German cabinet approves bill to phase out oil and gas heating systems

German cabinet approves bill to phase out oil and gas heating systems

19 Apr    Finance News, PMN Business, REU

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BERLIN — The German cabinet on Wednesday approved a bill that bans most new oil and gas heating systems from 2024, the economy minister said, a policy designed to cut greenhouse gas emissions but that critics warned could be costly for poorer households.

Berlin’s ruling coalition last month agreed that almost all newly installed heating systems in Germany should run on 65% renewable energy from 2024, both in new and old buildings.

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The plan is part of Germany’s ambition to become climate neutral by 2045 as the construction sector was responsible for 112 million tonnes of greenhouse emissions last year or 15% of the country’s emissions.

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Houses could also use heat pumps that run on renewable electricity, district heating, electric heating or solar thermal systems as acceptable alternatives to fossil fuel heating, according to the bill, which was seen by Reuters.

The policy has met resistance from within Chancellor Olaf Scholz’s coalition, with critics calling it too costly and a burden on low- and medium-income households and tenants.

Such a shift could cost Germans around 9.16 billion euros ($10 billion) annually until 2028, the draft bill showed. The costs would fall to 5 billion from 2029 as Berlin expects renewable energy expansion and a ramp up of heating pumps production to make the switch cheaper.

The government will offer a subsidy of 30% for residential properties occupied by owners and 10% extra if the owners opt for an earlier climate-friendly heating switch than required by law, regardless of the household income.

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Homeowners who receive income-related welfare benefits could get 20% extra subsidy for the switch.

The money will come from the Climate and Transformation Fund, a supplementary budget to push green investments, with some 180 billion euros earmarked for 2023 to 2026.

“The financing is secured,” Economy Minister Robert Habeck told journalists in a news conference presenting the bill. Habeck declined to give a figure of how much this would cost the government but the sum would be “moderate.”

The bill gives some exemptions, for instance for homeowners who are over 80 years old and living in hardship.

Those who violate the new rules face a fine of 5,000 euros, said the draft law, which will be now be debated in parliament.

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Germany’s push to phase out gas in heating became more urgent after Moscow’s invasion of Ukraine prompted Berlin to halt Russian fossil fuel imports.

Heating uses up more than 40% of Germany’s annual gas consumption as almost half of the country’s 41 million households heat with natural gas while almost 25% use heating oil.

“We’re starting comparatively late with this. Other countries have done this earlier,” Habeck said, citing the heating sector in Scandinavian countries that are much less reliant on fossil fuel to keep their homes warm.

The bill means Germany would have to shut down more than 90% of its 500,000-km (310,685-mile) gas distribution network in the next 20 years, a study by Agora think-tank showed on Tuesday. ($1 = 0.9143 euros)

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Around 78% of Germans are against the planned law, a survey by Forsa pollster published by ntv and RTL broadcasters showed on Wednesday. About 62% of those surveyed expect heating bills to rise after a switch to renewables, the poll showed.

Germany’s association of local utilities, VKU, said the law was an “emotional roller coaster” as the time given for the changes it required was too short.

“The deadlines should therefore be extended. At least transitional periods are urgently needed,” VKU said in a statement.

Environmental group Greenpeace called the bill a “milestone” for climate protection in Germany, and was long “overdue.”

“In this way, Germany can achieve the climate protection goals in the future, which the building sector has exceeded for three years,” it said.

(Reporting by Riham Alkousaa, Markus Wacket and Christian Kraemer; editing by Matthias Williams, Emelia Sithole-Matarise and Louise Heavens)

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