Finance ministry aims to shift billions of euros from climate fund to Germany’s core budget

The German finance ministry plans to transfer money from the Climate and Transformation Fund (CTF) to the core budget for the first time as part of a broader effort to plug gaps in the country’s finances. By cutting support programmes, for example for heat pumps, expenses from the CTF will be reduced by 3.4 billion euros in the 2027 budget, newspaper Handelsblatt reported. Through consecutive rounds of cuts, the government aims to save up to 13 billion euros by 2030, which would be transferred to the core budget. Projects that have already been agreed would not be affected by the cuts, the ministry said. 

However, despite cuts to individual programmes, total expenditure for the fund will rise to 40.3 billion euros in 2027, three billion euros more than in 2026. For building modernisation, the finance ministry still plans on providing 44 billion euros in support by 2030, and for electric mobility 14 billion euros. A final decision on the budget plans is expected after the parliamentary summer break ends in late August. 

The CTF is Germany’s main financial instrument for funding a wide range of energy transition and climate neutrality projects, including the heating sector, electric vehicles and industry decarbonisation. Its main source of income is revenues from carbon pricing, but it also receives a substantial portion of Germany’s 500 billion-euro special fund for infrastructure and climate neutrality. 

Energy industry association BDEW warned that some of the planned cuts would impede transformation progress, while the prospect of funds earmarked for climate spending being redirected created long-term uncertainty about the funding framework. “The planned transfer of revenues from European emissions trading is questionable,” said BDEW head Kerstin Andreae. “At the same time, money from the special fund for infrastructure and climate neutrality should go to the CTF. This reshuffling makes the dedicated use of emissions trading revenues and the special fund no longer traceable,” Andreae argued. 

NGOs and industry groups had already criticised plans by finance minister Lars Klingbeil, a Social Democrat, to use the funds to plug gaps in Germany’s strained budget earlier this week, when the planned cuts from the CTF were expected to total only 2.7 billion euros in 2027. The finance ministry regards the cuts as necessary to close a gap of 34 billion euros for next year alone, which among other things, is due to Germany’s increased spending on defence and persistently weak economic growth.