Using Tax Incentives to Support Thermal Retrofits in Germany

This report by the Climate Policy Initiative evaluates the potential for tax incentives to support thermal retrofits in Germany, comparing them with existing KfW loan and grant programs and international experiences from Italy, the Netherlands, and the United States.

• The German government aims to reduce the primary energy demand of buildings by 80% by 2050 and achieve a thermal retrofit rate of 2%, necessitating deep thermal retrofits across existing building stocks.
• Germany is considering two primary tax support options: accelerated depreciation of energy efficiency investments (specifically further development of  82a EStDV) and expanding tax credits, such as the current 35a German Income Tax Act (EStG) which allows 20% of up to 6000 Euro in labor costs to be deducted.
• Tax credit schemes in Italy, the Netherlands, and the U.S. have seen high utilization by building owners, although studies from the U.S. and Netherlands suggest there may be high free-rider rates, meaning retrofits might have occurred without the incentives.
• Current tax credit designs in Italy and the Netherlands fail to deliver comprehensive retrofits, with only 2% of measures in Italy and 3% in the Netherlands being comprehensive. In contrast, comprehensive retrofits account for 70% of total investment support from the German KfW loan program.
• The higher success rate of comprehensive retrofits in Germany is attributed to significantly higher support levels for deep retrofits compared to single measures, and the requirement for building owners to engage a certified expert to review plans prior to approval.
• Simple and clear application and compliance processes are key to program utilization. The report suggests that aligning new tax incentives with existing KfW criteria, such as requiring certified experts and pre-construction plan approval, could reduce complexity and mitigate free-rider concerns.

APA

Neuhoff, K., Amecke, H., Novikova, A., Stelmakh, K., Deason, J., & Hobbs, A. (2011). Using Tax Incentives to Support Thermal Retrofits in Germany. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2011/09/Using-Tax-Incentives-to-Support-Thermal-Retrofit-Summary.pdf

Chicago

Neuhoff, Karsten, Hermann Amecke, Alexandra Novikova, Kateryna Stelmakh, Jeff Deason, and Andrew Hobbs. Using Tax Incentives to Support Thermal Retrofits in Germany. Climate Policy Initiative, 2011. https://www.climatepolicyinitiative.org/wp-content/uploads/2011/09/Using-Tax-Incentives-to-Support-Thermal-Retrofit-Summary.pdf.

Wikipedia

{{cite report |last1=Neuhoff |first1=Karsten |last2=Amecke |first2=Hermann |last3=Novikova |first3=Alexandra |last4=Stelmakh |first4=Kateryna |last5=Deason |first5=Jeff |last6=Hobbs |first6=Andrew |title=Using Tax Incentives to Support Thermal Retrofits in Germany |publisher=Climate Policy Initiative |date=July 2011 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2011/09/Using-Tax-Incentives-to-Support-Thermal-Retrofit-Summary.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{neuhoff2011using, author = {Neuhoff, Karsten and Amecke, Hermann and Novikova, Alexandra and Stelmakh, Kateryna and Deason, Jeff and Hobbs, Andrew}, title = {{Using Tax Incentives to Support Thermal Retrofits in Germany}}, institution = {Climate Policy Initiative}, year = {2011}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2011/09/Using-Tax-Incentives-to-Support-Thermal-Retrofit-Summary.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }