Germany to limit green heating fuel quota to households, ease compliance rules for suppliers – leaked paper

The planned rising quota for green fuels in Germany – a key tool for cutting emissions from existing gas and oil heating systems – will only cover fuel sold to households and will let suppliers pay their way out of missed targets, according to a key points paper by the economy ministry.

The paper, seen by Clean Energy Wire, said compliance with the quota will be made “flexible” and that consumption in industry, businesses, transport, power generation and district heating will be excluded. The document from the economy ministry surfaced ahead of a meeting with industry representatives on Friday (16 October). 

The quota is meant to supplement Germany’s Building Modernisation Act, which chancellor Friedrich Merz's coalition passed in July to replace the previous government’s controversial heating law that would have effectively banned the installation of new fossil heating systems by introducing a mandatory renewable energy quota for heating systems of 65 percent. 

Gas and oil suppliers will be obliged to sell a growing share of fuels from renewable sources, such as biogas or hydrogen. The quota starts at one percent in 2028 and is meant to rise to 20 percent by 2035, 50 percent by 2040 and 100 percent by 2045, with only the final year strictly binding. Suppliers could carry any surplus over into the following year, make up shortfalls later, trade quota fulfilment with other suppliers or pay a compensation fee if they miss the target, the paper said. 

Cutting emissions from heating is one of the biggest hurdles on Germany’s path to climate neutrality because the vast majority of heating systems still run on fossil fuels. The quota covers existing heating systems. Owners of newly installed gas and oil boilers must meet a separate, steeper green fuel requirement, the so-called bio-ladder. They have to ensure their system runs on a certain share of green fuels, starting at 10 percent in 2029 and rising to 60 percent by 2040.

Uncertainty regarding the availability of green gases raises questions about the quota’s contribution to decarbonisation and the possible costs for consumers, industry and environmental groups said. However, the economy ministry told Clean Energy Wire that analyses had shown Germany can procure the volumes needed. “We currently assume that domestic and European supplies are sufficient,” a ministry spokesperson said. 

The ministry put Germany’s long-term domestic biomethane production potential at 113 terawatt hours (TWh) annually, with another 27 TWh available from imports. The potential for bio-oil is 70 TWh in 2045, the ministry added. “A course correction is possible if the estimated amounts differ from the available ones,” including changing the quota, the spokesperson said. Germany used a total of 864 TWh of gas in 2025, with households and trade accounting for roughly 346 TWh, of which much is used for heating.

Bioenergy industry group Hauptstadtbüro Bioenergie (HBB) said the required volumes could be reached thanks to unused potential in waste processing and the expected decline in gas demand for heating. 

Ingbert Liebing, head of the Association of Local Utilities (VKU) said the paper finally sheds light on how the government plans to implement the reformed law and gives households a new option to decarbonise their heating without heat pumps or district heating. “But an answer from the government to the key question where the required volumes of green gas will come from remains missing,” Liebing said. Green gases are scarce and different sectors are competing for supplies, he said, adding that a government strategy that details domestic production and imports is “decisive” for making the green quota feasible and affordable. 

Environmental Action Germany (DUH) said the expected lack of green gas supplies would make the quota “ineffective” for reaching the climate targets. That suppliers can delay compliance, and targets can be adapted to market developments shows that the government itself “does not believe that the mandatory quota can be implemented,” said DUH managing director Barbara Metz. DUH also criticised which fuels count as green, arguing that biomethane production, for example, causes significant greenhouse gas emissions. 

Homeowners’ association BSB said the leaked paper suggested households would bear the brunt of the costs of the quota, calling it “a significant disadvantage” for homeowners and tenants. “Those who put the burden on households alone turn this into a social question,” said BSB head Henrik Fork-Weigel. He added that the government must introduce clear safeguards to ensure compensation payments made by suppliers are not passed on to consumers.