Germany’s 2027 budget plans fall short on climate fairness, future-oriented investments - researchers

The German government’s budget planning for 2027 is falling short of addressing social justice in climate action and ensuring sufficient future-oriented investments needed for long-term financial stability and social cohesion, researchers and civil society groups have said. 

Think tank Zukunft KlimaSozial said that the planned higher nominal expenditures in the country’s Climate and Transformation Fund (CTF) to a total of almost 40 billion euros for the coming year do not mean that more money will be spent on transformation projects or on social justice in climate action. Instead, the fund’s focus is shifting from investments with a “transformative effect” to energy cost relief that especially benefits companies while neglecting private households and low-income groups, the think tank said. 

The CTF is one of Germany’s key instruments for financing climate action and energy transition policies such as energy-efficient building modernisations, public charging infrastructure for electric cars, or industry decarbonisation. 

“The initial idea of using the CTF for the transition is disappearing” while “the social dimension continues to be insufficiently addressed,” said Zukunft KlimaSozial founder Brigitte Knopf. Investments should be directed at making the country more independent of imported oil and gas in the long run, instead of supporting the use of fossil fuels by funding relief measures, and ensuring that no one is left behind in the transformation, Knopf said.

Social justice is increasingly moving into focus in Germany’s climate and energy policy debates, as low growth rates coincide with rising costs for energy imports and the continued need for investments in decarbonisation and the energy transition. While most citizens continue to support ambitious emissions reduction, many also feel that decarbonisation costs are distributed unfairly and reject measures that cause additional costs. 

Observers have argued that this perceived climate injustice has also played a role in the success of the far-right and anti-climate action party Alternative for Germany (AfD) at a recent state election in Saxony-Anhalt, in which the conservative Christian Democratic Union (CDU) of chancellor Friedrich Merz suffered heavy losses. 

In a separate analysis of the finance ministry’s core budget proposal, released jointly by economic research institute ZEW and environmental protection NGO WWF Germany, the researchers found that so-called "future-oriented expenditures" could reach a new record level of 140 billion euros – while their share in the core budget drops to the lowest level since at least 2018. This spending includes government expenditure on education, infrastructure, climate protection and nature conservation, and the advancement of technical knowledge, "which create sustainable foundations for life and the economy in the long term," the press release said.

The government increasingly would rely on its 500-billion-euro Special Fund for Infrastructure and Climate Neutrality and other temporary accounts outside of the core budget to finance future-oriented projects instead of the core budget, the economist said. “This means the federal government’s future-oriented expenditures are standing on shaky ground instead of a solid foundation,” said ZEW public finances expert Friedrich Heinemann. 

“A permanently stronger future-orientation can only be achieved if these expenditures are better anchored in the core budget,” he added. At the same time, only 37 percent of the new debt Germany has taken on in 2026 are earmarked for future-oriented investments, the researchers added. Observers have repeatedly criticised that the government is not using the 500-billion-euro debt package as intended to finance additional infrastructure and climate projects but instead use the special fund to shift expenditures out of the core budget to plug funding gaps.