The Lobby-Driven Building Modernization Act | Experts stunned: Is the CDU's heating law even more chaotic than Habeck's draft? – Image: Xpert.Digital
Warning to homeowners: Why the Union's new heating law will become a cost trap
"Bio-staircase" exposed: Why the new law cannot physically work
The Katherina Reiche file: Is the gas lobby writing our new heating regulations?
The CDU/CSU promised to abolish Robert Habeck's much-debated Building Energy Act (GEG) and replace it with a practical, technology-neutral model. However, the draft of the new "Building Modernization Act" (GMG) presented by the CDU/CSU-SPD coalition government is facing devastating criticism from all sides – to an extent that has surprised even experienced political observers.
- The National Regulatory Control Council speaks of an unprecedented technical disaster
- Environmental experts warn of a blatant failure to meet climate targets
- and city representatives fear an unsolvable infrastructure chaos.
At the center of the storm are a physically unrealistic "bio-staircase," a looming cost trap for millions of tenants and homeowners, and an economics minister whose close ties to the gas industry raise the pressing question: Whose interests does this law actually serve? A deep analysis of a project that renders the promise of deregulation and an affordable energy transition absurd.
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From the traffic light coalition's heating dispute to the Union's self-destruction
Few legislative proposals have polarized German domestic politics in recent years as much as the so-called heating law. When Economics Minister Robert Habeck presented his draft for the amendment of the Building Energy Act (GEG) in the spring of 2023, a social storm erupted, the intensity of which is virtually unparalleled in recent German legislative history. The central demand was objectively sound: From 2024 onward, newly installed heating systems should be powered by at least 65 percent renewable energy in order to gradually bring the building sector onto a climate-friendly path. What followed was a months-long exchange of blows in which the CDU/CSU systematically defamed the law as a bureaucratic monster, a social imposition, and an expression of paternalistic green policies. The CDU/CSU instrumentalized the issue in the 2024/2025 federal election campaign and promised to repeal the heating law if they came to power.
The black-red coalition under Friedrich Merz has now fulfilled this promise – and in a way that has astonished even well-meaning observers. On May 14, 2026, the National Regulatory Control Council (NKR), an independent, volunteer advisory body for reducing bureaucracy, published a scathing assessment of the planned Building Modernization Act (GMG). NKR Chairman Lutz Goebel described the cabinet draft as one of the weakest and most impractical proposals submitted to the council in recent years. He stated that large sections of the text were barely comprehensible, unnecessarily complicated, and often incomprehensible to those affected. The irony that the very party that had criticized the Habeck law for years due to its alleged complexity is now presenting a bill that is being criticized even more harshly – this twist of fate is hard to miss.
The institutional guardian speaks – and nobody listens
The National Regulatory Control Council is not an actor that can be accused of political bias. The body was established in 2006 under the then-governing grand coalition to systematically review draft legislation for its bureaucratic burden and clarity. Its members are volunteer experts from business, administration, and academia who are not bound to any government line. If this council, in its history, designates a law as one of the worst it has ever received, that carries weight—regardless of who is currently in power.
In the case of the Building Modernization Act, the NKR (National Regulatory Control Council) not only expressed formal criticism but also issued a comprehensive condemnation of its content. Goebel pointed out that even heating industry associations—that is, representatives of sectors that certainly have no interest in stricter climate policy—were citing significant implementation problems and a lack of practical applicability. The NKR was particularly critical of the regulations governing the allocation of ancillary costs when installing fossil fuel heating systems, which many homeowners could only implement with the assistance of external consultants. Anyone promising less bureaucracy should not introduce legislation that creates new uncertainty, new documentation requirements, and new complexity, Goebel stated unequivocally in his demand to the Bundestag (German Federal Parliament).
The fact that the National Regulatory Control Council (NKR) is calling on the legislature to fundamentally improve the parliamentary process and seriously examine the proposals of the professional associations is an unusual occurrence. It is the institutionalized voice of expertise urging the government to do its homework – a voice that has so far largely gone unheard.
The Bio-Stairway: A promise built on sand
The centerpiece of the Building Modernization Act is the so-called "bio-staircase," a mechanism intended to replace the abolished 65 percent renewable energy requirement. The principle initially sounds reasonable: New gas and oil heating systems are to be gradually operated with increasing proportions of climate-friendly gases. From 2029, a green gas quota of ten percent will apply, increasing in further stages to 30 percent by 2035 and 60 percent by 2040. In addition, there will be a so-called green gas quota for existing systems, starting at one percent from 2028.
The problem lies not in the principle itself, but in the physics of the available fuel. To meet the ten percent quota for newly installed heating systems from 2029 onward, approximately 22.5 terawatt-hours of biomethane would be required. However, in 2024, only 10.7 terawatt-hours of biomethane were fed into the grid in Germany – and even of this amount, only a fraction was actually available for heating. According to the German Energy Agency (dena), a mere 0.68 terawatt-hours were used exclusively for heat production. The gap between what the bio-staircase requires and what is actually available has therefore been dramatic from the outset.
To make matters worse, the expansion of domestic biomethane production is hitting a tough wall. A massive increase in biogas production would put agricultural land in competition with food production – a classic dilemma of bioenergy use. Imports from Denmark, Great Britain, and the Netherlands supplemented domestic production by around 3.5 terawatt-hours in 2024, but these supplier countries also lack sufficient export volumes to meet potentially rising German demand. The German Renewable Energy Federation (BEE) summed it up: The bioenergy transition plan, in its current form, is too unambitious, and its target of 60 percent renewables by 2040 is simply a step backward compared to the previous 65 percent rule.
Synthetic natural gas and hydrogen cannot provide short-term relief either: Domestic production of climate-friendly hydrogen is still in its infancy, and secure supply contracts of any significant scale do not exist. The "bio-staircase" therefore relies on fuels that simply do not exist in the required quantities – at least not within the timeframe in which the legal requirements are intended to apply. The result is predictable: Anyone installing a new gas heating system based on this regulation will sooner or later either be surprised by skyrocketing fuel costs or confronted with the reality that the promised green gases are unavailable.
Climate targets missed – predictably so
The building sector is one of the most persistent problem areas in German climate policy. In 2024, it caused around 101 million tons of greenhouse gas emissions, missing its legally mandated sector target by approximately five million tons. In 2025, building emissions even rose by 3.4 percent to 103.4 million tons, which the Federal Ministry for the Environment partly attributed to the cold weather, but at the same time admitted that overall progress was insufficient. Emissions are supposed to fall to around 65 million tons by 2030 – a path on which Germany is currently hopelessly lagging behind.
A study published in March 2026 quantified the climate policy costs of the Building Modernization Act in hard figures: The planned elimination of the 65 percent reduction requirement would result in a cumulative additional 108 to 172 million tons of CO2 equivalents by 2040 compared to the legally mandated emissions budget. The 65 percent requirement alone had achieved a reduction of 9.6 million tons of CO2 in 2030 and 30.2 million tons in 2040 – thus accounting for over 80 percent of the total emissions reduction effect of the Building Modernization Act. Its removal effectively rendered the most significant climate protection instrument in the building sector ineffective.
Even more remarkable is that the German government admitted in its own cabinet proposal that a reliable cost estimate was not possible – an admission unprecedented in the history of modern legislation. Passing a law whose economic consequences the government itself does not dare to quantify is irresponsible. Furthermore, the EU Commission had instructed Germany to fully transpose the new EU Energy Performance of Buildings Directive (EPBD) into national law by May 2026 – the directive stipulates, among other things, that from 2030 onwards, new buildings must no longer generate CO2 emissions from fossil fuels. The German Renewable Energy Federation (BEE) unequivocally criticized the fact that the Building Modernization Act fails to meet these requirements: the draft threatens neither to comply with the EU Energy Performance of Buildings Directive nor to reliably shape the transformation pathway in the heating sector.
Cities in a dilemma: Three networks, no plan
The German Association of Towns and Municipalities, one of Germany's most influential municipal interest groups, did not fundamentally oppose the Building Modernization Act – but it formulated a structural critique that ruthlessly exposes the law's logical flaws. Managing Director Berghegger stated that it cannot be a long-term goal to simultaneously continue operating gas networks, expand electricity grids for widespread heat pumps, and build new district heating networks. Only local municipal heat planning can determine which infrastructure is sensible.
This criticism strikes at the heart of one of the fundamental design flaws of the law. Municipalities are legally obligated under federal law to conduct local heat planning – many cities are already on the home stretch of this mammoth planning task, while the new law undermines their planning foundations with contradictory funding incentives. Berghegger explicitly warned that the heat transition will become economically inefficient and financially overburden citizens, businesses, and municipalities if the regulations of the new law lead to a tangle of parallel infrastructure systems. The cities also criticized the lack of a credible biomethane strategy: Reliability is particularly lacking regarding the use of green gases. The German Association of Cities echoed this criticism and called for earlier clarification of key issues and more support from the federal and state governments to manage the heat transition financially and in terms of planning.
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Who benefits from the building modernization law? Tenants face higher costs
Tenants and owners: Who pays the bill?
The socio-political dimension of the law is no less explosive than its climate policy dimension. The abandonment of the 65 percent requirement and the introduction of the "bio-staircase" create an absurd situation: landlords can continue to install inexpensive gas or oil heating systems, while the ongoing fuel costs, particularly the rising CO2 price and increasing gas network charges, are passed on to tenants. To at least mitigate this obvious conflict of interest, the coalition agreed on a cost-sharing arrangement: landlords will henceforth be required to contribute half of the CO2 levies, gas network charges, and the additional costs of the bio-staircase.
Homeowners' Association President Warnecke expressed concern about the financial burden this would place on landlords. He argued that the governing coalition was shifting state-caused costs onto landlords, which would eventually leave them without the funds to modernize their buildings. Environmental groups and the Green Party, however, pointed out that the cost-sharing arrangement merely masked the real problem: the coalition was fixing a problem it had created itself. The Munich Environmental Institute described it as a cost trap: anyone tempted by the new rules to install a new gas heating system should expect costs to skyrocket in the future or even have their house disconnected from the gas network.
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Katherina Reiche: The revolving door as a career model
No other aspect of the Building Modernization Act is as controversially debated as the question of whose interests the law actually serves – and who is responsible for it. Katherina Reiche, Federal Minister for Economic Affairs in the Merz cabinet, is a figure around whose biography this debate centers. The trained chemist from Luckenwalde was a member of the Bundestag for the CDU from 1998 to 2015 and held state secretary positions in the Federal Ministry for the Environment and the Federal Ministry of Transport. In 2015, she seamlessly transitioned – without a cooling-off period – to become managing director of the Association of Municipal Enterprises (VKU), thus triggering the first revolving-door debate about her.
From 2020, she assumed the chairmanship of the board of Westenergie AG, an E.ON subsidiary and one of Germany's largest regional gas network operators. Westenergie operates a nationwide network of electricity, gas, and water supply infrastructure, holds minority stakes in numerous regional municipal utilities, and thus has a vital economic interest in the continued existence of fossil gas networks. In 2025, immediately after the change of government, Reiche once again moved directly from the corporate board to the Federal Ministry for Economic Affairs and Energy without a cooling-off period. From the outset, the opposition pointed to Reiche's past as the chief lobbyist for the gas industry; the SPD, by its own admission, appeared contrite.
What followed fueled these concerns. In April 2026, Der Spiegel revealed that Reich's Ministry of Economics had actively solicited arguments from the energy company EnBW in favor of using gas-fired power plants over battery storage. EnBW—the company with the highest lobbying expenditures in all of Germany—initially failed to register the relevant lobbying document and only uploaded it after being requested to do so by Der Spiegel, thereby violating registration rules, according to LobbyControl. LobbyControl commented sharply on the incident: It was clear once again that Reiche was commissioning arguments for her backward-looking fossil fuel policies from precisely those actors who profited from the continued existence of fossil fuel business models. The gas lobby had practically been at the table while Reiche negotiated the power plant strategy with the EU Commission.
Transparency International Germany warned that ministers are prohibited from allowing their decisions to be guided by one-sided interests and neglecting the common good. If the reports are accurate, Reiche allowed precisely such special interests to guide his decision on energy supply. Economist Claudia Kemfert also criticized the fact that CDU ministers like Reiche move directly from the private sector into politics without establishing the necessary distance.
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Technological openness as a cover term
The German government justifies the Building Modernization Act with the slogan of technological neutrality. The law makes building modernization more technologically open, flexible, practical, and simpler, according to official cabinet communications. Owners can now decide for themselves which type of heating system they want to install. This rhetoric sounds convincing – but it masks a fundamental economic and climate policy logic.
True technological neutrality would mean that all heating options compete under fair conditions – that is, that heat pumps, district heating, biomass, hydrogen, and fossil gases would be used under identical frameworks. Instead, the Building Modernization Act structurally favors the fossil fuel option: The 65 percent requirement is being eliminated, the ban on operating fossil fuel heating systems from 2045 onward is being dropped, and the "bio-staircase" relies on alternative fuels that are not available in the required quantities. At the same time, while heat pumps continue to be subsidized, the signal to consumers is clear: Anyone buying a new gas heating system today is acting legally and even receives cost protection through the tenant cost allocation.
The German Federation for the Environment and Nature Conservation (BUND) summed up the consequence succinctly: Not only will oil and gas heating systems continue to be installed without restrictions, but they will also be permitted to continue operating on fossil fuels even after 2045. This means that Economics Minister Reiche is effectively abandoning the 2045 climate target. The Christian Democratic Union (CDU/CSU) is selling this as a resolution to a major societal conflict – CDU/CSU parliamentary group leader Jens Spahn celebrated the agreement, declaring that the era of harassment and paternalism was over and that the boiler room would once again be a private matter. What is being ignored is that global climate change makes no exception for German boiler rooms, which are simply being relegated to the private sphere.
Social resistance is growing
Resistance to the building modernization law is widespread and steadily growing. On the petition platform WeAct, a Campact campaign entitled "Stop the heating nightmare – protect climate goals!" has already garnered 150,000 signatures. Environmental organizations like BUND (Friends of the Earth Germany) called it a climate policy bankruptcy and demanded that the cabinet halt the irresponsible law during inter-ministerial consultation. Green Party leader Felix Banaszak criticized the governing coalition, stating that while they claim to be meeting climate targets, this law will actually increase utility costs and jeopardize climate goals.
Critical voices also came from industry. The German Renewable Energy Federation (BEE) complained that the constant postponements of deadlines and the introduction of the less ambitious successor law were eliminating important investment incentives in the sector. Planning certainty – the crucial factor for capital-intensive investments in heat pumps, district heating networks, and renewable heating systems – would be further undermined, rather than strengthened, by the Building Modernization Act. While craft businesses and manufacturers of climate-friendly heating technology need to base their capacity planning on reliable political signals, the federal government is sending the message that gas heating systems will remain a viable option indefinitely.
A structural problem: The revolving door and the common good
The Building Modernization Act is more than just a poorly drafted piece of legislation – it is a symptom of a structural problem in German energy policy. When decision-makers like Katherina Reiche move directly from the executive suites of large energy companies into political office without any cooling-off period or institutional safeguards, a gray area emerges where corporate interests and the public good are virtually indistinguishable. This is not an attack on Reiche's personal integrity – it is an institutional critique of a system that allows such transitions to occur without requiring effective safeguards.
Many democratic countries have binding cooling-off periods that prevent former CEOs from directly heading the ministries that regulate their former companies. Germany only has such regulations in a rudimentary form – and, as the Reiche case shows, does not enforce them consistently. There is also a media policy problem: the discourse surrounding the Building Modernization Act is dominated by two extremes – on the one hand, climate activists who describe the law as a catastrophe, and on the other hand, government representatives who celebrate it as progress for freedom. The sober economic and legal analysis – as provided by the National Regulatory Control Council (NKR), the German Renewable Energy Federation (BEE), the German Association of Cities and Towns, and climate researchers – is too often overlooked.
What a rational heat policy should achieve
An economically rational and climate-politically credible heating policy would be based on three principles: firstly, a clear, long-term binding expansion path for renewable heating technologies that creates investment security; secondly, honest cost transparency instead of hidden subsidizing fossil fuel options through the back door of the "bio-staircase"; and thirdly, a coherent infrastructure strategy that decides which networks are expanded and which are systematically dismantled, instead of continuing to operate all options simultaneously.
The Building Modernization Act fails to meet any of these criteria. It provides neither clear signals nor planning certainty, neither cost transparency nor infrastructural coherence. It postpones difficult decisions into the future – at the expense of rising overall economic costs, growing CO2 debt, and a heat transition that has thus lost another decade. The municipal heat planning, which cities and towns undertake at considerable expense, is limited in its effectiveness by the contradictory incentives of the new law. The German Association of Cities and Towns and the German Federation of Cities have rightly pointed out that reliability – not only with regard to green gases, but in the entire funding system – is the fundamental prerequisite for a successful heat transition.
When promises to reduce bureaucracy contradict themselves
There is a bitter irony in the history of the building modernization law that should not go unaddressed. For years, the CDU/CSU denounced the Habeck law as a prime example of unnecessary regulatory zeal and state paternalism – and now they have delivered a law that the independent Regulatory Control Council considers the weakest in terms of its craftsmanship in recent years. Goebel's warning that precisely such laws contribute to the frustration of many citizens with the state and politics is not just directed at the current government – it describes a phenomenon that transcends party lines.
Citizens lose trust in government action not primarily because laws impose inconvenient goals, but because they experience laws as poorly drafted, incomprehensibly worded, and ill-conceived in their consequences. A law that is incomprehensible even to trade associations in the affected craft sector; whose cost implications the government itself cannot quantify; that relies on raw materials that do not exist in the required quantities; and that may violate the EU Building Directive – this law is not the result of unavoidable political compromises. It is the result of a legislative process that has set the wrong priorities.
The Bundestag now has the task – and the duty – to accomplish in parliamentary deliberations what the cabinet failed to do: to create a bill that is understandable, based on realistic assumptions, complies with EU law, and actually puts the building sector on the path to climate action. The institutional watchdogs – from the National Regulatory Control Council (NKR) to the leading municipal associations and industry associations – have done their work and formulated clear demands for corrections. Whether the political will exists to heed these demands remains to be seen. The 150,000 people who signed the Campact petition and the millions of tenants and owners directly affected by this law will be watching the response very closely.
