Billions in climate subsidies have been wasted on new buildings with low efficiency standards - NGO

In a scathing report, Environmental Action Germany (DUH) has said billions of euros in federal subsidies intended for climate protection measures in the building sector have instead been used for new buildings with a negligible climate benefit. The funding system has also failed to sufficiently stimulate urgently needed renovations. The NGO is therefore calling for a rapid realignment of funding with a focus on the renovation of existing buildings and the introduction of legally mandatory minimum efficiency standards. The DUH’s review of subsidy funding in the sector shows a clear imbalance. “With the federal programmes for climate protection in residential buildings, buildings are mostly constructed that do not meet the necessary climate protection requirements,” the organisation states. The factors behind this development include an increase in funding quotas and the introduction of direct subsidies in new buildings, it adds. This “has led to massive false incentives and deadweight effects by the building industry”. While new construction makes up less than 5 percent of the building stock, it nevertheless accounted for more than 60 percent of funding in 2020. In 2021, almost 6 billion euros unnecessarily flowed into the construction of homes whose energy efficiency standards have long been a common building practice. “The completely misguided funding policy of the previous government meant that for more than two years there were massive free-rider effects for construction projects that did not fit the climate targets,” said DUH deputy executive director Barbara Metz.

The German government in January cancelled a controversial funding programme set up by the previous administration, arguing that a surge in demand for the funds made it unviable. After the move triggered a backlash from the building sector, however, the government agreed to review funding applications submitted by 24 January, when the government announced the programme’s cancellation.

The building sector accounts for about a third of Germany’s total CO2 emissions and has been slow to reduce its carbon footprint. The creation of a new buildings ministry, however, could lead to more progress in the area.