The German government will provide as much as €10 billion ($10.9 billion) through 2027 to cushion the costs of a mandatory phase-out of fossil-fuel boilers, according to people familiar with the planning.
(Bloomberg) — The German government will provide as much as €10 billion ($10.9 billion) through 2027 to cushion the costs of a mandatory phase-out of fossil-fuel boilers, according to people familiar with the planning.
The aid, worth around €2.5 billion per year, is to be financed from Germany’s special climate and transformation fund, said the people, who asked not to be identified discussing confidential information. The fund was set up last year to pay for measures to protect the environment and for the transformation to a cleaner economy.
The agreement on the amount of assistance comes after months of bickering within the ruling coalition over the design of the controversial heating legislation, which still needs parliamentary approval.
Germany’s Bild tabloid labeled the law — which was proposed by Economy Minister Robert Habeck — the “heating hammer” due to the costs it potentially imposes on citizens. It effectively bans the installation of new fossil-fuel boiler systems starting next year.
Following the public outcry, the legislation was watered down. The coalition this week agreed to subsidize up to 70% of the investment costs for new heat pumps if homeowners act quickly.
Currently the state only covers up to 40%, and costs for such electricity-powered devices can amount to as much as €35,000.
Coalition Compromise
The German industry lobby association — known by its German abbreviation BDI — said it welcomed the coalition’s agreement on the heating law and the planned subsidies.
“The decision to promote the switch to heating systems that use renewable energies is the right one to gain the necessary acceptance among the population,” Holger Loesch, BDI deputy director, said in a emailed statement.
Still, the path to a climate-neutral building involves more than just boilers, and politicians must create the right framework and communicate this transition to people appropriately, he said.
In a separate law, municipalities are due to submit a plan by 2028 at the latest on how they intend to make their heating supplies emissions-free. This is seen as a compromise between the proposal presented by the Economy Ministry, which is led by the Greens, and the Social Democrat’s call for a socially acceptable solution and the openness to technology demanded by the liberal FDP.
The deal on the heating law comes as the three coalition parties are about to resolve another big dispute about the 2024 budget plan from Finance Minister Christian Lindner, who has proposed hard cuts in nearly all departments except in the area of defense.
Lindner, who heads the FDP, has said that the cabinet will approve his controversial finance plan during its regular meeting on July 5, suggesting an agreement could be found with all ministers without any crisis meeting or emergency talks.
–With assistance from Petra Sorge.
(Update with BDI reaction starting in seventh paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.