The German government successfully allocated €212 billion to climate action between 2024 and 2027, but is an unwillingness to find political compromise holding them back?

Germany’s climate and transformation fund marks significant political will to decarbonise, but with the ruling coalition, the nation could be missing out on a higher level of ambition.
September 5, 2023

Germany aims to spend big on climate in the coming years

In order to expedite the green transition, the German government approved the budget for its flagship climate and transformation fund (KTF) on 9 August. This fund would allocate €212 billion to various initiatives in the building renovation and decarbonisation industry between 2024 and 2027. The government now uses the designated fund, which is free from the typically stringent German spending regulations, as one of its main resources for funding important initiatives. The government has set aside €57.6 billion for various projects for 2024 alone, an increase of more than €20 billion from 2023. The fund specifically seeks to finance the expansion of renewable energy sources, electromobility, and charging infrastructure, as well as the energy-efficient restoration of buildings and the decarbonisation of industries.[i]

Source: Unsplash

Political gridlock takes the spotlight on funding for climate initiatives

The majority of the additional funding, €27 billion, will go towards renovating current oil and gas heating systems in favour of more environmentally friendly options like heat pumps.  The government intends to make all heating systems erected after 2024 operate at least 65% on renewable energy, thus outlawing natural fossil-fuel boilers. An earlier draught of the law was strongly opposed by the liberal Free Democratic Party (FDP), which put the government in danger of a coalition crisis.[ii]

This isn’t the only stumbling block the German government has faced in its green strategy of late. On August 16, a meeting of the German cabinet included a tax break and relief package worth €6 billion for corporations. However, Family Minister Lisa Paus objected, saying she could not support the proposal unless more funds were set aside for child benefits and as such, the legislation was removed from the table. The goal of the German ministerial cabinet was to enact a slew of tax cuts and refunds in order to boost the economy and encourage energy-efficient investment. Government sources, however, claim that Paus (Greens), whose request for €12 billion in family benefits was turned down earlier this year, was the reason behind the adoption's postponement.[iii] The German Social Democrats (SPD/S&D), Green Party, and liberal FDP (Renew Europe) represent the ruling coalition. This was the first cabinet meeting following the summer break, and it didn't go well for them. During the first part of 2023, internal conflicts over laws regarding heating installations and budgetary matters had already become apparent.[iv]

Compromise in pursuit of effective climate governance

Compromise in pursuit of effective climate governance is a hot topic globally. In the US, progress was made towards effective bipartisan legislation in the form of the Infrastructure Investment and Jobs Act. Originally, the act was a $547–715 billion infrastructure package containing provisions for the Department of Transportation's hazardous materials, rail, motor carrier, research, highway safety, and transit programmes funded by federal sources. Following discussions in Congress, it was revised and renamed the Infrastructure Investment and Jobs Act. This new name included financing not only for the transportation and road provisions of the original House bill but also for broadband access, clean water, and electric grid renewal. About $1.2 trillion in spending was included in this revised version, of which $550 billion was newly authorised on top of the normal spending that Congress already intended to authorise.[v] Now referred to as the Bipartisan Infrastructure law, the legislation has the support of 72% of voters in the US.[vi] Such a majority of support shows how even if elected officials disagree at the outset, compromise does not have to come at the cost of popular support. The Centre for American Progress said of the legislation:

“It is critical that the federal government seize the moment presented by the IIJA to offer coordinated interagency support to subnational governments in implementing their climate efforts.”

The USA followed up on their successful bipartisan infrastructure law from two years ago with the more recent Inflation Reduction Act, which was hailed as the most significant piece of climate legislation in history.[vii] This bill did not receive the same level of bipartisan support in government, with no Republicans supporting its passing in the House or the Senate.[viii] Despite this, support for the act has come from most political wings amongst voters. This adds a different perspective to governance, being that even if the legislation itself is partisan-led, if the outcomes positively impact people of all political leanings, then support will be found in the medium to long term.

Source: Yale Program on climate change communication[ix]

Such value placed on coordination and collaboration at all levels of government is vital. Particularly at more local levels, as these are the areas that can have the most involved impact on communities and businesses.


[i] Euractiv- German government passes €212bn climate fund

[ii] Ibid

[iii] Euractiv- German coalition infighting delays energy efficiency tax breaks for companies

[iv] Ibid

[v] Investopedia- Understanding Infrastructure Legislation

[vi] The Hill- Poll shows broad support for bipartisan infrastructure bill

[vii] EESI- Historic—The Bipartisan Infrastructure Law and Inflation Reduction Act

[viii] The Atlantic- Not Even a Single Republican Voted for the Climate Bill

[ix] Yale Program on climate change communication- Who is most supportive of the Inflation Reduction Act?

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Oscar Pusey
Research Analyst

Oscar is a recent graduate with a background in earth science. He is currently studying an MSc focussing on disaster responses, emergency planning and community resilience. His postgraduate research project will assess the link between climate crisis risk perception and attitudes to green energy projects. “Adapting to the climate crisis through the pursuit of net zero requires community engagement and understanding. Zero Carbon Academy’s goals closely align with this approach and I’m excited to have the opportunity to research and communicate a variety of topics relating to our environment and sustainability”.

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