Energy prices in Germany have soared in the last year, and fears of an escalation of the crisis between Ukraine and gas supplier Russia are set to push them higher still.
Germany's ruling parties, the Social Democrats (SPD), ecologist Greens and pro-business Free Democrats (FDP), said the steps were designed to help households with the greatest need.
"We are all seeing how rising prices are hitting many people very hard, especially the situation abroad with Russia is fuelling that," said Greens co-leader Ricarda Lang.
The parties agreed to abolish the renewable energy surcharge in July, some six months earlier than planned. It is expected to save an average household about 150 euros a year. Finance Minister Christian Lindner said it was worth a total of 6.6 billion euros.
Other measures, including raising the income tax allowance, increasing an allowance for commuters and granting more aid for children in poorer families, would result in a total of around 7 billion euros of relief, said Lindner.
Data this week showed that German producer prices rose in January at their fastest rate since modern records began, soaring 25% as energy costs spiralled. Energy costs rose 66.7% year-on-year in January, the Statistics Office has said.
Lindner said no supplementary budget would be needed, and Social Democrat Saskia Esken said she was confident the upper house of Parliament would approve the package.
(Reporting by Madeline Chambers, Andreas Rinke, Holger Hansen; Editing by Leslie Adler)
