Debt limit ruling must not undermine Germany's climate action plans – economy minister

German economy minister Robert Habeck has insisted that planned climate action measures must continue to be financed despite a constitutional court ruling which means the country might have significantly less funding available than planned, reports news magazine Der Spiegel. The court ruled in the past week that reallocating 60 billion euros in credit authorities meant to tackle the consequences of the coronavirus pandemic into the Climate and Transformation Fund was unconstitutional. Habeck emphasised that he wants to stimulate the economy and create jobs by investing in domestic technologies that help protect the climate, even if the current legal situation makes that more difficult. “What I can say is that there is a firm intention to do this,” he said. As the impact of the ruling on the budget is still being assessed, the finance ministry has taken precautionary measures to block certain commitments across all ministries.

The court’s decision has also led to the finance ministry halting future pledges for funding Germany’s energy price caps through the Economic Stabilisation Fund, reports Der Tagesspiegel. This did not concern funding this year, but the government planned to extend the price caps, which were introduced to deal with rising energy prices due to Russia's war on Ukraine, to spring 2024. “In plain language, this means that citizens might have to pay higher electricity and possibly higher gas prices in the future,” said Habeck.

Journalists have referred to the ruling as a “damning verdict on the government’s financial policy.” The verdict has increased already high tensions within the three-party coalition over how to finance the country’s transition to climate neutrality, with some members advocating for more subsidies, while others are calling for stricter market-based instruments, such as carbon pricing. Controversial ideas to fill the immediate financing gap include spending cuts, raising taxes or the national CO2 price, and declaring yet another emergency situation, which would allow the government to exceed the constitutional cap on state debt again.