03.01.2023 | KPMG Law Insights

The CO2 Cost Sharing Act – Relief for Tenants

On January 1, 2023, the CO₂ Cost Sharing Act went into effect. This is intended to relieve tenants of increased heating and hot water costs due to the poor energy condition of the building space they rent.

Objectives of the CO₂ Cost Sharing Act

The EU has set itself the goal of achieving climate neutrality by 2050. One building block on this path is the rapid and consistent expansion of renewable energies, another is improving the overall energy efficiency of buildings.

To achieve this goal, the legislature has already launched the so-called CO₂ tax for the supply of oil and gas in 2019. Until now, landlords have been able to pass on the costs incurred by the CO₂ tax in full to tenants. When the CO₂ Cost Sharing Act comes into force on January 1, 2023, landlords will share in the additional costs incurred. The amount of the contribution depends on how climate-friendly the house is built – the less climate-friendly, the higher the costs for the landlord in the future.

Applicability of the law

Landlord cost-sharing automatically applies to all leases for buildings heated by gas or oil, regardless of whether they are leases that already existed on January 1, 2023, or leases entered into after that date. The new rule also applies to all billing periods beginning on or after January 1, 2023. Only fuel deliveries that were already accounted for under the old legal situation are to be disregarded.

Cost allocation for residential buildings according to a graduated model

For residential buildings and mixed-use buildings that are predominantly residential, the calculation and allocation of CO₂ costs is provided for according to a 10-stage model depending on the CO₂ emissions per square meter of living space per year. The landlord is obliged to determine the CO₂ costs and the distribution key in the course of the annual heating cost statement and to indicate how they are calculated. In the case of apartments with an extremely poor energy balance – with annual emissions of more than 52 kilograms of CO₂ per square meter – the landlord side is to bear 90 percent and the tenant side the remaining ten percent of the CO₂ costs in future, while in the case of apartments with a good energy balance – with annual emissions of less than 12 kilograms of CO₂ per square meter – the tenant side is to bear the CO₂ costs alone.

If the tenants themselves are responsible for procuring the fuels and supplying the heat, as may be the case in a rented single-family house, they are entitled to a claim for reimbursement against their landlord or landlady, which must be filed within a period of twelve months beginning with the (final) settlement of the delivered fuels by the supplier. If an operating cost settlement has been agreed, it is possible to offset the costs incurred.

Cost allocation for non-residential buildings according to flat rates

For non-residential buildings, a 50/50 split of CO₂ costs applies for the time being. A phased model is also to be developed here by the end of 2025. § Section 106 of the JCT governs the treatment of buildings that have both residential and commercial uses.


Exceptions to the application of the CO₂ Cost Allocation Act are provided for residential buildings with a maximum of two apartments, one of which is occupied by the landlord or landlady themselves, and in the special cases provided for in Section 11 of the Heating Costs Ordinance.

If public law requirements, such as restrictions under historic preservation law, fully or partially prevent a significant energy improvement to the building or a significant improvement to the building’s heat and hot water supply, the percentage share of the CO₂ costs that the landlord would have to bear in accordance with the CO₂ Cost Sharing Act shall also be reduced by half or shall not apply at all.

Legal consequences of failure to allocate CO₂ costs

If the CO₂ costs are not allocated or if the required information is not shown in the heating cost statement, the tenant has the right to reduce the share of the heating costs attributable to it according to the heating cost statement by three percent.

Practice Notes

The CO₂ Cost Sharing Act provides incentives for landlords to invest in energy-efficient refurbishment of the buildings they own and to equip buildings in such a way that CO₂ costs cannot be apportioned to them, or can only be apportioned to a small extent. Which investments actually pay off here can and should be calculated on a case-by-case basis. The respective tenants must generally tolerate the (energy-related) modernization measures if they are duly announced to them within a period of three months prior to their commencement. In addition, the tenant’s right to a reasonable reduction of the rent in the event of defects in the leased property is excluded for the renovation period of three months. Furthermore, the landlord has the right to increase the annual rent by up to eight percent of the costs incurred for the dwelling (less any public subsidies granted), at any rate in the case of housing refurbishment. In the case of non-residential buildings, on the other hand, the right to unilaterally increase rents due to modernization measures only exists if this is provided for in the contract (in line with current design practice) or if the parties reach a separate agreement to this effect.

Since the amount of the CO₂ levy to be borne by the landlord is largely determined by the consumption of the tenant and, at least in the case of residential buildings, consumption depends not least on the number of people living in the dwelling, it would appear to make sense, taking into account the new legal situation, to link the amount of the rent to the number of regular users of the dwelling.


The CO₂ Cost Sharing Act emphasizes the landlord’s responsibility to equip residential buildings with climate-friendly heating systems and ensure good insulation. The price for this is paid by the landlords. They now have to determine for each rented building how climate-friendly their property is, in other words, how many kilograms of CO₂ are emitted per year. The data on CO₂ emissions and CO₂ costs required for this are shown in the energy suppliers’ invoices.

Whether the CO₂ Cost Sharing Act will actually lead landlords to invest more in energy-efficient refurbishment of their buildings remains to be seen and is certainly also dependent on corresponding subsidies. However, a further step in this direction is likely to be the EU’s planned update of the Energy Performance of Buildings Directive (EPBD), which is to include a requirement for the energy refurbishment of such residential buildings that have very poor energy performance.

All landlords are therefore advised to check whether and in what form measures to reduce heating energy consumption can be implemented and whether and to what extent the tenants can participate in the resulting costs. The appropriate course should already be set when concluding new leases and on the occasion of amending existing leases in order to be well prepared for the future. Please do not hesitate to contact us if you have any questions regarding the regulations described above or the implementation of the practice notes.

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Inke Reuter

Senior Manager

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01067 Dresden

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Dr. Rainer Algermissen

Head of Construction and Real Estate Law

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tel: +49 40 3609945331

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