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2 October 2019

Sound fi­nanc­ing for ef­fec­tive and so­cial­ly eq­ui­table cli­mate ac­tion

Today the federal cabinet has approved the draft supplementary federal budget for 2020 and the draft budget for the Energy and Climate Fund for 2020.

  • Number 5

Today’s decision has created the budgetary conditions for rapid implementation of the Climate Action Programme agreed by the German government on 25 September 2019.

Our financing proposal creates a solid foundation for the climate action package. This includes a mechanism to annually check whether the climate targets have been achieved and make adjustments if necessary. For the first time, there are clear rules and a national carbon price. The Climate Action Programme is socially equitable and will cost more than €54bn by 2023 alone. It is an immense financial effort that will pay off for all of us: climate action costs money, but doing nothing would cost even more.Olaf Scholz, Finance Mninister

The federal government is making considerable financial resources available to achieve its climate goals. Between now and 2023 alone, it is investing €54bn in new technologies, infrastructure and measures to encourage environmentally friendly behaviour. This will boost growth potential and supplement the record investments already allocated in the federal budget for infrastructure, education and research.

The supplementary budget earmarks expenditures for the Energy and Climate Fund (ECF) of approximately €38.9bn between 2020 and 2023. In addition, it provides for new climate action measures in the departmental budgets, tax incentives and relief measures amounting to a total of approximately €15.5bn for the period until 2023.

Effective action on climate change

A coordinated comprehensive package of investments and funding, regulatory measures, carbon pricing and a binding monitoring mechanism will create the conditions to meet climate targets in future. This includes significantly higher investments and incentives for the energy efficiency of buildings, the transport sector, research and education, energy, industry and agriculture.

For the buildings sector, total programme resources amount to approximately €3bn for 2020 and €14.3bn for the period until 2023, plus additional planned tax incentives for the retrofitting of buildings. For the transport sector, the supplementary budget provides for €2.3bn in support measures in 2020. By 2023, projects with a total volume of €16.6bn are to be funded by the ECF and the federal budget. This includes large-scale funding for rail transport, in particular.

For the energy and manufacturing sectors and electricity price compensation, €1.7bn has been made available for 2020 and approximately €8.9bn for the period until 2023. For the agricultural and forestry sector, the Climate Action Programme provides for approximately €0.2bn in funding in 2020 and €1.3bn for the period until 2023.

Furthermore, for projects like the existing National Climate Initiative and international climate action financing, there are planned expenditures of more than €1bn in 2020 and €3.6bn for the period until 2023, not to mention revenue-side support measures under the Climate Action Programme of approximately €0.4bn in 2020 and €3.6bn for the period until 2023.

Socially equitable climate action

The German government is creating the right conditions for a socially equitable climate action programme. The support measures are specifically designed to allow those on low and middle incomes to also switch to environmentally friendly alternatives. In addition to these incentives and funding measures, revenues from carbon pricing will be returned to taxpayers in the form of relief for individuals.

The relief measures to be implemented together with carbon pricing from 2021 onwards will have a total volume of approximately €5.4bn for the period until 2023. The revenue from carbon pricing will be used to gradually reduce the levy charged on electricity consumers to promote renewable energy sources. From 2021, the commuter tax allowance will be increased to 35 cents for each kilometre above 20 kilometres. To prevent social hardship as a result of rising heating costs, housing benefit recipients will receive a 10% increase in payments.

Sound financing

With today’s decision, the German government has created a solid financial foundation for the rapid implementation of the climate action package. Furthermore, the 2020 federal budget manages to achieve this without incurring new debt.

In addition to existing revenues from the ECF, the budget includes revenues from carbon pricing, motor vehicle tax, the new emissions-based HGV toll structure and aviation tax.

The supplementary budget provides for the following key figures:

Diagram: Amendments to the draft 2020 federal budget of 26 June 2019

The ECF is the main instrument for implementing the programme measures. The climate-related expenditures that have already been budgeted for in the ECF will be readjusted in accordance with the targets of the climate action package and supplemented by additional measures.

This leads to the following key figures for the 2020 ECF budget. The chart also includes information on the current financial plan:

Financial plan for the energy and climate fund

Target

Draft

Financial Plan

2019

2020

2021

2022

2023

in €k

Revenue

Revenues from emission allowances

2,124,000

2,744,000

2,915,000

3,057,000

3,297,000

Revenues from carbon pricing

0

3,600,000

6,900,000

8,275,000

Allocations from the federal budget

1,791,954

191,179

815,246

1.351,309

178,173

Withdrawal from reserves

2,206,936

6,000,000

2,188,458

0

0

Total revenues

6,122,890

8,935,179

9,518,704

11,308,309

11,750,173

Expenditures

Buildings sector

2,954,278

2,957,515

3,447,915

3,806,415

4,099,715

Transport sector

643,800

1,233,503

2,764,700

3,765,000

3,501,200

Manufacturing sector

183,530

511,100

822,300

773,800

973,800

Energy sector

196,793

586,499

730,079

812,984

462,984

Agricultural/forestry sector

24,538

69,550

186,100

198,650

224,650

Research and innovation sector

83,300

160,800

175,800

178,800

180,800

National Climate Initiative and other measures

for national climate protection

263,817

330,310

380,610

395,610

395,610

Horizontal task: energy efficiency

358,315

330,520

286,620

444,950

470,950

Electricity price compensation

230,000

566,924

724,580

932,100

968,600

Miscellaneous

36,671

Programme expenditures

4,615,042

6,746,721

9,518,704

11,308,309

11,278,309

Allocations to reserves

1,507,848

2,188,458

0

0

471,864

Total expenditures

6,122,890

8,935,179

9,518,704

11,308,309

11,750,173