German government earmarks smaller budget for climate action in 2025
The German coalition government plans with decreased expenditures for key climate action measures next year, shows its draft plan for the Climate and Transformation Fund (CTF). The fund is the country's special federal budget vehicle for programmes such as heating transition support for households or subsidies for green industry.
Of a total of 34.5 billion euros in 2025, 15.9 billion euros are earmarked to support the switch to climate-friendly heating, said the draft seen by Clean Energy Wire. That is about 2 billion euros less than in the current budget for 2024. There is also less money earmarked for compensation for electricity-intensive businesses, ramping up the hydrogen economy and natural climate action measures next year.
The draft budget must now be debated in parliament, which will amend the plans and must give the final green light later this year.
The agreement by the government follows months of difficult budget negotiations, after the coalition was dealt a heavy blow by a ruling of the constitutional court in November 2023. The court declared the use of 60 billion euros in the Climate and Transformation Fund unlawful because it violated debt limit rules, leading to disputes between the partners of the government alliance – the Social Democrats (SPD), the Green Party and the Free Democrats (FDP) – about how to reshuffle and cut funding across the board.
The CTF is only one of several special-purpose funds outside of the regular state budget, which also exists for other areas such as defence spending. Its funds can be used to “promote measures that serve to achieve the climate targets” under the country’s climate legislation, especially measures to advance Germany’s transformation to a climate neutral economy.
"Reckless at best" – researcher
Experts criticised that the government has put the 2025 plans on insecure footing: The CTF is fed with revenues from emissions trading. The government projects 22.2 billion euros next year from the national and EU systems, so a funding gap of roughly 12 billion euros would remain.
Usually, by the end of a budget year, not all funds earmarked for a certain programme are actually spent, for example due to lower-than-expected interest in support programmes, or slow processes which lead to delays for climate measures. The draft says that this could amount to 9 billion euros next year, while emissions trading could lead to higher revenues than projected, closing the gap.
One third of the planned programme expenditure for 2025 (12 billion euros of the total 34.5 billion euros) is therefore "based on optimistic assumptions without secure financing," Niklas Illenseer, policy analyst at the Mercator Research Institute on Global Commons and Climate Change (MCC), said. "This is reckless at best, yet by no means stable financial policy," he added.
Last week (16 August), the government had announced yet another deal on next year's federal budget, after an initial agreement on 18 July. Advisors had casted doubt on the initial plans, which they said might violate constitutional checks on government spending.
