CO₂ Cost Allocation Act 10-tier model explained.

What the CO₂ Cost Act regulates

The German Carbon Dioxide Cost Allocation Act (CO₂ cost allocation) entered into force on 1 January 2023. It governs how the CO₂ costs from the Fuel Emissions Trading Act (BEHG) are split between landlord and tenant. Previously the tenant bore all heating costs including the CO₂ surcharge — today the landlord share is determined by the building's energy efficiency. based on building energy efficiency determined.

The CO₂ price rises annually: 2023 was €30/ton, 2024 €40, 2025 €50. For 2026/2027 a further increase is planned, possibly to €55–65/ton. The worse insulated your house, the more you pay.

The 10 tiers in detail

For residential buildings there are 10 tiers, depending on CO₂ output per m² and year. Basis: energy consumption in kWh × fuel emission factor ÷ living area.

• Tier 1: < 12 kg CO₂/m²/a — landlord 0% · tenant 100% (KfW-40 or better, very efficient)
• Tier 2: 12–17 kg — landlord 10% · tenant 90% (new build from 2016)
• Tier 3: 17–22 kg — landlord 20% · tenant 80% (renovated period building, good heating)
• Tier 4: 22–27 kg — landlord 30% · tenant 70%
• Tier 5: 27–32 kg — landlord 40% · tenant 60% (average German housing stock)
• Tier 6: 32–37 kg — landlord 50% · tenant 50%
• Tier 7: 37–42 kg — landlord 60% · tenant 40%
• Tier 8: 42–47 kg — landlord 70% · tenant 30% (Unrenovated old building, old gas heating)
• Tier 9: 47–52 kg — landlord 80% · tenant 20%
• Tier 10: ≥ 52 kg — landlord 95% · tenant 5% (very inefficient, old oil heating)

Calculation example: old building with gas heating

Assumptions: 80 m² apartment, natural gas heating, annual consumption 14,000 kWh.

• CO₂-Emission: 14.000 kWh × 0,201 kg CO₂/kWh = 2.814 kg CO₂
• Pro m² pro Jahr: 2.814 / 80 = 35,18 kg CO₂/m²/a
• Einordnung: Stufe 6 (32–37 kg)
• Split: landlord 50%, tenant 50%
• At the 2025 CO₂ price (50 €/t): 2,814 t × 50 € = 140,70 € total CO₂ costs
• Of which landlord: €70.35 · tenant: €70.35

For 6 similar residential units in the building, you pay as landlord about €420 per year just for your CO₂ share — and rising as the CO₂ price grows.

Emission factors of fuels

• Natural gas: 0.201 kg CO₂/kWh — most common fuel in Germany
• Heating oil: 0.266 kg CO₂/kWh — highest CO₂ share, landlord burden greatest
• District heating: varies widely (0.12–0.45) by source — average 0.221
• Wood pellets: 0.038 kg CO₂/kWh — counted as nearly climate-neutral, not covered by BEHG
• Heat pump (electricity): 0,105 kg CO₂/kWh — indirectly via the electricity mix

Anyone heating with pellets effectively has no CO₂ cost share — the energy source is considered climate-neutral. Heat pumps have indirect CO₂ via electricity, but usually much lower than fossil heating.

Special cases

Non-residential buildings: For practice, office, shop on ground floor, 50/50 applies as flat rate.

Heritage protection: If energetic refurbishment is not possible due to public-law regulations (heritage protection, zoning), the landlord's share can be reduced by up to 100%. Application must be made to BAFA.

Low-energy tier: In tier 1, the landlord pays nothing — an incentive for energy renovation.

How you can reduce your share

• Heating modernization: replacing old gas heating with heat pump → jump of 2-4 tiers
• Roof and façade insulation: 20–40% consumption reduction
• Solar thermal for hot water: supplementary to the heating
• Hydraulic balancing: 5–15% efficiency gain, very inexpensive
• Fuel change: heating oil → natural gas cuts CO₂ factor by 25%, natural gas → pellets eliminates the share

Retention obligation

You must keep the calculation for 10 years (§ 9 CO₂ cost allocation). In an audit by the German Main Customs Office you must be able to present all underlying data (consumption, fuel type, living areas, tier classification). With Rentprime all calculations are automatically archived HMRC-compliant.