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PROPERTY

Germany’s heat subsidies now available to all homeowners

This year, homeowners in Germany can apply for subsidies for environmentally friendly heating systems. The third wave of applications opened Tuesday, meaning all eligible groups can now apply.

Published: 27 August 2024 10:31 CEST
heat pump installation
Heat engineers remove a gas boiler after installing a heat pump (left). Homeowners who switch to a new heat pump can benefit from an initial subsidy, as well as lower energy costs in the long term. Photo: picture alliance/dpa/STIEBEL ELTRON | STIEBEL ELTRON

As of Tuesday, all home and apartment owners can apply for state subsidies for the replacement of old gas and oil heating systems with more climate-friendly heat pumps.

This includes landlords of single-family homes, as well as companies and municipalities.

This marks the third and final funding round of the Heating Act, with all eligible groups now able to apply. 

Earlier this year, applications had opened to private owners of apartment buildings and owner-occupied single-family homes, as well as condominium owners’ associations with central heating.

Grants cover up to 70 percent of replacement costs

The heating grants are designed to cover at least 30 percent of the costs to replace an oil or gas burner with a heat pump system for both residential or commercial buildings.

In some cases up to 70 percent of the instalment costs could be covered, depending on your income, and the speed and implementation of the heating system replacement. 

For owners who live in their property themselves and have up to €40,000 of taxable annual household income, the basic 30 percent subsidy generally applies.

By 2028, a speed bonus of 20 percent will be added for the early replacement of old gas and oil heating systems as well as night storage heaters and old biomass heating systems. 

There is also an efficiency bonus of an additional five percent for heat pumps that use water, soil or wastewater as a heat source, and those that use a natural refrigerant.

The heating law is not yet meeting expectations

According to Germany’s new heating law, starting this year 65 percent of newly installed heating systems should be powered by renewable energies. But the regulations initially only apply to new buildings in new development areas. Functioning heating systems can be left alone.

According to the Federal Ministry of Economics (BMWK), around 93,000 applications for heating grants have been approved so far. 

The BMWK expects an increase in applicants for funding following the opening of grants to the remaining groups. 

Overall the number of subsidies granted per month has increased since they opened in February, but is far below expectations.

Sales of heat pumps in Germany collapsed at the end of July this year, according to the Federal Association of the German Heating Industry (BDH). In the first half of 2024, 90,000 heat pumps were sold, which was 54 percent less compared to the same period in 2023, which had been a record year for the sale of heat pumps. 

The BMWK cited pull-forward effects and higher interest rates as possible reasons for the decline in sales this year.

READ ALSO: German consumer confidence to worsen in September

The BDH is “cautiously optimistic that the second half of the year will be better than the first,” a spokesperson told DPA. Nevertheless, the association expects a maximum of 200,000 heat pumps to be sold in Germany by the end of the year.

The German government had set a goal of installing 500,000 heat pumps every year from 2024.

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CLIMATE CRISIS

Germany spends billions on climate-harming subsidies each year, study finds

A study commissioned by the German ministry of economics (BMWK) calculated exactly how much the government spends on subsidies that increase greenhouse gas emissions.

Published: 20 August 2024 11:54 CEST
Germany spends billions on climate-harming subsidies each year, study finds

The study, which was released Monday, found that subsidies and tax breaks of at least €35.8 billion drove up greenhouse gas emissions in Germany in 2020 alone.

It also suggests that if current subsidies remain in place, they would amount to an additional 156 million tonnes of CO2 emissions between 2023 and 2030. 

Titled “Quantification of the greenhouse effect of state benefits in Germany”, the study was carried out by six institutes.

According to German Environmental Aid (DUH), the report was withheld from publication for nine months. The organisation had taken legal action to ensure the report would be made public, and accused Federal Ministers Habeck (Greens) of “disregarding freedom of information”.

The study’s authors confirmed that the report was completed in November 2023. 

Germany’s climate commitments versus its actions

Within an agreement between G7 countries, Germany committed itself to eliminating all subsidies on fossil fuels that are inefficient for reducing greenhouse gas emissions by 2025.

Also in the traffic light’s coalition agreement, the current government set the goal of reducing “climate-damaging subsidies” and thereby creating “additional budgetary leeway”. 

But this 150-page report, prepared by six institutes – IREES, Prognos, GWS, Fraunhofer ISI, Ifeu and the Oeko-Institut – shows just how far those goals are from reality.

Of the €35.8 billion per year spent on climate-harming subsidies, the largest share by far goes to the transport sector – amounting to €24.8 billion in total.

The next biggest share of subsidies goes to agriculture (€4.7 billion), and then industry (€4.1 billion) and finally energy (€2.1 billion).

How transportation emissions are subsidised

Transportation remains one of Germany’s primary polluting sectors, and one that has proven particularly hard for the country to reduce emissions in.

READ ALSO: Has Germany avoided ‘driving bans’ by loosening its climate rules?

According to reporting by Clean Energy Wire (CLEW), subsidies in this sector have remained largely unchecked for years partly because the government doesn’t have a solid definition for which tax breaks and assistance programmes are included. 

The most obvious subsidies in this sector would include tax breaks for diesel fuel. But they also include, for instance, tax breaks for privately used company cars.

The study found that abolishing diesel tax breaks alone would save 25.7 million tonnes of CO2 by 2030 and €9.6 billion more in annual tax revenue. Diesel subsidies amount to huge savings for shipping and aviation companies, among others.

But tax breaks for private car drivers would also amount to significant savings.

Cutting the so-called distance allowance, a tax break for employees who drive to work, would also amount to a CO2 emission reduction of 16.4 million tonnes, and €5.3 billion in additional revenue in that time.

Cutting tax breaks for privately used company cars could save 7.9 million tonnes of CO2 and add €6.1 billion in additional tax revenue.

READ ALSO: EXPLAINED – The top tax deductions often overlooked by employees in Germany

Other efforts

According to the report, other subsidies worth considering include energy and electricity tax breaks, which could amount to CO2 emissions reductions of 26.8 million tonnes and 25.2 million tonnes, respectively.

Also, a reduced VAT rate on meat products equates to an estimated 17 million tonnes of CO2 emissions by 2023.

Meanwhile, there are some climate-friendly subsidies already in effect. The report suggests that subsidies for energy and resource efficiency can be expected to reduce a total of 40.4 million tonnes of CO2 emissions by 2030. 

The federal subsidy for efficient buildings is also intended to reduce emissions by a total of 53.6 million tonnes.

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