Carbon Pricing in the Building Sector: Recognizing the Urgency and Seizing the Opportunities

Carbon pricing is evolving into a key cost and risk factor for the asset management of commercial buildings. While Germany is maintaining fixed carbon prices through the national emissions trading system (nETS) until the end of 2025, an auction phase with a price range will follow in 2026, with the EU-wide European Emissions Trading System 2 (EU ETS 2) for buildings and road transport taking effect in 2027. For property owners, this can only mean one thing: According to forecasts, carbon prices will rise dramatically, directly and increasingly impacting ongoing operating costs and the value stability of real estate portfolios.

Why Carbon Pricing Exists and How It Works

Carbon pricing (also referred to as a “carbon tax” or “carbon price”) refers to the monetary valuation of greenhouse gas emissions. Every metric ton of CO₂ emitted carries a price that makes low-emission technologies economically more attractive and regulates CO₂ emissions through market mechanisms. Climate and environmental damage becomes priced into market processes. So carbon pricing is a major economic tool for promoting the shift to climate-friendly technologies. This occurs either through fixed prices – as in Germany through the Fuel Emission Trading Allowance Act (BEHG) as part of the national emissions trading system (nETS) – or through market-based trading of emission allowances. Emissions trading in the EU is regulated through the EU Emissions Trading System (EU ETS) and follows the cap-and-trade principle, where the total volume of emissions is capped and emission allowances are traded. The EU ETS 2 was introduced at European level as part of the “Fit for 55” package of measures. Starting in 2027, this system will expand beyond the industrial, aviation, and maritime sectors to include buildings and road transport too.

For the real estate sector, in concrete terms this means that emissions from building operations will become predictable costs in the OPEX calculation. Building owners will receive clear incentives to increase energy efficiency and implement decarbonization measures. And, conversely, heating generated by fossil fuels will continue to become more expensive. Those relying on gas or oil heating systems must expect their operating costs to rise.

What Regulatory Changes Are Coming for Real Estate Portfolios?

Fixed prices were politically determined in Germany’s national emissions trading system for fuels: 45 euros per metric ton of carbon dioxide in 2024, and 55 euros per metric ton of carbon dioxide in 2025. For 2026, there are plans for an auction with a price range of 55 to 65 euros per metric ton. The German Emissions Trading Authority at the German Federal Environment Agency is continuously specifying details for practical implementation. With the EU ETS 2, starting in 2027, fuel suppliers will primarily be regulated at the upstream level. However, the costs will impact downstream building operations. One thing is certain: costs for carbon dioxide emissions are not a short-term trend or an isolated effect. Instead, they must become an integral part of financial planning.

Increasing Pressure on Owners to Decarbonize

In Germany, the distribution of carbon dioxide costs between owners and tenants in commercial buildings is currently split between both parties according to the Carbon Dioxide Cost Allocation Act (CO2KostAufG). However, this is set to be replaced by a tiered model at the end of 2025, where owners with very high building carbon dioxide emissions will face increased payment obligations. Such a tiered model already applies to residential buildings. The higher a building’s total CO₂ emissions, the higher the owner’s share of the costs. Tenants are entirely responsible for the costs in energy-efficient renovated buildings with low emissions. Applied to commercial buildings with high carbon dioxide emissions, owners may therefore face avoidable increases in operating costs.

Forecast: How Will Carbon Pricing Develop Under the New Emissions Trading System?

Studies and market analyses indicate that prices for CO₂ certificates in Europe will rise significantly in the coming years. However, it is difficult to make reliable predictions, since actual prices will depend on supply and demand.

• Documentation from the German Bundestag provides various scenarios, with a price range of 60 to 380 euros per metric ton of CO₂ emissions by 2030.
• According to the BloombergNEF EU ETS II Market Outlook, prices could reach approximately 149 euros per metric ton of CO₂ by 2030 when the new emissions trading system for buildings, transport, and small industrial sources becomes effective in 2027.
• The Institute of Energy Economics at the University of Cologne (EWI) presents a scenario where the carbon price in the EU ETS 2 reaches approximately 120 euros per metric ton of CO₂ from 2027 and rises to over 200 euros per metric ton of CO₂ by 2035.

All scenarios demonstrate one thing in particular: even if it is impossible to reliably predict the full extent at present, carbon prices will rise significantly.

Direct and Indirect Impacts on the Operating Costs of Commercial Real Estate

Real estate with fossil fuel heating systems are directly affected by carbon pricing, as the carbon price is incorporated directly into energy costs. If a property measuring approximately 165 square meters emits 7.84 metric tons of CO₂ per year on average, the additional costs at the current carbon price of 55 euros per metric ton amount to 431 euros. Should the carbon price rise to 100 euros per metric ton, the additional costs would reach 784 euros. At an assumed price of 250 euros per metric ton, they would even reach 1 960 euros (average values according to Handelsblatt, citing a study conducted by climate tech firm Purpose Green).

This calculation is based on a mix of buildings that includes renovated properties that are not used for industrial purposes. For commercial buildings with industrial consumption levels, particularly those using fossil fuels, the impacts will be considerably more pronounced.

Beyond direct impacts, owners also face a range of indirect effects:

• Maintenance costs for inefficient systems are rising rapidly.
• Lease agreements increasingly contain provisions regarding the transferability of carbon pricing.
• Most valuation methods now factor CO₂ costs into cash flows.

Conclusion: Signal Effect and Opportunity

The development of carbon pricing serves as both a wake-up call and an opportunity to take strategic action. Declining consumption does more than just lower ongoing operating costs. It also safeguards property values and improves access to capital markets under EU taxonomy and disclosure regulations. Those who fail to act now risk losing value potential. Data-driven measures along the decarbonization pathway offer a pragmatic and rapid starting point for taking action, including real-time data collection, automated analysis, and AI-supported operational optimization.

Particularly for existing properties, aedifion offers custom-made complete packages to optimize building efficiency without any need for extensive new investments.

Contact us and actively drive the decarbonization of your assets forward!