CO2 bankruptcies: “This will kill me in business”: How emissions trading can drive industrial companies into bankruptcy

Chancellor Merz wants to stick to emissions trading. However, the rising costs of CO₂ certificates can become a question of existence for struggling industrial companies.

Energy-intensive industry: Emissions trading can become a question of existence for struggling companies. Photo: Getty Images [M]

In a letter to Ursula von der Leyen, Chancellor Friedrich Merz calls for European emissions trading not to be changed.

Rising CO₂ prices and fewer free certificates are placing additional strain on the industry.

Financially struggling companies sell CO₂ certificates to gain liquidity, but risk difficulties in later procurement.

In the event of insolvency, CO₂ obligations remain in place and state aid may cease.

The summary was created and editorially checked using AI.

Dusseldorf. Chancellor Friedrich Merz (CDU) demands that European emissions trading should not be changed any further. This emerges from a letter to Commission President Ursula von der Leyen (CDU), which is available exclusively to Handelsblatt.

But what the federal government believes is intended to create planning security can become a question of existence for struggling industrial companies. Experts warn of a danger to the already ailing German industry that has so far received little attention: emissions trading can ultimately drive companies into insolvency.

Particularly energy-intensive sectors such as steel, chemicals and paper are already under considerable cost pressure. High energy prices and weak demand are putting pressure on companies.

Added to this are the costs of emitting greenhouse gases: Last year, the average price for CO₂ certificates in European emissions trading was just under 74 euros per ton, and the trend is rising: currently prices are around 88 euros per ton, and at the beginning of November they were even over 90 euros at times. The EU is gradually reducing the number of certificates in order to reduce CO₂ emissions. This drives prices up in the long term.

At the same time, parts of the industry will have to make do with fewer free certificates since 2026. This further increases the financial pressure for struggling companies.

Companies lack “strength to invest”

“Emissions trading will kill me as a business if it stays at the current level,” reports Max Jankowsky, managing director of the Lößnitz foundry. The company generates around 22 million euros in sales per year, with a margin of two to three percent. At the same time, the foundry is now paying 350,000 euros for CO₂ certificates. “This means my margin is almost zero,” says Jankowsky. From a certificate price of 100 euros, his business model is over.

The entrepreneur accepted emissions trading as a tool for decarbonization. But the financial burden is now reaching its limits and is endangering the existence of businesses. “I actually only make the investments that are absolutely necessary,” says Jankowsky. The company has wanted to electrify its production for years in order to produce sustainably. But: “I don’t have the strength to invest forward.”

“We are not demanding that the climate goals be thrown out the window,” says the entrepreneur. But politicians must show a sense of proportion, especially when it comes to companies that have demonstrably reached the limits of their financial possibilities.

A case from North Rhine-Westphalia shows how things can end in the worst case: The Kabel paper factory filed for bankruptcy last year after 130 years of production. Around 420 employees lost their jobs in 2025. Most recently, the company generated annual sales of over 200 million euros. The demand for graphic papers has been declining for years due to digitalization. At the same time, energy prices had also risen sharply.

Insolvency administrator Peter Neu is dealing with the case. “We are not talking about small amounts here, but about millions,” says Neu, quantifying the additional effort for companies. The CO₂ certificates were not the direct cause of the Kabel paper factory's insolvency. “You have to clearly state the energy prices,” says Neu. The locational disadvantage compared to competitors abroad outweighed the disadvantages.

In an interview with Handelsblatt, Neu, together with Philipp Heilmann, managing director of the company Emissionsbörse.com, which specializes in CO₂ trading, warns of a danger to German industry that has so far received little attention. Companies must maintain certificates for their greenhouse gas emissions. Anyone who underestimates their needs or sells existing certificates in financial distress can find themselves in considerable difficulty when the next deadline comes. Once a year, companies have to submit certificates for their emissions from the previous year.

Heilmann reports that companies partly underestimated their need for certificates this year because they had expected more free certificates. The expert sees small and medium-sized industrial companies at particular risk. But that's not all: Even after bankruptcy, the obligations can remain and deter potential buyers.

Another problem also emerged in the insolvency proceedings: According to Neu, the Kabel paper factory lost access to state electricity price compensation. This is a subsidy with which particularly electricity-intensive companies are reimbursed for part of the CO₂ costs that power plant operators pass on in the electricity price.

“With cable, that would have meant that 15 million euros in subsidies would not flow,” says Neu. According to him, the corresponding electricity price compensation was not paid. This is a significant sum for a company that is already struggling to survive.

The background: Companies in difficulty, especially those that have applied for or opened insolvency proceedings, are generally excluded from this funding. However, the CO₂-related electricity costs continue to be incurred.

However, the danger often begins before bankruptcy. According to the two experts' observations, financially struggling companies sometimes use their existing CO₂ certificates to obtain short-term liquidity.

The principle is simple: an industrial company receives part of its required emission allowances free of charge or has already acquired them. Instead of holding these back for later delivery, he sells them. This initially brings money into the till. However, he must have the required certificates again by the next submission deadline at the latest.

If prices have now risen or there is no longer enough liquidity for the buyback, the crisis worsens.

The scenario can be illustrated using a calculation: If a company has to procure 100,000 certificates, it will cost seven million euros at a price of 70 euros per ton. If the price rises to 90 euros, it becomes nine million euros. This results in an additional financing requirement of two million euros.

Heilmann therefore warns against selling certificates that have to be handed in a short time later. “This is not commercially sensible and ultimately a management error that is difficult to explain in retrospect.”

The situation becomes particularly explosive when a company has already filed for bankruptcy. Since the reform of the Greenhouse Gas Emissions Trading Act in 2025, all of the operator's obligations expressly continue to apply during the insolvency proceedings.

This reduces the resources available to continue a business and satisfy other creditors. “This means that continuation is made more difficult or impossible,” says Neu.

Since 2026, the free allocation of certificates for certain products covered by the European CO₂ border adjustment CBAM has been gradually reduced. Parts of the steel, aluminum, cement and fertilizer industries are affected, among others. In addition, there are stricter standards for free allocation in the period up to 2030.