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10 Nov 2021, 13:14
Edgar Meza

Fiscal instruments exist to finance Germany’s climate investments – think tanks

Clean Energy Wire

Germany's next federal government can finance the necessary climate protection measures despite a return to the so-called “debt brake”, - the balanced budget amendment that limits government borrowing - with a smart fiscal policy, according to think tanks Agora Energiewende and Forum New Economy. Noting that the new German government faces the challenge of providing sufficient public funds for climate protection while also complying with legal regulations on new debt, the groups say the necessary fiscal policy instruments exist to finance necessary climate protection investments – around 46 billion euros annually by 2030 – while complying with the debt brake and without raising taxes.

The new government can increase public investment via state-owned companies, promote private climate investments, reduce subsidies that are harmful to the climate, offset crisis-related losses in the 2022 federal budget, and further develop the calculation method to allow new debt. “Germany’s climate success depends significantly on the financial planning of the new federal government,” says Agora Energiewende executive director Patrick Graichen. “If the new government draws up a climate budget immediately after taking office and uses smart financial instruments to promote investments, the necessary investments for the future can be set in motion.”

Securing funding for climate action and ensuring a fair distribution of benefits and costs has been one of the main challenges for the Social Democrats (SPD), Greens and Free Democratic Party (FDP) as they seek to form a coalition for Germany’s next government.

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