German gov’t nearing deal on heating law reform – coalition parties

Germany’s coalition government plans to present key points of a law reform to phase out fossil fuel-powered boilers later this week, the parliamentary group leader of the Social Democrats (SPD), Matthias Miersch, told public broadcaster ARD. Jens Spahn, the Christian Democrat (CDU) parliamentary group leader, added that he was confident “something good” would be presented, ARD reported. 

The contested "heating law", passed originally in 2023 by the previous coalition government amid heated debates, stipulates the gradual phase-out of oil and gas boilers and their replacement by climate friendly alternatives, such as heat pumps or district heating. However, it was watered down compared to initial drafts, and deadlines for the installation of clean heating systems were pushed into the future after being criticised for imposing costly rules too fast.

Having promised to “abolish” the law in their coalition agreement in early 2025, the government then announced it would rename it, present key points by the end of January and adopt the new law by the end of February. It has since missed the self-imposed deadline. Homeowners and the heating industry are therefore eagerly awaiting legal clarity on the future of oil and gas heating systems to decide on the timing of their investments in a sector in which decarbonisation has been particularly slow. 

After intensive talks between the CDU-led economy ministry and the SPD-led buildings ministry, the parties are nearly ready to present their compromise, an economy ministry spokesperson said at a press conference on Friday (20 February). Discussions are still ongoing, “but we are in the home stretch,” the spokesperson added. 

A central point of contention is a requirement that new heating systems run on at least 65 percent renewable energy, which amounts to a de facto ban on the installation of new gas and oil heating systems. Details on available subsidies and deadlines for switching to climate-friendly alternatives could also be changed. 

The so-called heating law marked a major dispute within the former coalition government of Olaf Scholz. Advocates of a rapid transition towards clean heating technologies argued it was key to reaching climate targets and pointed to their low long-term running costs, while critics said that upfront investment costs would overburden homeowners and tenants.

The months of uncertainty have weighed on the market, with sales of heating systems falling 12 percent last year after an already weak 2024, according to the German Heating Industry Association (BDH) – marking the lowest level in 15 years. Although sales of heat pumps grew 55 percent, the increase failed to offset what the BDH described as a "collapse of the overall market," which the industry group blamed "government-induced uncertainties." 

Only last month, a wide alliance of energy industry associations called on the government to quickly present reform proposals for the law, warning against “disruptive” changes.