ETS2, the EU's new emissions trading system for fuels used in buildings and road transport, starts on 1 January 2028 after a one-year delay. Fuel suppliers will buy allowances for the CO₂ their gas, heating oil and coal will emit, and pass the cost on. At €50 per tonne of CO₂, that adds about 1 cent per kWh to natural gas. A home heated by a heat pump is not directly covered, because electricity already falls under the existing EU ETS.
For most households in Europe, the carbon cost of heating has so far depended on national rules: some countries tax CO₂ on heating fuels, many do not. From 2028, an EU-wide market will put a price on the emissions of every liter of heating oil and every cubic meter of gas sold to homes. This guide explains how ETS2 works, what it is likely to add to heating bills, how the start date and price safeguards were set, and what it means for the choice of heating in a new home.
What is ETS2?
ETS2 is a second EU emissions trading system, created by Directive (EU) 2023/959, separate from the existing EU ETS for power plants and industry. It covers fuel combustion in buildings, road transport and some smaller industry. Instead of households trading permits, the obligation sits upstream: fuel suppliers must surrender one allowance for each tonne of CO₂ their fuels will emit, and they recover that cost in their prices.
The system was due to start in 2027. In March 2026, the EU adopted an amendment to the European Climate Law that moved the start of compliance to 1 January 2028.
How much will ETS2 add to heating bills?
The added cost follows directly from the carbon content of the fuel. Burning natural gas emits about 0.2 kg of CO₂ per kWh, so each €50 per tonne of CO₂ adds about 1 cent per kWh. Heating oil emits about 0.267 kg of CO₂ per kWh, giving a calculated surcharge of about 1.3 cents per kWh at €50 per tonne, before VAT and assuming the full cost is passed on.
| Yearly gas use | CO₂ emitted | Added cost at €50/t | Added cost at €100/t |
|---|---|---|---|
| 8,000 kWh | about 1.6 t | about €80 | about €160 |
| 15,000 kWh | about 3 t | about €150 | about €300 |
| 25,000 kWh | about 5 t | about €250 | about €500 |
These figures are simple calculations from the emission factor of natural gas, before VAT, and assume the full carbon price is passed on. The actual ETS2 price will depend on the market. To limit early price spikes, EU governments approved in October 2026 a mechanism that releases 40 million extra allowances when the price rises above €45 per tonne in 2020 euros; it slows increases but does not cap the price (Council of the EU). Some countries, such as Germany, already charge a national CO₂ price on heating fuels, so the step for households there depends on the national price in place before 2028.
ETS2 turns the carbon content of your heating fuel into a running cost. The less fossil fuel a home burns, the less that cost matters: in an all-electric home with a heat pump, it is not charged at all.
Are heat pumps and electric heating affected?
Not by ETS2 directly. Electricity generation is already covered by the existing EU ETS, so its carbon cost is part of today's power prices. ETS2 adds a new cost only to fuels burned in the home itself: gas, heating oil, coal and similar fuels. A home heated by a heat pump avoids that new charge, and a home with very low heating demand uses little energy of any kind.
Who gets help with the transition?
The EU set up a Social Climate Fund, financed in part by ETS2 revenue, to support vulnerable households and micro-enterprises with measures such as renovation, clean heating and transport. Each country prepares a plan for how it will use the fund. Check your national programs for current support.
What does ETS2 mean for a new home?
A home built today will need heating for decades, making carbon pricing part of the design decision. Two choices limit exposure: a building envelope that needs little heat, and a heating system that burns no fossil fuel on site. BioBuilds homes are built on a Passivhaus-certified building system with a heating demand target of around 15 kWh/m² per year on standard models, and the Turnkey finish includes a Samsung WindFree or Panasonic heat pump with Zehnder ventilation and heat recovery: no gas connection, no oil tank. Our guide to zero-emission buildings explains the 2030 standard for new homes, and our guide to heating costs compares running costs. Prices start from €134,470 for Wanderlust 48 in Turnkey, including an illustrative 19% German VAT; to see yours, configure your home.
