in Milieuschutz areas, an extreme regional case that shows how much these exceptions can relieve individual portfolios.

How do property managers calculate the landlord's share step by step?

The landlord's share comes down to fuel consumption and the emission factor, combined with the building's living space. The actual process breaks down into six steps.

Under Section 3 of the CO2KostAufG, the fuel or heat supplier itself must disclose the figures needed for steps one and two. The invoice has to show the emission volume and the CO₂ price component, plus the emission factor and the energy content. In practice, the metering service or billing company usually pulls these figures together with the consumption data for each property. How solid that calculation turns out depends on the data behind it: measured values from energy and fuel invoices give a far more reliable basis for the tier assessment than flat estimates based on building type.

How can you lower the landlord's share without renovating?

The landlord's share drops whenever the specific CO₂ output per square metre falls below the next tier threshold, and a smaller drop in consumption is often enough to get there. Hydraulic balancing, or heating optimization more broadly, cuts heating energy consumption in existing buildings by roughly 10 to 15 percent according to common rules of thumb. It has been a legal requirement for heating systems serving six or more residential units since 2024, with staggered deadlines running up to September 30, 2027 for older systems.

KUGU EOS, KUGU's energy optimization system (Energie-Optimierungssystem), takes this same approach further and automates it. It optimizes heating systems regardless of system age and without any structural work, based on a digital building twin, and achieves an average of more than 20 percent in energy and CO₂ savings, 12 percent of which is contractually guaranteed. In the pilot project with Gewobag, that guarantee was met across every property and, in some cases, clearly exceeded.

The example building shows the effect concretely. If gas consumption drops by the guaranteed 12 percent, from 150,000 to 132,000 kWh, the specific CO₂ output falls from 30.15 to 26.53 kg per square metre. The building moves from tier 5 into tier 4, and the landlord's share drops from 40 to 30 percent. In euro terms, the saving stacks twice: total CO₂ costs fall to roughly €1,592 thanks to the lower consumption, and the landlord's share of that drops further, to around €478, down from €724 before.

At a glance, example property with 12 residential units: the landlord's share before optimization is around €724 a year in tier 5 (40%). After a 12 percent cut in consumption, it drops to around €478 a year in tier 4 (30%). That's a relief of about €246 a year on CO₂ costs alone, on top of the energy costs that simply disappear for the fuel no longer burned.

Getting this kind of calculation right requires real transparency into actual consumption at each property. VIS Betriebstransparenz, KUGU's visual information system (Visuelles-Informationssystem), makes energy and CO₂ data visible across the entire portfolio and shows which properties sit closest to a tier threshold, and therefore offer the biggest lever for cutting consumption. How this fits into a broader decarbonization program, entirely without renovation, is something we cover in Decarbonization in the Building Stock Without Renovation. For the other levers available alongside hydraulic balancing, see Heating Optimization in Existing Buildings: Levers, Costs, Savings Potential.

How do you plan the landlord's share across your entire portfolio?

For a portfolio with several hundred buildings, a case-by-case calculation isn't enough. What matters here is an overview across all properties at once. The heaviest costs sit in the upper tiers 7 through 10, where most of the CO₂ cost accumulates. Those are the properties to review first, while the price per tonne is still low.

An annual reassessment makes sense, because a building's tier can shift with every billing period. Weather and genuine changes in consumption both play into that. Optimizing the properties with the highest specific CO₂ output first lowers your own cost position and the risk of a rising burden once the CO₂ price climbs to €90 to €250 per tonne after 2028.

CO₂ costs are becoming a fixed line in portfolio planning

Looking at the numbers reveals a shift that many portfolios haven't priced in yet. While the CO₂ price sits at €55 to €65 per tonne, a high landlord's share is annoying but manageable. Once the price climbs to €90 to €250 per tonne after 2028, the very same tier gets substantially more expensive, without anything changing at the building itself.

Reviewing your tiers pays off today, well before that price jump arrives. Anyone who knows the specific CO₂ output per property and works from metered consumption data can target the buildings that sit just below a costlier tier. The sensible next step is a portfolio-wide inventory of the current tiers, followed by prioritizing the properties with the greatest potential for optimization.

Frequently asked questions about the CO₂ levy for landlords

Does a building's CO₂ tier need to be recalculated every year?

Yes, the tier is based on fuel consumption for that specific billing period, so it has to be recalculated annually. If consumption changes due to weather or different usage patterns, a building can shift into a different tier and, with it, a different landlord's share.

How much of the CO₂ costs do landlords actually pay, according to current data?

Landlords pay around 27 percent, according to a sample analysis of 80 heating bills by the German Tenants' Association, while tenants pay the remaining 73 percent on average. That's well below the even split lawmakers intended, and it was also confirmed in an evaluation report from the Federal Ministry for Economic Affairs published in April 2026.

Does the new flat 50/50 rule from the Building Modernization Act also apply to existing gas heating systems?

No, the new Sections 5a, 5b and 5d of the CO2KostAufG apply only to gas, oil or LPG heating systems newly installed from 2028 or 2029 onward. For existing systems, the regular ten-tier model based on CO₂ output per square metre remains the relevant standard for now.

Which exceptions reduce the landlord's share under Section 9 of the CO2KostAufG?

Two categories can reduce it: heritage protection status and area protection rules known as Milieuschutz. A mandatory connection and usage obligation has the same effect. Together, they can cut the landlord's share in half or remove it entirely if enforcing it would meaningfully limit an energy retrofit, as is the case in Berlin, where around 600,000 apartments sit in Milieuschutz areas.

How much could the CO₂ price rise once the EU ETS2 launches?

Most forecasts put the price at roughly €90 to €250 per tonne for the market phase starting in 2028, with a few extreme scenarios naming figures as high as €300. By comparison, the official rate used for splitting costs in 2026 still sits at €60 per tonne.