As part of the Fit-for-55-package, EU policymakers are discussing the option to introduce an EU-wide emissions trading also in the building sector. There is a vivid debate on this concept, one problem being that under current EU regulations any CO2 pricing mechanism on heating fuels will only exacerbate the landlord-tenant dilemma. This is because, with few exceptions, heating costs are fully paid by the tenants, so rising CO2 prices just increase their bills while giving little incentives for landlords to invest in energy efficiency measures.
The example of Sweden shows a way out of the dilemma. All-inclusive and temperature-based rents would ensure that landlords benefit from energy savings and emissions reductions.
However, Sweden is profiting from an exception clause in the Energy Efficiency Directive (EED). Similar systems in other Member States would currently not be allowed. We thus propose changes to the EED so that carbon pricing affects those best positioned to respond to price signals: the landlords.