Germany’s Climate and Transformation Fund (CTF) is facing a shortfall of up to EUR10bn (USD10.8bn) in 2025, putting the country’s climate targets on edge, as reported by Bloomberg on February 3. According to people familiar with the matter, the financial gap in the off-budget fund threatens key solar and hydrogen projects. The gap stemmed from a November German top court ruling that the government’s move to reallocate EUR60bn of unused debt from the pandemic era to the CTF was unconstitutional, blowing a huge hole in the finances of the fund.

After the ruling, German Chancellor Olaf Scholz’s coalition had to overhaul its budget plans, which had intended to spend more than EUR188bn over the next three years for Germany’s industrial modernization and green energy transition. Last December, the German coalition government finally agreed on a budget for 2024 that comply with the constitutionally enshrined limits on borrowing, only to cut the CTF by around EUR12bn in 2024 and EUR45bn until 2027. Although Scholz assured that Germany will adhere to its key target of achieving climate neutral transformation of the economy, he acknowledged that the target would need to be met with significantly less money now. The curtailing of CTF may hold back the government’s original plan to build 40 to 50 new hydrogen and gas-power plants needed to address power shortages as it phases out coal. Moreover, the reduction may disrupt the government’s EUR1bn subsidy plan to help the ailing domestic solar manufacturers boost production capacity and compete against Chinese rivals.

Sources:

https://www.bloomberg.com/news/articles/2024-02-02/germany-s-budget-chaos-leaves-green-energy-projects-in-limbo?srnd=green

https://www.ft.com/content/e36830bf-0fb4-4878-944c-0bf9088478d2

https://www.theguardian.com/commentisfree/2023/dec/13/germany-budget-debt-europe-constitution-crisis

https://www.cleanenergywire.org/news/scholzs-government-cuts-climate-fund-45-bln-euros-2027-response-debt-brake-ruling