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The CO₂ Price – An Overview | Prokon

The CO₂ Price: A decisive lever in the fight against climate change

What exactly is the CO₂ price and why does it play such a central role in the fight against climate change? The CO₂ price is a financial instrument that is used to internalise the costs of emitting carbon dioxide (CO₂) - the main cause of climate change. It is a price that companies or individuals must pay for the right to emit a certain amount of CO₂ into the atmosphere. This concept is based on the principle of "the polluter pays". The economic and ecological costs of environmental damage are thus assigned to those who cause them.

At the UN Climate Conference in Kyoto in 1997, the signatory states, for the first time, established mandatory emission reductions for industrialized countries to limit the increasing warming of the Earth's atmosphere. Subsequently, a series of measures were taken worldwide to implement these objectives economically. A central tool for this is the pricing of carbon dioxide, which different countries, including the EU, implement through the issuance of so-called emission certificates. This not only creates a concrete incentive to produce more climate-friendly, but also establishes a specific price for the geophysical and health-related costs of global CO2 emissions.

Since 2005, around 11,000 companies in the EU from energy generation and heavy industry have been obliged to purchase a certificate for each tonne of emitted greenhouse gas. These emission certificates can be auctioned or traded among each other. In addition to trading certificates, individual industrialized countries, including Germany, also rely on taxing CO2 emissions. In this country, as of 2021, fuels and heating fuels have been subject to a CO2 tax, currently set at 25 euros per tonne, which is planned to increase to 55 euros by 2025.

The current CO₂ price and price development.

The CO₂ price is a dynamic value that constantly changes and is influenced by numerous global and local factors. Since 1st January 2024, the CO₂ price has been set at 45 euros per tonne of emitted CO₂ , significantly higher than in the early years of emissions trading. The price is set to increase to 55 euros next year. Experts predict that the CO₂ price will continue to rise in the coming years. These forecasts are based on the assumption that governments worldwide will intensify their efforts in the fight against climate change, increasing the pressure on companies to reduce their CO₂ emissions. Overall, the CO₂ price development signals a growing awareness of the urgency of climate protection.

The basic principle of emission certificates

Emission certificates represent the right to release a specific amount of greenhouse gases into the atmosphere. The fundamental principle behind emission certificates is called "Cap and Trade": A cap is set on total emissions, significantly lower than previous emissions, to achieve a gradual reduction in greenhouse gases. Within this cap, companies receive or purchase emission certificates, allowing them to emit a specific amount of emissions. Companies that reduce their emissions and have excess certificates can sell or trade them, creating a financial incentive for overall emissions reduction.

The prices of emission certificates are variable and determined by supply and demand. Factors influencing supply and demand include the set cap on emissions, political decisions, economic developments, progress in emission reduction technologies, and changes in consumer behaviour. Price fluctuations reflect changes in these factors and general market dynamics. Recent trends show a significant price increase, reflecting a growing scarcity of certificates and increased efforts to combat climate change.

CO₂ price as a guide to a sustainable future

To engage in reducing global CO₂ emissions. Companies are encouraged to invest in sustainable technologies and processes that enhance their CO₂ balance and bring long-term economic benefits. The introduction and gradual increase of the CO₂ price signal an important shift towards global recognition of the true costs of carbon dioxide emissions. This is a crucial step in accelerating the transition to a sustainable, low-carbon economy.

The role of the individual: What does that mean for you?

Even as an individual, you can make a contribution. By consuming more consciously and choosing products and services that come with a lower CO₂ impact, you support companies that focus on sustainable practices. A crucial step in this direction is selecting your electricity tariff. By switching to a genuine green electricity tariff, like the one offered by Prokon, you opt for energy from renewable sources and make a clear statement for climate protection.

Prokon makes it easy for you to become part of the energy transition. Our green electricity tariffs are sourced 100% from renewable energy sources. This means that for every kilowatt-hour of electricity you consume, there are no additional CO₂ emissions associated. By doing so, you directly contribute to reducing greenhouse gas emissions and promote the expansion of renewable energies.

Furthermore, we are Germany's largest citizen energy cooperative. As a member of our cooperative, you can witness how your purchased Prokon shares flow into the construction of new renewable energy facilities, while directly participating in the generation of clean electricity and benefiting from attractive dividends.