German energy companies and environmentalists reject quotas for zero-emission heating fuels

The German government wants to replace the existing requirement to use at least 65% renewable energy when installing new heating systems with a mandatory blending scheme for zero-emission fuels in fossil gas and heating oil. But a broad coalition of energy companies, industry associations and environmental organizations has unexpectedly come out against the proposal. Critics warn that biomethane and hydrogen will be expensive and in short supply for home heating, potentially driving up consumer costs while slowing the decarbonization of the buildings sector.

Germany’s debate over the decarbonization of heating is the subject of further disputes. Chancellor Friedrich Merz’s government is preparing a reform of the Buildings Energy Act (GEG) that would scrap the controversial requirement introduced in 2023 to use at least 65% renewable energy in newly installed heating systems. Instead, it wants to introduce a so-called zero-emission fuel quota, under which climate-neutral alternatives such as biomethane, bio-oils or hydrogen would gradually be blended into the gas and heating oil supplied through distribution networks.

Under the proposal, the share of these fuels would reach at least 10% from 2029, then rise to 15% in 2030, 30% in 2035 and as much as 60% in 2040. At the same time, households would still be allowed to install new gas and oil-fired boilers.

This approach has prompted an unusual consensus among organizations that usually find themselves on opposite sides of energy debates. The German Association of Energy and Water Industries (BDEW) warns that continued installation of fossil-fuel heating systems could cause the buildings sector to miss its emissions targets and create long-term dependence on expensive gas infrastructure.

Environmental organizations united under the umbrella of the German Nature Conservation Ring (Deutscher Naturschutzring, DNR) make a similar argument. In a joint statement, they described the zero-emission fuel quota as an “expensive sham solution” that would make home heating more costly and delay the shift to low-emission technologies. DNR President Kai Niebert said the measure could make it impossible to achieve climate targets in the heating sector.

Chancellor Merz is also facing opposition from within his own ranks. Some members of his conservative Christian Democratic Union (CDU) have expressed concern that the reform could be unconstitutional.

A key problem is the limited availability of biomethane and renewable hydrogen. Many expert studies and energy strategies assume that these resources will be prioritized for industry and other hard-to-decarbonize sectors, where readily available alternatives do not exist. This means there may not be sufficient volumes available at an affordable price for widespread home heating.

The buildings sector should meet its decarbonization targets primarily through electrification, the expansion of district heating and improved energy efficiency, while biomethane and other zero-emission fuels should be used in sectors where alternatives are technically difficult to implement or entail high costs.

The buildings sector is the Achilles’ heel of Germany’s decarbonization

Germany has long lagged behind on meeting its emissions targets for the buildings sector. According to the latest projections, if current measures remain in place, the country will reduce emissions by around 63% by 2030 compared with 1990, short of the 65% target. Buildings are among the weakest links in German climate policy and have repeatedly failed to meet the set limits.

Reforming the rules on heating decarbonization has been one of the most controversial climate policy debates in Germany in recent years, and industry has long called for regulatory clarity, arguing that uncertainty is holding back investment decisions.

The government argues that its proposal offers greater technological neutrality and aims to remove the most controversial part of the so-called “Heating Act.” Subsidy programs for heat pumps and connections to district heating networks are expected to remain in place at least until 2029.