Obligations for Owners to Climate-Proof Buildings in Germany

2.1 80The Constitution

Environmental protection was introduced in the German Constitution in 1994 as an objective State goal (Art. 20 a GG). This State goal affects all state activity, i.e., the executive and the legislative branch. Citizens do not have a direct claim against the State for certain environmental measures under this provision, but it does nevertheless – in conjunction with fundamental rights – impose an obligation on the State and all its branches to direct actions in a way that freedom rights of future generations are respected. This is how the Federal Constitutional Court (Bundesverfassungsgericht, hereinafter ’BVerfG’) interpreted the climate protection law in its famous decision of March 2021.^[146] While the different subsequent German governments at the Federal level have pushed for a reduction of greenhouse gas emissions since 2014, the BVerfG ruled that the Climate Protection Act of 2019^[147] was not specific enough. With respect for the legislatures’ scope for action, the Court declared that the legislature must move towards a “freedom-preserving transition to climate neutrality”.^[148] The decision led to significant legal changes of climate protection and set guidelines for future legislation.

The shift in emphasis in the constitutional context is clear:^[149] the climate protection requirement in Germany now derives from Article 20 a GG in conjunction with freedom rights and interacts with Article 14 GG, which protects the property title of the owner and the possession right of the tenant.^[150] Climate protection as a precondition for the exercise of freedom has now been given a constitutional status in Germany. Yet, the recognition of climate protection as a precondition for freedom does not amount to a subjective individual right. The primary addressee of Article 20 a GG remains the legislature, which fulfills the State’s constitutional mandate through climate-protecting standards. However, it implies an impact on the proportionality of State obligations for homeowners. Ultimately, there is considerable leeway for the legislature, without specifications of the instruments.^[151]

2.2 81The Federal Climate Protection Act

The Federal Climate Protection Act (Klimaschutzgesetz, hereinafter KSG) is the central legal-administrative framework for German climate policy. When enacted in 2020, the KSG set, for the first time, legally binding climate targets in transposing international commitments, and coupled these goals with a concrete reduction pathway, with milestones and procedural safeguards. The aim is to become carbon neutral by 2045, and to reduce carbon emissions until 2030 by 65 %.^[152] These targets are coupled to defined pathways for six sectors, with the built environment one of them,^[153] stipulating continuously decreasing ‘CO₂-equivalents’.^[154] In 2022, it became evident that sectors are missing their reduction goals, among which the building sector missing it for 2021 by two million tons of CO₂-equivalents.^[155] Against the background of continuously growing living spaces by 2 %^[156] and the evident gap,^[157] the responsible ministries submitted an Emergency Programme on 13 July 2022,^[158] as mandated by § 8 Climate Protection Act. Yet, in March 2023 the political goal of fixed sector reduction goals was lifted in the course of a tense political discourse. While the coalition held on to the overall reduction goal of 65 %, sectors may compensate among each other.^[159] That said, the Emergency Programme of the building sector was not repealed.

2.3 82Buildings Energy Act (GEG)

The Buildings Energy Act (GEG) of 2020^[160] was enacted by the previous Christian democrats-led coalition government (cabinet Merkel IV 2017–2021), in conjunction with an amendment of the German Civil Code (BGB), which limits the passing-on of renovation costs to tenants,^[161] and has introduced a claim of tenants and co-owners to make e-mobility possible (see section 5 below).^[162] It replaced earlier energy saving legislation^[163] and bundled respective duties in one single Act. Previous legislation had not prescribed specific housing standards. However, subordinated ordinances standardized building efficiency (most notably the Energieeinsparverordnung, EnEV, first enacted 2001) by technical standardization. The focus was on insulation,^[164] incentives for refurbishment, and the incentivized consultation of energy experts through subsidization. The standards (usually DIN standards) were not legally binding, but in practice semi-binding since the Public Bank for Redevelopment (Kreditanstalt für Wiederaufbau, KfW) linked public subsidies to compliance with those standards. The GEG (2020) harmonized standards for energy-efficient construction and refurbishment following EU law,^[165] and made existing standards mandatory – by technically naming the DIN-standards in the norm text.

83Prior to 2002, regulations were only addressed to builders and, thus, newly built houses.^[166] The GEG (2020) is also directed at owners,^[167] thus extending obligations to existing buildings. Yet, obligations for owners to climate-proof their buildings must comply with the principle of economic viability (§ 1(2) GEG). The aim is to initiate a sustainable development of the energy supply (§ 1(2) GEG) with the public building stock serving as a role model (§ 4 GEG). However, the law has remained lenient on private homeowners by extending the deadline for compliance to the next transfer of title.^[168]

The first light regulation of real estate transactions was introduced in 2002, a voluntary information instrument: the energy pass, transposing EU law. Yet, it evolved: In 2008, it became mandatory for buildings being sold or rented. For 2023, the GEG 2020 reduced the permissible yearly primary energy consumption in newly built houses from 75 % down to 55 % in reference to comparable houses.^[169] As in all other Member States, the federal obligation does not require specific measures.

Overall, the early GEG (2020) was conceptualized as complementary to the mix of instruments, such as pricing through carbon trading (primarily targeting the industrial sector, including the construction sector since 2023^[170]) and incentives such as subsidies (primarily addressed to private homeowners). While it focused on newly built and major renovated buildings,^[171] including commercial office spaces, it was restrained in regard to existing buildings. Many federaled States responded to 84this lacuna by establishing concrete implementation duties also for existing buildings, such as solar panels on a minimal rooftop space (see Section 3 below).

The current German coalition government has targeted the modernization of heating systems in existing buildings, including private homes. While the coalition treaty of December 2021 was still limited to mandatory solar rooftop panels for all (new) commercial buildings and a rule-and-exception mechanism for private newly built homes,^[172] the Russian war in Ukraine and the subsequently projected energy shortage raised the pressure in 2022.^[173] It gave way to a phase-in of new heating systems in existing private homes. Draft legislation in spring 2023 required 65 % renewable heating sources for replacements of old heating systems from 1 January 2024, coupled with any necessary exchange in existing private housing (dubbed “heating law” [“Heizungsgesetz”]),^[174] which caused a coalition crisis.^[175] In contrast to inter alia the Netherlands, the political opposition did not frame the legislative proposal as an assault on private property per se (be it the German Constitution or the ECHR), but as a disproportionate measure (in more depth Section 4 below). The focus was on objective feasibility (shortage of service personal and machinery) and social justice (overburdening the less affluent). In September 2023, a strongly curtailed revision was approved by Parliament, to become effective on 1 January 2024. The principal goal remained: all newly installed heating systems should be powered 85by at least 65 % renewable energy. The regulation is now technologically neutral. The compromise has introduced obligations for municipalities to complete their heat infrastructure planning first,^[176] and catered for technological openness and innovativeness by way of exceptions for new technologies. Functioning heating systems in existing buildings do not have to be replaced and repairs can also be carried out. If old heating systems can no longer be repaired, generous transition periods apply. The counselling by energy experts has become obligatory (§ 48 GEG 2024). Currently (October 2023), the GEG is under review of the BVerfG.^[177] Yet, the yardstick is not property protection, but the right of members of Parliament to be given enough time to scrutinize submitted drafts (Art. 38 GG).^[178]

The already announced next revision will tackle buildings with particularly high consumption levels, inter alia data processing service centres, and envisions differentiations between large, middle-sized and small companies.^[179] It will also adopt a life-cycle approach that will take emission standards to produce construction material^[180] and the recycling of building material on board.^[181]

In parallel with the domestic heating system’s debate, the contested debate about the renewal of the EU-Energy Performance of Buildings Directive (EPBD) continued.^[182] The EPBD was supported by the German government in 2022,^[183] but after 86broad opposition by the German construction industry, the responsible ministry pulled back.^[184] The Directive intends to further increase the energy requirements for new buildings in two steps (first EH-55 by 2024, and then EH-40 by 2025). Carbon neutrality for new houses shall be achieved in 2028; for buildings used and owned by public agencies, the deadline shall be 2026. All new buildings shall be equipped with solar panels from 2028 onwards, as far as proportional. More importantly, the European Parliament (EP) opted for a duty to renovate: “G“-class-residential houses shall achieve class “E“ until 2030, and class “D“ by 2033. Non-residential and public buildings shall achieve these standards by already by 2027. At the same time, the EP decided that renovation duties are to be coupled with subsidies and exceptions. However, the Council of the EU has largely rejected these obligations to climate-proof existing buildings.

In sum, German climate-proofing regulation is, on the one hand, path-dependent on domestic energy saving regulation originally responding to the energy crisis in the 1970 s^[185] and the peculiar federal^[186] and corporatist structure of Germany.^[187] On the other hand, regulation has evolved in coordination with EU policies, most notably Directive 2010/31/EU (Energy Performance of Buildings, EPBD) and Directive 2012/27/EU (energy efficiency).^[188] It is therefore no surprise that the conceptual differentiations in German climate-proof building laws mirror European and the other 87Member States’ regulations: rules distinguish between private and public buildings (with higher standards for public buildings), commercial and non-commercial (with higher standards for commercial buildings), residential and non-residential buildings (with higher standards for non-residential buildings), commercial housing versus private homeowners (with higher standards for commercial housing), and between new and existing buildings (with higher standards for new buildings). Only recently, positive obligations were coupled with municipal infrastructure planning, and for technological openness and innovativeness, privileges for new technologies are fostered or supported as ‘bridge technologies’.

2.4 Federated State level – municipal level: concrete positive solar installation duties

Municipal heat planning has become the basis for a climate-neutral heat supply, and the Federal Heat Planning Act^[189] now provides the statutory ground.^[190] It came into force at the same time as the GEG (Buildings Energy Act), on 1 January 2024. In the longer term, the legislation will enhance the resilience of the heat supply within the building sector. From 2024, heat plans will be drawn up in all municipalities in Germany.

The Heat Planning Act provides for a gradual, harmonized transformation in the federated States. Until December 2023, only Baden-Württemberg, Hesse, Schleswig-Holstein, and Lower Saxony had enacted respective laws.^[191] The practice of municipal heat planning in Germany has been inconsistent. Yet, many municipalities, almost every fifth city, have already drawn up heat plans, because of the positive effects of local district heating.^[192]

The goal of the Heat Planning Act is a decarbonized heating supply by 2045. Citizens and companies will be informed by 2028 whether they can expect a district heating connection in the municipality. Under German municipal law, an obligation 88to connect to a district heating network is already possible.^[193] The respective instrument is the ‘compulsory participation and use’, which is available for public facilities of German municipalities. An obligation to connect to district heating for the purpose of global climate protection was also approved by the Federal Administrative Court (BVerwG).^[194] The usual form to introduce a compulsory participation and use of district heating is the municipal statute.^[195]

In principle, the new Act introduced a priority for municipal district heating supply, which cannot be easily undermined by the federated States,^[196] molded into § 109 Buildings Energy Act, GEG. Affected property owners can defend themselves against a connection order based on fundamental rights. Implementing heat planning in the federated States must therefore provide for exceptions. If property owners have already invested in heat pumps, for example, this must be taken into account when enforcing compulsory participation and use to guarantee proportionality.

3.1 General Climate-Proofing

As early as 1977, German law introduced building energy standards (at the time limited to new and renovated buildings).^[197] The chosen technique was the maxi89mum ‘heat transmission coefficient’, i.e., the reduced loss of heat, in reference to comparable buildings.^[198] In 1978, heating systems became regulated.^[199] Both measures were based on the Federal competence for energy regulation (Art. 74 GG). In 2002, the Energy Saving Regulation, EnEV, merged these two Acts. Since then, the energy efficiency of a building and the heating system are evaluated as one system. The standardized classification of buildings from A to H was only integrated in the EnEV in 2014, linked to the mandatory energy efficiency passport in transposition of Directive 2010/31/EU. Until today, German law does not oblige building owners to meet a particular standard (for example, standard ‘C’),^[200] but, if needed, to install heat recovery systems that meet specific DIN-standards.^[201]

The point of departure for determining duties is the prohibition to deteriorate the energy performance of a building (§ 46 GEG). The central distinction between office buildings and residential housing relates to the required energy saving level^[202] and methods of measurement,^[203] but is not a question of whether obligations apply at all. Commercial use is no normative category under the Federal GEG, but it is under some State laws (see sub-section 3.3 below^[204]), nor is the distinction between the building as such (as evidenced by the building passport), the activities, and the energy use for specific activities carried out within the building. Instead, proportionality is the cross-cutting category applicable to all obligations, which is triggered 90when investments become too costly, even when savings in a reasonable timeframe are considered.^[205] Then, the duty is not applicable.^[206]

The GEG as a building regulation is closely related to efforts to transform the energy mix towards renewables by the authorities responsible for energy policies. These are connected with land use planning, but different authorities at different State levels are in charge, despite a Federal framework competence (BauGB). Only a few States have enacted State climate-related laws. That said, federal law has recently prescribed that the central planning instruments (at State level: BaunutzungsVO; at municipal level: Bauordnungen) amend municipal district heating planning.^[207]

3.2 Insulation & Windows

Already the EnEV, first enacted in 2001, aimed at climate neutrality by 2050. Path-dependently, the regulatory set-up was of a technical nature. Standards were primarily defined by concrete technical norms, less by broad classifications. In practical terms, efforts focused on insulation, most prominently the heat loss through the roof.^[208] Yet, already Art. 7(2) Directive 2010/31/EC made clear that the building unit as a whole is the target, which would include insulating glazing. Yet, since 1 February 2002, the statutory duty to comply with heat loss standards has only emerged for residential private homes with the transfer.^[209] The legislation does not provide for a legal duty to renovate for the current owner.

Yet, as described, although the duty to comply with heat loss standards was not legally binding, it was made contractually binding once the renovation was supported by public subsidies. Those were available, and recommended by energy consultants and – depending on general interest rates – also by banks.

3.3 91Sustainable Heating Systems (Solar panels, heating replacement, district heating)

While already § 72 GEG-2020 mandated the phasing-out of oil-fired boilers for (all) buildings built prior to 1991, the duty did not apply to boilers units below 4 kW or above 400 kW,^[210] and the reasonableness standard of § 72(5) GEG^[211] applied. This legislative set-up had the consequence that the duty has not been enforced in practice.

The Federal government tackled the modernization of heating systems in 2023. The GEG-2024 (see sub-section 2.3 above) prescribes 65 % renewable heating sources in private homes once replacement is necessary, from 1 January 2024 onwards. The rule is technology-neutral, therefore the goal can be reached by any type of renewable energy.^[212] The political compromise rests on three pillars: (1) the duty to exchange the heating system is linked to the municipal heating planning. This secures the planning autonomy of homeowners; (2) gas heaters will remain acceptable (also for new constructions) if they can be retrofitted to hydrogen. Wood-pellet heating systems remain allowed. This secures technology openness; and (3) landlords may only shift the burden to the tenants if they had previously applied for public financial support. This obligation secures social justice. No other financial consideration applies.^[213]

On State level, several States and municipalities – following the precedent of a few cities^[214] – enacted climate protection legislation that included duties to install solar panels.^[215] Baden-Württemberg (BW) has been a forerunner as it enacted the 92first State Climate Protection Act in 2013,^[216] and reformed it in early 2023.^[217] In 2013, the law was limited to concrete obligations to install solar panels for newly built buildings.^[218] The recast Act, the Klimaschutz- und Klimawandelanpassungsgesetz Baden-Württemberg (KlimaG BW), adapts climate reduction targets to new timelines (2030/2040)^[219] and sectors. Interesting is the reversal of duties: In principle, also the private residential house owner has a “solar duty” in case of a modernization, but they may request to be exempted from it (§ 23(3) KlimaG BW, see sub-section 4.2 below). Owners are under the duty to establish the fulfilment of their duties after no more than twelve months vis-à-vis the competent authority for energy network supervision (Bundesnetzagentur). Further concretizations are made in a respective regulation.^[220] Hamburg was the first State to enact a duty on existing buildings (2020^[221]) and decided on a revision in August 2023.^[222] The Act triggers a solar-panel duty for existing buildings in the course of rooftop modernizations from 2027 onwards, in addition to such a duty for new buildings and large parking lots from 1.1.2024. Berlin enacted a similar Act in July 2021,^[223] with the duty taking effect on 1.1.2023. Bavaria limited its solar-panel duty to non-residential buildings; similarly, Hesse and North Rhine-Westphalia only have solar-duties for State-owned buildings and parking lots. Lower Saxony has a duty for all ‘commercial buildings’ (including existing ones), so does Schleswig-Holstein, in addition to parking lots. Rhineland-Palatinate has limited the duty to new commercial buildings but extended the duty to parking lots.

4.1 Property Protection under German Law

German constitutional law strictly distinguishes three categories of property restrictions:^[227] (1) expropriation,^[228] which is only legitimate with compensation, Art. 14(3) GG;^[229] (2) regulation that amounts to a particularly heavy burden (Sonder94opfer^[230]), which has to be compensated; (3) finally, regulation that only requires compensation where the measure would otherwise be disproportionate.^[231] Against the background of the international discussion about regulatory takings or indirect expropriation, one can argue that this specific category does not exist under German constitutional law. The German discussion unfolds under Art. 14(1) GG as the distinction between regulation without or with compensation. The yardstick is proportionality (see sub-sections 4.1 and 4.2 below). As indicated earlier, the German debate about climate-proofing buildings is not framed as a violation of property rights, but of proportionality. Thus, the public debate unfolds along the criteria that courts have hammered out for property restrictions to be reasonable and justified, thus proportionate. The proportionality principle is not a concept limited to the justification for property restrictions. It is a basic constitutional, cross-cutting principle, anchored in the rule of law principle (Art. 20 GG). It is this yardstick against which also property restrictions are measured (Art. 14(1) sentence 2 GG^[232]): property restrictions demand a legal base (Gesetzesvorbehalt). Both the (abstract) legal base and its (concrete) application must be proportionate. The proportionality principle is to be followed by all branches of the State (the legislative, the executive, and the judiciary), only the scope of judicial review will vary. It will take the constitutional functions of each branch into account, the margin of discretion, but also the degree to which basic rights are infringed.^[233] These considerations are coagulated in proportionality’s three-step test: suitability, necessity, and proportionality stricto sensu.^[234] To climate-proof buildings, three aspects are particularly relevant to proportionality. (1) Time: the addressee must have enough time to ad95just, therefore transitional periods are key. (2) Social justice: less well-off citizens may not be ‘overburdened’. (3) Availability of less intrusive means if they are equally effective in achieving the pursued policy goal. The last aspect is a central element of the proportionality test, not only for the CJEU in European law, but also for the constitutionality for German courts. As a matter of principle, informational tools and incentives deserve priority over command-and-control measures.

These three considerations have shaped German climate-proof building policies over time, and guided the design of regulations. At the beginning, only new buildings, commercial entities, and buildings owned by the were tackled. While technical standards may have been questioned as far as they can be attributed to public authority, no judicial procedure has become known which challenged the lawfulness of the general building norms. Two developments unfolded. On the one hand, standards have become progressively tightened. On the other hand, new trigger points such as refurbishment, renovations and, most recently, the transfer of title activated the obligation to comply with modern standards (see sub-section 4.2 below). Yet, private homes remained exempt until most recently, understood as an expression of social justice,^[235] under federal^[236] and State laws.^[237] Subsidies were the central policy tool to incentivize voluntary modernization.

4.2 Proportionality of Obligations to Climate-Proof Buildings

4.3 The Financial Impact of the Obligation and Compensation for Owners

As discussed, available loans and subsidies can alleviate the financial burden and thus render a measure proportionate. Where financial support is available, com99pensation is precluded.^[248]Vice versa, where subsidies are insufficient, compensation might be possible. Yet, in the context of energy-saving investments, cost-effectiveness is another argument that plays into the balance exercise of proportionality. The argument may block compensation (sub-section 4.3.1), be a condition for compensation (4.3.2), or require substantiation, such as in the case of landlords (4.3.3).