Article content

(Bloomberg) — Germany plans to cut generous subsidies for low-carbon heat pumps by about €2.1 billion ($2.4 billion) in the coming years, as it aims to make some budget savings while raising spending on defense and security.

Article content

The savings would be made through the end of the decade by gradually reducing costs eligible for funding for renewable heating systems, according to a draft proposal from the Energy Ministry that was seen by Bloomberg. Maximum funding rates will initially be lowered by €2,000, and then by another €750 every six months, according to the proposal submitted to parliament’s budget committee.

Article content

Article content

Article content

The plan highlights the challenge Europe’s largest economy faces in continuing to fund programs to help meet climate goals while trying to increase military spending. Chancellor Friedrich Merz’s cabinet approved a budget proposal for 2027 on Monday that includes ramping up spending on defense and security to more than €200 billion by 2030, while assigning ministries to cut subsidies.

Article content

Article content

The ministry’s proposal still needs to be voted on by parliament. An Economy Ministry spokesperson confirmed the plan to reduce subsidies by €2.1 billion.

Article content

Germany currently has some of the most generous heat pump subsidies — up to 70% — as it aims to cut carbon emissions by two-thirds by 2030, compared with 1990 levels. However, an advisory group warned in May that the nation is likely to miss key climate targets as it waters down emission-reduction programs.

Article content

Another linked draft law that proposes abolishing a controversial ban on new gas and oil heating systems is being discussed in parliament this week.

Article content