Germany has put an indefinite stop to a series of subsidies viewed as key to meeting climate goals, a move that could undermine the rollout of heat pumps as the country attempts to plug a multi-billion-euro hole in its budget.
Nine funding programmes, covering everything from energy efficient homes to cargo bikes for commercial use, are now on hold as Olaf Scholz’s coalition government seeks to make savings of about €17bn (£15bn).
The government was thrown into a quandary last month over how to finance its ambitious environmental and industrial transformation programme (KTF) when the country’s highest court blocked its attempts to switch €60bn of pandemic-era borrowing to pay for it.
The three-party government, which sees Scholz’s Social Democrats sitting alongside the Greens and the liberal FDP, has been scrambling for ideas to achieve a solution to the budget shortfall ever since. On Monday evening, the federal office for economic affairs and export control (Bafa), an agency subordinated to the economic ministry, identified the areas that will be hit.
Consultations on how to make homes more energy efficient, which have been subsidised to the tune of several thousand euros per household, as well as the funding of collective citizen energy initiatives for onshore wind, are among the measures affected.
Individual applications for measures which have already been approved for funding would still go ahead, Bafa said. However, industry figureheads said the pause, even if only temporary, was likely to affect market confidence and stall progress.
Subsidies to boost the installation of heat pumps – a key pillar in the government’s attempts to wean German households off fossil fuels – will also be hit.
Germany has a shortfall of about 20,000 engineers to install heat pumps and the subsidies were introduced to facilitate the training of a new generation of installers.
Subsidies for electric vehicles are not affected, prompting an angry response by environmental reform observers about the government’s priorities.
Ingwar Perowanowitsch, a Germany-based political scientist specialising in the climate crisis, wrote on X:
“Hard to fathom which funding was stopped yesterday due to the budget crisis: support for efficient heat networks, energy consultation for homes, an energy efficient economy, the heat pump installation programme and electric cargo bikes. And which were not? … the environmental bonus for electric cars.”
The accusation among environmentalists is that the German car industry – which was late to the electric car revolution – is being afforded special protection by the government.
Germany’s attempts at environmental transformation, while often greatly admired from afar, have triggered considerable political division within the country. The far-right AfD in particular, as well as the right-wing CDU, have accused the government of overseeing an “eco-dictatorship” in its attempts to encourage both industry and private individuals to switch from fossil fuel usage to cleaner alternatives.
The heat pump has therefore become a symbol of – as AfD supporters widely see it – an attempt to impose a new, less reliably prosperous lifestyle on them. It has even become a flashpoint in Germany’s culture wars, with the AfD comparing the government’s energy transformation programme with legislation aimed at making it easier for transgender people to self-identify.
Alice Weidel, the party’s national joint leader, told a party rally in the autumn: “We are being bullied … Citizens are no longer free to choose which heating system they want to have in their cellar. But we are allowed on an annual basis to choose whether we want to be male or female or anything else.”
In the autumn the government was forced to water down its rules on when people would have to switch from gas boilers to more environmentally-friendly alternatives, after a backlash led by the pro-business FDP, and supported by the opposition CDU and AfD parties.
Christian Lindner, the finance minister and FDP head, welcomed the changes, which he said by giving people more time to transition, would lessen state intrusion in Germans’ lives.
“It is now no longer a law that people should be afraid of, over the expectation that the state will descend into their boiler rooms,” he said.
Robert Habeck, the economy minister and leading Green, said the changes, by delaying the green heating revolution, would mean Germany would fail to meet its emission reduction goals.
