Germany to spend €177.5 bln on climate action and economic transformation by 2026

The German government plans to spend 177.5 billion euros of the federal budget for climate action, and the transformation of the country’s economy, from 2023 to 2026. The cabinet adopted its draft finance plan for the so-called “Climate and Transformation Fund”, which is part of the federal budget. The majority of funds will contribute to support for climate-friendly building renovation (56.3 billion euros), but the plan also includes support programmes for sectors like transport (e.g. e-mobility charging infrastructure) and industry, as well as to lower power prices. Germany has abolished the renewables levy consumers used to pay with their power bills to help finance expansion of wind and solar power. Instead, the support will now be covered through the federal budget. The draft plan must now be debated in parliament.

A recent analysis by consultancy Prognos for public development bank KfW said that the German government will have to invest almost half a trillion euros to reach its 2045 climate neutral target. Meanwhile the total investments – including by private households and businesses – necessary to make Germany climate neutral add up to around five trillion euros, said a report conducted by consultancies Prognos, Nextra Consultung and NKI for KfW in late 2021.