Ban fossil fuel heating systems? A way out of the war of beliefs

In several industrialized countries, governments are backing away from controversial building energy legislation that sought to ban oil and gas heating and replace them with fossil-free systems.

An article co-authored by the Potsdam Institute for Climate Impact Research (PIK) in Nature Climate Change now offers guidance on achieving the switch to climate-friendly technology without political uproar. Based on recent economic findings, the article provides criteria and a political roadmap for moderate, targeted regulation to complement the gradual increase in carbon pricing.

A complete ban on new conventional oil and gas heating systems from mid-2028, along with a strict timetable for phasing out old ones: the heating transition proposed by the former “traffic light” coalition in Germany was controversial and even criticized as a “heating hammer.”

But now, the new government alliance under CDU Chancellor Friedrich Merz has announced it will “abolish” the corresponding law and act more “flexibly”—even old gas systems from before 1991 will be allowed to continue operating. Other industrialized countries are making similar U-turns. The research team takes this international policy shift as an opportunity for a fundamental review.

“At first glance, two incompatible views clash on the issue of heating bans,” says PIK Director Ottmar Edenhofer, one of the authors of the article. “For some, the state is protecting people from making the wrong decision because, for example, they underestimate the long-term cost advantage of a heat pump in view of steadily rising carbon prices.

“But for others, it denies them the opportunity to act in their own best interests given their personal cost situation and perhaps a preference for continuing with natural gas for a while longer. The irony is that both schools of thought are correct under certain conditions. That is the starting point for our analysis.”

Four indicators for guidance

In fact, recent economic research shows that there is a way out of this war of beliefs. It suggests that policymakers should understand the considerations that drive certain household groups to purchase heat pumps or gas boilers: is it a personal cost situation, or is it about information gaps and misperceptions?

In the first case, a ban forces people to act uneconomically, triggering protests. In the second case, the state prevents households from inadvertently falling into a long-term cost trap because they do not take all relevant information into account at the time of the decision. The article identifies four indicators that can help target policies more precisely.

First, they must differentiate according to the type of investment. For example, the decision to opt for fossil-free heating is more difficult for existing properties that are difficult to insulate than it is for new buildings. Second, the local availability of skilled workers and materials must be taken into account. Bottlenecks can lead to temporary price spikes, which make bans particularly painful.

Third, information and advice are important. If a great deal of expertise is available to households when they’re making decisions, less regulation is needed. And fourth, there is the problem of split incentives. For example, there may be a greater need for regulation in rented buildings where the investment costs and ongoing savings are borne by different people.

A plea for pilot projects

Instead of a one-size-fits-all ban or laissez-faire policy, the article concludes that there should be moderate, targeted regulation of the heating transition based on these four considerations. “It’s about treating different groups of private households differently, depending on whether bans are more likely to help or hurt them,” explains Michael Pahle, head of PIK’s Climate & Energy Policy working group and also an author of the article.

“Targeted bans can certainly play an important role in complementing the core policy instrument of carbon pricing, which will be EU-wide in the buildings sector from 2027. An infrastructure that facilitates the transition, a good information policy and support measures for hardship cases are also necessary.”

The research team recommends that policymakers quickly consolidate and make better use of existing data sources to understand the decision-making process of private households. For example, more data could be collected during energy consultations and through applications for heating subsidies.

“In addition, a program of regionally limited pilot projects should be set up immediately to facilitate the necessary rapid political learning process,” says Andreas Gerster from the University of Mainz and the RWI—Leibniz Institute for Economic Research, also one of the authors.

“The heat transition is long overdue, which is why we need a fast-track strategy for an ambitious and socially acceptable transformation. This article sheds light on the extent to which bans can be used in this context.”