How Germany plans to phase out oil and gas heating

The Green Party's Robert Habeck, Germany's Economy and Climate Protection Minister, wants to ban almost all new oil and gas heating systems in Germany from 2024, both for climate protection reasons and because the price for oil and gas has risen sharply after Russia's attack on Ukraine just over a year ago.

This week in Berlin, Habeck said that Germany must speed up its switch to renewable energy, making up for time lost under the previous government. Otherwise, he said, neither the climate targets, enshrined in law but which Germany is unlikely to meet, nor the transformation of the economy necessary to ensure future prosperity could be achieved.

Expensive heat pumps

Heat pumps are to replace the old gas and oil heating systems, the energy for which is to come from renewable sources such as wind turbines or solar plants.

When the current three-way coalition of center-left Social Democrats (SPD), Greens, and neoliberal Free Democrats (FDP) came to power in 2021, they agreed to ban new oil and gas systems from 2025 and permit only new ones that generate at least 65% of their heat from renewable energies. This will require alternative systems such as heat pumps or local district heating.

But Habeck's ministry now sees a need for swifter action: Over 80% of the demand for heat is currently still met by burning fossil fuels. "Every year, we burn more than 40% of the natural gas Germany imports to heat our buildings and supply them with hot water. Of the approximately 41 million households in Germany, nearly one in two heats with natural gas."

Since around half of Germany's households are still dependent on gas and oil, switching to alternatives is costly and simply not affordable for many. A heat pump costs between €11,000 ($11,700) and €25,000 for a single-family house. That's a big investment, even if the government subsidizes up to 40% of the cost.

That leaves two major problems for Habeck: Firstly, how to curb the costs for homeowners and tenants with a subsidy program that will potentially cost the state billions – he has yet to say exactly how large this program will be. Secondly, there is a lack of skilled workers, both for the mass installation of new heat pumps and, for example, in the solar industry, which says it is currently lacking around 200,000 jobs.

New dispute with the FDP

Chancellor Olaf Scholz (SPD) threw his weight behind Habeck this week when he said, "From 2024, we will install 500,000 new heat pumps every year."

But once again, there are signs of an open conflict between the Greens and the FDP, whose parliamentary group leader in the Bundestag, Christian Dürr, promptly said, "I think blanket bans are wrong; instead, we should remain open-minded and ensure that classic heating systems can also be operated in a climate-neutral manner in the future."

It seems clear that there are budget arguments going on behind the scenes: On Friday, Finance Minister Christian Lindner (FDP) postponed the federal cabinet's meeting to agree on the key figures for next year's budget, which had been scheduled for next Wednesday. His state secretary Florian Toncar explained: "The spending wishes of many departments are still clearly too high or there is a lack of savings elsewhere to be able to set new priorities."

This article was originally written in German.

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