The German federal government plans to significantly lower state subsidies for heating system replacements in an effort to save billions of euros. According to a letter from the Finance Ministry to the Bundestag's budget committee, the amount of subsidizable costs for installing a heat pump, for example, is set to decrease starting next year.
The so-called climate bonus for the early replacement of an old heating system is also expected to be reduced faster than previously planned. In return, subsidies for low-income households would be increased.
Homeowners can currently apply for a base subsidy covering 30 percent of the costs of installing a modern heating system, with subsidizable costs capped at 30,000 euros. According to the letter, which was seen by the news agency AFP on Tuesday, this cap will drop to 28,000 euros next year and then decrease by a further 750 euros every six months.
In addition, the current 20 percent bonus for replacing a still-functional heating system that is at least 20 years old is set to fall by four percentage points every six months starting next year. This would phase the bonus out entirely by 2029.
At the same time, the existing additional subsidy of 30 percent of costs for households with a taxable income under 40,000 euros a year is to be broken down further: households earning under 30,000 euros a year would see their bonus rise to 40 percent, while those earning between 30,000 and 40,000 euros would keep the current 30 percent. Households with an income between 40,000 and 50,000 euros would receive a bonus of ten percent of the subsidizable costs.
The proposal, which according to the Finance Ministry is based on an agreement between the ministries involved, led by the Federal Ministry for Economic Affairs, also includes a number of smaller changes. Among them, the efficiency bonus for heat pumps would be scrapped, and switching from district heating to another heating technology would no longer be subsidized. The Bundestag's budget committee is set to discuss the proposal on Wednesday.
"The federal government promised people reliable heating subsidies through 2029," criticized Green Party lawmaker Alaa Alhamwi. "Anyone who now waters down that promise and puts cuts on the table is creating massive uncertainty." He added that the government was also risking jobs, since the subsidies support the skilled trades and the heat pump industry.
The Finance Ministry cites the need for savings. If the current subsidy system were maintained, the fiscal plan through 2030 would be short around 4.2 billion euros. The proposed reform, by contrast, would save up to 2.1 billion euros.
According to the information provided, a so-called local-content criterion is also planned: a bonus of up to 15 percent would be granted if the new heating system comes from domestic production. In this context, "domestic production" means "Made with Europe" or "value creation within the EU and associated markets," which includes countries such as Japan or Canada that have a trade agreement with the EU. However, this rule has not yet been finalized and is not expected to be introduced before next year at the earliest.
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