Germany Cuts Climate Fund by Over €30 Billion Through 2030

Germany plans to cut more than €30 billion ($34.2 billion) from its climate and transformation fund through 2030 and shift some of those resources into the federal budget as Chancellor Friedrich Merz’s government seeks to consolidate public finances.

(Bloomberg) — Germany plans to cut more than €30 billion ($34.2 billion) from its climate and transformation fund through 2030 and shift some of those resources into the federal budget as Chancellor Friedrich Merz’s government seeks to consolidate public finances. The government will reduce the fund’s spending by €19.7 billion and transfer an additional €13.2 billion into the federal budget within the next four years, according to a financial plan approved by the cabinet on Wednesday. The coalition government overseen by Merz and Finance Minister Lars Klingbeil previously earmarked €100 billion for the climate and transformation fund, the flagship tool in Germany’s effort to slash carbon emissions.

Now, some programs supported by that initiative will see their funding reduced as part of the effort to scale down public spending. Subsidies for heat pumps and incentives to promote electric mobility are among the programs being targeted. Officials said the changes will ensure that only people in financial need are eligible for those subsidies and benefits.

The government has justified the cuts on the grounds that it has separately launched a subsidy program worth billions to lower electricity prices for energy-intensive industries. That program requires participating companies to invest in making their production more climate-friendly. In addition to the €100 billion allocated under the government’s infrastructure package, the climate and transformation fund receives revenue from Germany’s national emissions trading system and its European Union equivalent.

The fund’s annual budget is expected to remain around €40 billion in the coming years before declining to about €38 billion in 2030, according to the documents. —With assistance from Petra Sorge.