Germany updates heating law, removing 65% renewable energy mandate

Germany's new Building Modernization Act (Gebäudemodernisierungsgesetz), effective as of July 29, 2026, has removed the previous requirement that new heating systems must utilize at least 65 percent renewable energy. This change grants homeowners more flexibility, allowing the installation of heat pumps, district heating, biomass, and even new gas or oil heating systems, provided they are gradually operated with increasing shares of climate-neutral fuels.

Despite the increased freedom, experts warn of significant long-term financial implications. While the immediate mandate for renewable energy is gone, the cost of using fossil fuels is expected to rise due to increasing CO2 prices. In 2026, the national emissions trading price corridor is projected to be between 55 and 65 euros per tonne of CO2, which could add several hundred euros in annual costs for gas and oil-heated homes.

Critics and environmental organizations have raised concerns regarding the law's effectiveness. The Deutsche Umwelthilfe has announced plans to challenge the law in the Federal Constitutional Court, arguing that loosening these requirements makes it significantly harder to reach national climate targets. Experts also cite potential bureaucratic hurdles, social risks, and uncertainty for both owners and tenants regarding the long-term economic viability of various heating technologies.