Sudden halt of controversial buildings subsidy dismays Germany's construction sector

The new economy and climate minister Robert Habeck has stopped support payments for energy-efficient new residential buildings in Germany with immediate effect, arguing a surge in demand for the funds has made the programme unviable. “The enormous flood of applications” had already exceeded the earmarked funding, Habeck’s ministry (BMWK) said. According to the BMWK’s state secretary Patrick Graichen, the ministry received applications worth some 20 billion euros since November last year for a programme launched by the previous government that was due to end at the end of January and whose effects were rather questionable, the official said. The "Efficient House 55" (EH 55) programme was supporting houses according to outdated climate standards and used money inefficiently, the government says - something that has long been criticised. The annual CO2 savings per euro of subsidy spent on energy-efficient refurbishments of existing houses is up to ten times higher than for the EH 55.

“We are currently supporting the wrong thing and this money is then missing for climate action measures that actually work,” Graichen argued. The ministry said it would review the structure of current support programmes in the buildings sector provided by state-owned development bank KfW and aim to launch new and more effective alternatives. Applications that were already submitted might still be considered and would be examined in due course, the ministry said, adding the government would seek to ensure that no one relying on the support funds should run into severe liquidity problems. Other support programmes in the sector, for example for heating system modernisation, would not be affected by the decision.

The move by the new government has caused resentment in the construction industry, said Christian Noll of the German Industry Initiative for Energy Efficiency (DENEFF). “The government has to restore planning security for everyone without delay,” Noll said, adding that energy-efficient building support had to be continued in some form without interruption. However, DENEFF welcomed the ministry’s plans to redistribute more funds to the modernisation of existing buildings, calling it an “overdue step” for climate action in the sector. Holger Lösch, of the Federation of German Industries (BDI), said the government should reinstall the programme “instantly”. The halt of the so-called EH-55 support would be a “bombshell” and a “disservice” to the government itself, as it could choke off a momentum for private climate investments and might also stall much needed new construction of housing space. The Federal Chamber of Engineers (BIngK) said the programme’s halt would mean many construction projects could not be completed as planned. “The energy transition won’t work this way,” said the chamber’s president, Heinrich Bökamp. The government now had to quickly explain how it intends to fulfil its promises to build 400,000 new flats per year, speed up refurbishment, and install more solar panels on rooftops, Bökamp said.

The buildings sector accounts for roughly a third of Germany’s total CO2 emissions and has been slow to reduce its carbon footprint in the past years. The creation of a new buildings ministry, previously a sub-department of the interior ministry, has sparked hopes that the laggard sector will finally make more progress in emissions reduction.