Germany struggling to access multi-billion EU fund for social climate measures

As the German federal government struggles to provide relief to people facing rising energy costs, it has so far left one source of funding, a multi-billion-euro EU pot, untouched, Tagesspiegel Background reported. Germany’s constrained budget appears to be a major reason behind its difficulty in accessing the fund, the news service said. 

Between now and 2032, Germany is entitled to some 5.3 billion euros from the EU’s Social Climate Fund (SCF), intended to assist low-income households during the energy transition, for example by supporting the replacement of heating systems or the shift toward climate-friendly mobility. The fund is aimed at offsetting additional financial burdens that may arise from the launch of the EU’s new emissions trading system (ETS 2), which covers mobility and heating. 

Accessing the fund, however, is subject to several conditions, including submission of a national implementation plan outlining which measures will be financed – something Germany has yet to do. Around ten EU member states have already submitted theirs.

The environment ministry is overseeing the development of the plan, which is expected to be completed soon and include measures from several government ministries. A number of factors appear to be impeding progress, however, reported Tagesspiegel. First, Germany must pre-finance the measures, as funds from the SCF are only disbursed retroactively. Furthermore, member states are required to co-finance one quarter of the committed amount. Germany would therefore need to contribute approximately 1.3 billion euros – averaging about 200 million euros per year starting in 2027. Critics have decried the government’s apparent unwillingness to spend more. 

“No 200 million euros left in the budget for the social climate plan?” wrote Brigitte Knopf, head of think tank Zukunft Klimasozial, on LinkedIn. “That sounds absurd in times when 2.5 billion euros are used on the fuel tax cut, 2.7 billion euros of the ETS1 revenues from the Climate and Transformation Fund (CTF) are being misappropriated to plug budget gaps and there is serious discussion about a blanket reduction in electricity tax amounting to 5.4 billion euros.”

Additional EU requirements are compounding the situation, including allocating funds specifically for low-income households or those particularly affected by energy poverty, and ensuring that the measures come in addition to existing ones. The government would have to introduce new measures or significantly adapt programmes it is already financing.

The government is considering some measures as part of its plan, including an income-based bonus for heating system replacements as well as an “energy-saving check," but it has not yet decided on measures in the transport sector, Tagesspiegel wrote.