Merz Coalition Sets 2026 Deadline for Revised Heating Law to Ease Homeowner Burden

German Chancellor Friedrich Merz's Ruling Alliance Sets Firm Deadline for Replacing Fossil-Fuel Heating Law

German Chancellor Friedrich Merz's ruling alliance set a firm deadline for finalizing a revised plan to replace the controversial fossil-fuel heating law by the end of February 2026. After the latest coalition discussions in Berlin, Merz announced that the existing law would be scrapped and replaced with a more flexible and technology-neutral building modernization bill. The overhaul aims to reduce the burden on homeowners while still pushing forward the country's climate goals.

The previous version of the law, introduced by Chancellor Olaf Scholz's government, required homeowners to replace old heating systems with those powered by at least 65% renewable energy. This mandate sparked widespread backlash, with critics calling it costly and intrusive. Most German homes still rely on oil and gas heating, and the transition to greener alternatives has been a contentious issue.

Merz's conservative bloc has pushed to reduce or eliminate the 65% renewable threshold, arguing that it places an undue financial strain on families. The Social Democrats, however, insist on maintaining the threshold to ensure progress toward carbon neutrality. The coalition's seventh and final round of talks for 2025 was held on Wednesday, leaving other major issues like pension reform and welfare overhauls for 2026.

A Delicate Balancing Act

Finding common ground among the coalition partners has proven difficult. The Social Democrats and Greens had previously championed the 65% threshold as a necessary measure to decarbonize the building sector. However, the new government, led by Merz, is under pressure to ease the transition for homeowners and small businesses. The revised law will reportedly be simpler and more technology-neutral, opening the door to a broader range of heating solutions beyond just renewables.

The coalition has now set a timeline for passing the new law by the end of February. Once approved, it will move to the cabinet for finalization before being submitted to parliament. Merz emphasized the need for a "workable" compromise that balances environmental goals with public concerns.

Broader Reforms on the Horizon

The coalition's focus on the heating law is just one part of a broader agenda. With 2026 looming, Finance Minister Lars Klingbeil noted that the coming year will be defined by significant reforms. The pension system and welfare benefits are among the key issues that remain unresolved. Klingbeil, a Social Democrat and vice chancellor, expressed confidence in the coalition's ability to tackle these challenges.

The coalition's ability to maintain stability will be tested by the complexity of these reforms. While Merz and Klingbeil both acknowledge the scale of the tasks ahead, they remain optimistic about the coalition's strength. The government faces pressure to deliver results on multiple fronts, from climate policy to economic security and social welfare.

What This Means for Germany's Climate Goals

Germany's climate goals remain ambitious, but the revised heating law may shift the approach to achieving them. The new building modernization law will likely prioritize gradual, cost-effective transitions over strict mandates. This could affect the pace of renewable adoption in residential and commercial heating.

Industry analysts will be watching how the new policy impacts the renewable heating market. While the government seeks to ease the burden on homeowners, it must also ensure that the nation stays on track to meet its carbon neutrality goals. The revised law will need to strike a delicate balance between affordability and environmental impact.