Bundestag Budget Committee Approves Cuts to Heating Subsidies – KfW Halts Applications

The plans were first reported by the Deutsche Presse-Agentur. The federal government's plan envisages gradually reducing state subsidies for heat pumps and other climate-friendly heating systems over the coming years. This is set out in a draft for the Bundestag's Budget Committee.

Comparison of Old and New Subsidy Rates

Until now, switching to a climate-friendly heating system has been eligible for state funding of up to 70 percent. Homeowners have so far been able to apply for basic funding of 30 percent of the costs of installing a modern heating system. The Climate Speed Bonus has so far provided self-using owners with an additional subsidy of 20 percent of the eligible costs. The maximum investment cost grant available for a heating replacement was up to 21,000 euros of the so-called eligible costs, which were capped at 30,000 euros.

Under the new rules, eligible costs are capped at 28,000 euros for the first residential unit. The Climate Speed Bonus will be 16 percent in the future. Those earning less than 30,000 euros per year could in future receive up to 22,400 euros in funding. For households with an annual income above 30,000 euros, the maximum subsidy amount is to be reduced initially to 19,600 euros this year and fall to 13,200 euros by 2030. For incomes of 40,000 euros and above, the maximum funding is already 16,500 euros and is also set to decrease gradually.

The amount will be reduced for the first time on February 1, 2027, and then semi-annually on February 1 and August 1 of each year by 750 euros. This is intended to gradually lower the amount by several thousand euros by 2030. For incomes between 40,000 and 50,000 euros, a bonus of ten percent of eligible costs would be granted. For households with more than 50,000 euros in annual income, the grant could drop to 6,600 euros by 2030 according to the plans.

Planned Savings and Social Differentiation

A child bonus is also planned: for families with children, the income thresholds are to rise by 10,000 euros each. The previous additional funding of 30 percent of costs for households with a taxable income of less than 40,000 euros per year is to be further differentiated at the same time. In the heating subsidy, there will in future be a stronger social differentiation. Changes are being made above all to the so-called income bonus.

The ministry further stated that there is a "Vertrauensschutzregelung." According to the Federal Ministry of Economic Affairs, a trust protection arrangement is to apply during the technical transition. Those who already have a valid confirmation for the application or a technical project description can reportedly continue to apply under the previous conditions. A KfW spokesperson stated: "Wer bereits eine gültige Antragsbestätigung hat, den Antrag aber noch nicht eingereicht hat, kann dies während der Umstellungsphase bis 20. Juli noch zu den bisherigen Konditionen tun."

The German Heat Pump Association (Bundesverband Wärmepumpe) emphasizes, however, that the confirmation for the application alone is not yet a valid funding application. Managing Director Martin Sabel told MDR AKTUELL: "Es gibt keinen Grund zu warten, aber es gibt jetzt auch keinen Grund, panisch zu werden." Those considering a heat pump would be "gut beraten, nicht allzu lange zu warten." He therefore advises that the application be submitted in full via the KfW portal by Wednesday if possible. Applications for heat pump funding under the old conditions can only be submitted until July 8.

Reactions from Associations and Industry

A suspension of the application option would be "ein falsches Signal an Verbraucherinnen und Verbraucher, Fachhandwerk und alle anderen Marktteilnehmer," the association stated on Tuesday. Sabel said at the same time that there continued to be continuity in the funding, and that the reduction would happen "maßvoll." On its homepage, the association recommended that customers who already have a confirmation for the application submit an application via the KfW portal today.

Economy Minister Katherina Reiche (CDU) said the subsidy would become more socially equitable. "Wer auf Unterstützung besonders angewiesen ist, profitiert künftig stärker." The funding would be deployed more purposefully and at the same time make a contribution to "soliden" budget management. "Die Förderung bleibt erhalten, wird zielgerichteter eingesetzt und leistet zugleich einen Beitrag zu einer soliden Haushaltsführung," Reiche stated.

Statements from the Government

Environment Minister Carsten Schneider (SPD) said: "Mit der Reform der Heizungsförderung gelingt es uns, Geld einzusparen und zugleich die positiven Wirkungen für Klimaschutz und moderne Heizungstechnologie zu erhalten." The Federal Ministry of Economic Affairs stated that the federal government would continue to provide comprehensive financial support for renovations in the building sector based on the reformed federal subsidy. Around 2.1 billion euros are to be saved by 2030 through the measure. The funds come from the Climate and Transformation Fund, a special federal pot.

The black-red federal government is planning a reform of the previous heating law. The black-red coalition wants to overturn key points of the regulations passed by the former Ampel government in the new Building Modernization Act. The core of the existing Building Energy Act is to be dropped, namely the 65-percent rule: this stipulates that every newly installed heating system should be operated with 65 percent renewable energies. In future, new gas and oil heating systems should still be able to be installed—provided that they gradually use an increasing share of CO2-neutral fuels such as biomethane.

Criticism from the Opposition

Union parliamentary group vice chair Müller told Deutschlandfunk that the subsidy would be modified and improved for lower and smaller incomes. Green parliamentary group vice chair Vierlinden, on the other hand, stated that it was "ein absolut fatales Signal, dass die Bundesregierung nun an der Heizungsförderung spare." The Greens' energy policy spokesperson, Alaa Alhamwi, said: "Die Bundesregierung hat den Menschen eine verlässliche Heizungsförderung bis 2029 versprochen." Anyone softening this promise now would cause massive uncertainty. The government would also be putting jobs at risk, because the subsidy strengthened the skilled trades and the heat pump industry.

Green politician Katrin Uhlig said: "Weniger Mittel bedeuten weniger Förderung, weniger Investitionen und weniger Klimaschutz - mit fatalen Folgen für die Wärmewende." It had been communicated for years that financing was secured until 2029. "Dieses Vertrauen wird nun gebrochen." The German Heating Industry Association (Bundesverband der Deutschen Heizungsindustrie) stated that adjustments had to be made with "Augenmaß." It was crucial that necessary investments in the building stock were not held back.

The GIH warns against squandering trust and endangering ongoing renovation projects through short-term subsidy stops or new subsidy conditions. "Notwendig sind ausreichend lange Übergangsfristen, damit Investitionen verlässlich geplant und umgesetzt werden können," the association stated. The advocacy group for energy consultants in North Rhine-Westphalia criticized the short-term changes in an initial reaction. From July 9 to July 20, there will be a transition phase in order to make "notwendige technische Anpassungen" at the state development bank KfW and the Federal Office Bafa. The new subsidy conditions are to enter into force on July 21.