Critics charge that Merz's conservative-led coalition is putting a brake on the shift to green energy through measures ranging from a planned expansion of gas power to proposals to scrap some renewable energy subsidies.
In a fiery debate in parliament marked by loud heckling from the opposition benches, the chancellor noted his critics claimed he was "undermining climate protection".
"Nothing could be further from the truth," said Merz, whose centre-right CDU/CSU bloc governs in coalition with the centre-left SPD.
He stressed he wanted climate protection "without ideology. That is the difference between us and the last government".
In the previous administration, the Greens party helmed the economy ministry and pushed ambitious measures to accelerate the energy transition -- some of which caused unease among businesses about extra burdens at a time they were already struggling.
"Climate protection that jeopardises or even destroys the industrial base of our country, climate protection that jeopardises our country's prosperity -- that will not be accepted by the population," Merz said.
Anyone who did not take this into account will "not only fail in climate protection -- they will also fail fundamentally in terms of social cohesion in our country", he said.
Merz repeatedly stressed his government was open to using various different technologies -- from gas power plants to carbon capture and storage -- in an effort to achieve greenhouse gas neutrality while also protecting vital industries.
Germany aims to reach greenhouse gas neutrality by 2045, and a substantial proportion of electricity in Europe's top economy already comes from renewable sources.
Greens party lawmaker Britta Hasselmann accused Merz of taking a "step backwards into the past".
"If you invoke this openness to technology, why do you want to stifle the very thing that has made this country so successful -- namely, the expansion of renewable energies?"
Merz's government is seeking to revive the eurozone's traditional powerhouse, which shrank for the past two years, and advocates a more pragmatic approach to the energy transition that it says will ensure costs stay manageable.
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