Germany agrees cost-sharing plan in heating law reform

Germany's coalition government has agreed on a cost-sharing mechanism between landlords and tenants as part of planned reforms to its heating law, aiming to ease concerns over rising housing costs.

Under the agreement, landlords and tenants will split certain costs linked to heating systems, including fuel and network charges, coalition leaders of Chancellor Friedrich Merz's conservative CDU/CSU bloc and the Social Democrats said. 

The deal clears the way for the Cabinet to approve the revised legislation.

The reform would roll back key elements of the previous government's heating law, including unpopular requirements to shift rapidly toward renewable energy systems, which triggered a voter backlash.

The earlier law, championed by former economy minister Robert Habeck, required new heating systems to run on at least 65% renewable energy, initially applying to new buildings in designated development areas.

Instead, the new framework continues to allow the installation of new gas and oil heating, provided they gradually incorporate more climate-friendly fuels from 2029, including biomethane and synthetic fuels.

The government says the changes will make the law more flexible and practical, while maintaining subsidies for switching heating systems.

Environmental groups warned of a potential cost trap linked to gas, citing higher long-term costs from rising carbon prices and network charges. They also criticized the plans as a setback for climate action in buildings, arguing they would prolong reliance on fossil fuels.