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German retail gas prices to rise in 2021 due new CO2 tax

Millions of German households will see their gas heating bills rise at the start of 2021 because of a new carbon dioxide tax, price comparison portal Verivox said, citing 7.1% average increases planned by 104 suppliers it surveyed.

Verivox assesses hundreds of suppliers in mainland Europe's biggest gas market which, were it not for the regulated pipeline usage charges and the carbon tax, could have expected cheaper gas because of major global supply and low demand during the coronavirus pandemic.

"We are at the beginning of a wave of gas price increases," said Verivox energy expert Thorsten Storck.

"Because of the new CO2 price, which will be levied on the emissions of climate-harming gases from January, many utilities will be under pressure to pass on the higher costs to their customers."

A household consuming 20,000 kilowatt hours per year will pay 100 euros ($118.68) more under the new tax regime, Verivox calculated. A typical contract for that size of household currently costs around 1,464 euros/year.

The tax, passed by the German parliament last month, starts at 25 euros per tonne of carbon dioxide equivalent and will be raised in stages after 2021.

This means there will be no relief for households in later years. There are 40 million households in Germany, of which roughly half heat with gas.

The government wants to use the funds to cap a surcharge on household power prices that supports renewable power output, and to refund commuters some of their rising travel bills as gasoline and diesel will also be taxed more heavily.

($1 = 0.8426 euros)

(Reporting by Vera Eckert Editing by Mark Heinrich)

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