The German cabinet, under Chancellor Friedrich Merz, agreed on Wednesday to abolish the country’s contentious 2023 heating law. The move is part of a broader package of reforms designed to revitalise a struggling national economy and restore investor confidence in the construction sector.
Economy Minister Katherina Reiche stated that replacing the previous mandate—which required new heating systems to be powered by at least 65% renewable energy—would remove significant barriers to building restoration and property development.
The new Building Modernisation Law will drop the mandatory renewable requirements for individual households. Under the approved proposals, homeowners will be permitted to retain existing gas and oil boilers or install new ones, provided they gradually blend in climate-neutral fuels starting in 2029. The requirement for green fuel blending will rise from 10% initially to 60% by 2040.
“We are creating investment and planning security,” Reiche told reporters. “We are enabling technological openness and flexibility in the choice of heating systems.”
The original law, passed under former Chancellor Olaf Scholz, faced fierce opposition from conservatives and the public due to concerns over the high cost of mandatory heat pump installations. The Merz government aims to pass the new legislation before the parliamentary summer recess.
In addition to the heating reforms, the cabinet approved the creation of a “capacity market” for the electricity sector. As Germany continues to phase out coal, the government will now pay operators of power stations and storage facilities to keep capacity on standby. This measure is intended to provide a reliable backup for the grid during periods of low wind or solar output, ensuring energy security as the country pursues climate neutrality by 2045.
The policy shift comes as the ruling coalition of Christian Democrats (CDU) and Social Democrats (SPD) faces a sharp decline in approval ratings and rising support for the far-right Alternative for Germany (AfD).
The Federation of German Industries (BDI) welcomed the cabinet’s decision, describing it as an “important step” toward getting construction investment back on track.
However, the reversal has drawn sharp criticism from the Greens. Parliamentary leader Katherina Droege, whose party championed the original law, condemned the move as a “complete abandonment of Germany’s climate targets.”
Despite the rollback of domestic mandates, the government reiterated that it remains committed to the European Union’s Buildings Directive, which requires all new buildings to be zero-emission from 2030.
