A heating transition is urgently needed to fulfil the national CO2 reduction targets in Germany. Thus, in 2019, there has been a strong policy push towards increasing the share of renewables in heating through the introduction of the Climate Action Programme 2030 and the reform of existing policies. In addition to the policy landscape on the national level, federal states have further leeway to implement policies; these options are currently largely unresearched. In order to fill this gap, we developed a System Dynamics Model for Lower Saxony to determine the effect of recent policy changes as well as additional regional subsidy schemes on the heating market. The results show that even though changes in subsidies can increase the renewable uptake considerably, the CO2e and energy demand reduction targets are not met in any of the examined scenarios. Furthermore, the model shows that policy formulation must take the inertia of the sector into account and completely turn away from fossil fuels to reach the stipulated emission reductions.