By Christian Kraemer and Kirsti Knolle
BERLIN, May 13 (Reuters) - German Chancellor Friedrich Merz's cabinet agreed on Wednesday to scrap a contentious 2023 law that required new building heating systems to use at least 65% renewable energy, which the government had criticized as a deterrent to investment.
The so-called "heating law", passed under the government of former Chancellor Olaf Scholz, drew opposition from conservatives and some media over fears it would force households to scrap gas and oil heaters and spend thousands of euros on new green systems.
Plans to change the law have been among a package of measures planned by Merz's government, which has seen a plunge in ratings since taking office last year amid protracted wrangling between his conservative Christian Democrats (CDU) and their centre-left Social Democrat (SPD) coalition partners.
Under Wednesday's agreement in cabinet, the heating law will be replaced by a new building modernisation law that will drop the requirement to include mandatory renewables elements. Households will be allowed to keep existing boilers if they do not choose to switch to alternative systems like heat pumps, district heating and biomass systems.
"With it, we are creating investment security, we are creating planning security, we are enabling technological openness and flexibility in the choice of heating system," Economy Minister Katherina Reiche said.
The new law, expected to be passed before the start of parliament's summer recess, will require new gas and oil systems to gradually blend in climate-neutral fuels from 2029, increasing their level from 10% to 60% by 2040.
The law, which reiterates Germany's commitment to achieve climate neutrality by 2045, will also implement the European Union's Buildings Directive mandating all new buildings to be zero-emission from 2030.
Germany's BDI industry federation welcomed the change as "an important step towards finally getting investment back on track" and said it would provide a boost to refurbishing Germany's building stock and putting money into construction.
But it was heavily criticized by the Greens parliamentary leader Katherina Droege, whose party was the driving force of the heating law when it was in government with Scholz, as "a complete abandonment of Germany's climate targets."
(Reporting by Christian Kraemer, Kirsti Knolle, writing by James Mackenzie, editing by Andrew Cawthorne)
