New German government initiatives: country boosts its climate fund with €60 bln injection

    18 Dec 2021

    Germany’s new government passed a supplementary budget on December 12 to supercharge its climate and transformation fund with a debt-financed injection of  60 billion ($68 billion) to allow more investments in the shift towards a green economy, Reuters reports.

    The supplementary budget, passed unanimously by Chancellor Olaf Scholz’s cabinet, will channel 60 billion of unused debt in this year’s federal budget into the government’s climate and transformation fund for future spending.

    The budget manoeuvre was agreed last month by the centre-left Social Democrats (SPD), pro-spending Greens and fiscally more cautious Free Democrats (FDP) in their coalition deal, allowing the parties to make the most of a temporary, pandemic-related suspension of borrowing limits in the constitution.

    The budget compromise helps Germany’s new finance minister and FDP leader Christian Lindner to eye a return to the debt brake rule from 2023 and still enable more public investments needed to reduce carbon emissions in Europe’s largest economy.

    “The 60 billion for future investments are a booster for the economy,” Lindner said.

    The step will help the government to cope with the economic consequences of the coronavirus pandemic and enable a powerful leap into a carbon-neutral and more digital future, he added.

    The coalition wants to deploy the funds to make critical public investments in climate protection measures – from charging points for electric vehicles to better insulating homes – and the digitalization of the economy.

    The debt-financed injection of 60 billion will increase the fund’s volume to 76.2 billion at the start of next year, Lindner said.

    In addition, the government will channel up to 18 billion euros of additional tax revenue, mainly stemming from eco taxes and the CO2 emission trading scheme, into the climate and transformation fund in the course of next year, bringing its fiscal reserve for investments close to 95 billion euros.

    Scholz’s ruling coalition agreed to use an emergency clause in the constitution for a third year in a row in 2022 to suspend debt limits and enable new borrowing of 100 billion euros. This will come on top of unprecedented net new debt of 130 billion euros in 2020 and 240 billion euros in 2021.

    From 2023 onwards, the new ruling coalition aims to return to the debt brake rule of the constitution that limits new borrowing to a tiny fraction of economic output.


    New German government to revamp incentives for electric cars

    Germany’s new government said Monday it is extending the country’s current incentive payments for buyers of electric and hybrid cars for a year but then plans to impose tougher requirements for vehicles to qualify for the support, AP states.

    The economy and climate ministry that was set up when Germany’s new government took office last week said it will only provide payments starting in 2023 for “electric vehicles that demonstrably have a positive climate-protection effect.”

    Meeting that requirement will be based, in part, on a minimum distance that cars can travel under electric power.

    For the next year, the current system will still apply, making buyers of electric-only cars eligible for incentives of up to 9,000 euros (about $10,200) and qualifying buyers of plug-in hybrids for up to 6,750 euros.

    Robert Habeck, Germany’s new economy and climate minister, said the government is trying to ensure “continuity” while it works on a new system.

    “We will become more ambitious with support in the future, in order to boost electromobility further and strengthen climate protection,” he said.

    Habeck is a co-leader of the environmentalist Green party. He is also vice chancellor in the three-party government of center-left Chancellor Olaf Scholz, which took office Wednesday.

    The new government wants to have at least 15 million fully electric cars on the road by 2030. It also aims to step up efforts against climate change by expanding the use of renewable energy and bringing Germany’s exit from coal-fired power forward from 2038, “ideally” to 2030.


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