This week saw the first auction in Germany’s national emissions trading system, nEHS.
The auction cleared at the ceiling and was more than 26 times oversubscribed.
What’s more, due to the ‘€65 rule’, the allocated volume was doubled, already bringing forward the last expected auction.
The demand crunch isn’t going away, and shows that obligated parties should be getting on top of their strategy now.
As nEHS specialists, CFP Energy are ready to support on your carbon needs.
Our offering includes attractive terms, prefunding auctions, and regulatory guidance and key market insight to ensure businesses achieve their goals in a cost-effective and efficient manner.
You can get in touch with our nEHS specialists, here.
Germany is the highest emitter of carbon dioxide in the European Union, with emissions of 649 million tonnes CO2e in 2025, almost a quarter of the bloc’s overall emissions.
Germany is a decarbonisation success story, almost halving its emissions since 1990. However, progress has slowed in recent years as emissions only dropped 0.1% in 2025.
This puts Germany at risk of missing its ambitious target of at least 65% reduction in greenhouse gas emissions by 2030.
In 2023 the Federal Minister for Economic Affairs and Climate Action, Robert Habeck identified that some sectors pose a particular challenge:
“The development in the individual sectors shows a heterogeneous picture: the energy, industry, agriculture, waste management and other sectors are over-fulfilled. The transport and, above all, the buildings sectors show an improved trend compared to previous projections.
However, they fall short of their previous sector targets. As emissions in the transport and buildings sectors are decisive for the EU Effort Sharing Regulation (ESR), this also means that Germany could miss its targets by 2030 without further action.”
To address this challenge, Germany introduced a domestic carbon scheme in 2021: the nEHS.
The scheme covers sectors not already included in the EU Emissions Trading System (ETS), with a focus on primarily heating and road transport fuels.
Emitters must surrender a national emission certificate (nEZ) for each tonne of CO2e emitted.
Between 2021-2025, emitters paid a fixed price per nEZ, rising from €25/tCO₂ in 2021 to €55/tCO₂ in 2025.
This year the approach is different.
Weekly nEZ auctions within a regulated €55–€65 price corridor.
Initially, 18 auctions were scheduled between 1 July and 28 October 2026, with a total auction volume of 192 million nEZs.
However, there is a complication: the ‘€65 rule’: if an auction clears at the maximum permitted price of €65/tCO₂, the auction volume is automatically increased by releasing additional allowances from future auctions, until demand is met or until auction volume is doubled.
This means the last auction could be as early as 9 September.
If covered entities don’t obtain required volumes at auction, nEZs will be sold in November and December 2026 for €68, with post-purchase also available from 1 January until 31 August 2027 at €70.
From 2028, nEHS will be phased out as obligated parties transition to the EU ETS2.
This week, Wednesday 1 July, saw the first nEHS auction.
In a nutshell:
Estimated total 2026 compliance demand is around 250m nEZ. The total allocated auction volume for 2026 is 192m nEZ. With estimated 2026 compliance demand exceeding the total auction volume, some buyers will have to rely on the €68 fixed-price sale, or even the €70 post-purchase mechanism, to meet their obligations.
When the €65 rule triggers, the extra allocated volume isn’t additional, it’s just frontloading the auctions. Each week that volume is pulled forward leaves fewer and fewer remaining auction dates and brings forward the deadline to sort compliance in the €55–€65 price corridor.
With only 7% pro-rata allocation at the clearing price, both bid size and bid frequency matter enormously. The gap between what's left to buy at €55–€65 and what the market will need is not shrinking, but only the best prepared will secure the volume they need.
James Rosser, Head of Trading at CFP Energy said:
“The first auction has sent a clear signal: demand is strong, competition is high, and having a well-defined procurement strategy will matter more with every auction that follows.”
Now is the time to develop or update your nEHS purchasing strategy, and we can help.
CFP Energy’s award winning carbon team supports some of the largest manufacturing and industrial organisations in Europe with energy transition products to help navigate complex regulatory environments.
We have specialists focusing on the nEHS and experts on the German carbon market.
Our team even executed the first ever ETS2 trade with an end client, a German utilities provider, earlier this year.
To connect our team of experts, get in touch here.