What is the Special Fund for Infrastructure and Climate Neutrality?

The German government wants to safeguard jobs, strengthen the economy and promote investment in high-priority sectors. It plans to take measures that will improve people’s lives and make many aspects of day-to-day life easier – through better schools, childcare facilities, roads and railways.

The special fund creates the necessary fiscal space that will enable the government to press forward successfully with the structural modernisation of the country in the coming years. It provides federal, Länder and local governments with a total of €500 billion euros for additional investments in infrastructure and climate neutrality.

The special fund’s success will depend on the swift and targeted use of the investment funding. A special priority is being placed on sectors that have the greatest investment needs: transport infrastructure, education, digitalisation, housing construction and energy infrastructure.

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Why is this being done with a special fund?

Federal revenue and expenditure are normally part of the federal budget, which is also called the “core budget”. The core budget is subject to the debt brake, which is set out in Articles 109 and 115 of the Basic Law (Germany’s constitution) and which places strict limits on debt-financed government spending.

Therefore, in order to clear the investment backlog, the German parliament (Bundestag and Bundesrat) amended the Basic Law with a two-thirds majority in March 2025 and agreed to establish a Special Fund for Infrastructure and Climate Neutrality. The special fund has its own borrowing authorisation for investments totalling €500 billion, in addition to the investments financed by the core budget. Of this total, €300 billion is earmarked for investments by the Federation. €100 billion is earmarked for additional investments from the Climate and Transformation Fund to achieve climate neutrality by 2045. And €100 billion is earmarked for infrastructure investments by the Länder and local authorities.

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Why is it so important for Germany to make additional investments in infrastructure and climate neutrality?

Germany’s economy has been stagnant for several years. At the same time, there is a great need for investment in many key sectors. The investment backlog now stands at several hundred billion euros.

In order for Germany to get back on track towards sustained and sustainable growth, it is essential to invest in infrastructure modernisation, digitalisation and education. These investments will safeguard jobs and make Germany a more attractive place to do business.

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What is the special fund being used for?

The main objective is to improve people’s lives and to make many aspects of day-to-day life easier – through better schools, childcare facilities, roads and railways, through affordable and climate-friendly energy, and through high-speed internet connections and additional housing.

The federal investments financed by the special fund are being made on top of the investments contained in the core budget. The Federation plans to make investments totalling about €115 billion in 2025 and €120 billion in 2026. Of this amount, the special fund will account for about €37 billion in 2025 and about €58 billion in 2026.

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How exactly is the special fund disbursed and implemented?

The framework for the special fund was adopted on the basis of a cross-party consensus in close consultation with the Länder. The specific rules are set out in the Act Establishing the Special Fund for Infrastructure and Climate Neutrality (Gesetz zur Errichtung eines Sondervermögens Infrastruktur und Klimaneutralität) and the Act on the Financing of Länder and Local Authority Infrastructure Investment (Gesetz zur Finanzierung von Infrastrukturinvestitionen von Ländern und Kommunen).

1. €300 billion for investments by the Federation

How the money from the special fund can be spent, and in what amounts, is specified every year in an economic plan adopted by the legislature as an annex to the federal budget.

• The first economic plan for the special fund was adopted in October 2025 and took effect retroactively as of 1 January 2025. The document (in German) is available here: 2025 federal budget, departmental budget 60 (general revenue administration), annex 2: economic plan for the Special Fund for Infrastructure and Climate Neutrality [PDF, 2 MB].
• The economic plan for 2026 was adopted in November 2025 by the Bundestag: 2026 federal budget, departmental budget 60 (general revenue administration), annex 2: economic plan for the Special Fund for Infrastructure and Climate Neutrality [PDF, 2 MB].

The actual implementation of specific investment measures and the disbursement of funds fall under the remit of the responsible federal ministries. The procedures for this vary. In some cases, specific new projects are already in planning, for example to renovate bridges and roads. In other cases, existing successful programmes are being expanded. One example here is the funding programme Jung kauft Alt (“Young buys old”), which provides financial support to couples and single parents with children who purchase existing housing and make energy-efficient upgrades. In yet other cases, new projects and programmes still need to be initiated.

2. €100 billion for the Länder and local authorities

The Act on the Financing of Länder and Local Authority Infrastructure Investment states that the Länder themselves can decide how to spend the special fund money that is allocated to them, and what share of this funding will be used for investments in local authority infrastructure.

The competent Länder authorities are entitled to request the disbursement of federal funds when the money is needed to pay outstanding invoices. The €100 billion will be spent as needed, based on the plans of the Länder and the progress of the investment measures.

Money from the special fund can be spent on all types of Länder and local authority infrastructure, including civil protection; transport infrastructure; hospital, rehabilitation and long-term care infrastructure; energy infrastructure; education and childcare infrastructure; scientific infrastructure; research and development; and digitalisation.

The available funding is apportioned among the individual Länder in line with the “Königstein formula”.

3. €100 billion for the Climate and Transformation Fund

The Climate and Transformation Fund plays a central role in Germany’s efforts to achieve its energy and climate targets. The fund focuses primarily on (a) the transformation of industry and (b) the promotion of energy efficiency and renewable energy in the building sector. Other key priorities include climate-friendly transport, the hydrogen economy, nature-based climate action and climate-friendly energy supplies. Starting in 2025, the fund is providing significant financial support for international climate action. From 2026 onwards, it will provide substantial grid fee relief to private and commercial consumers in addition to existing energy cost reduction measures. Programme spending is expected to total about €36.6 billion in 2025.

Starting in 2025, the fund is receiving an additional €10 billion per year from the Special Fund for Infrastructure and Climate Neutrality. Proceeds from the EU emissions trading system and from Germany’s national carbon pricing scheme also accrue to the fund.

The Climate and Transformation Fund is a special fund with its own economic plan that is adopted by the legislature on an annual basis. Its revenue must be spent in line with the purposes stipulated in the Climate and Transformation Fund Act (KTF-Gesetz). As is the case with the Special Fund for Infrastructure and Climate Neutrality, various federal ministries are responsible for the measures, projects and programmes that are carried out under the auspices of the Climate and Transformation Fund.

Overall, the budget items are administered by seven different federal ministries. A precise breakdown is provided here (in German): 2025 federal budget, departmental budget 60 (general revenue administration), annex 3: economic plan for the Climate and Transformation Fund [PDF, 2 MB]. Detailed information (in German) on the federal budget, all departmental budgets and the economic plans of special funds can be downloaded at bundeshaushalt.de.

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What is being done to ensure that the funds are spent in a way that focuses on targets and outcomes?

Measures that are financed with money from the special fund are subject to economic feasibility studies as well as interim and final performance evaluations. These reviews assess whether the investments achieve their intended objectives and impacts. Both the responsible ministry and the Federal Ministry of Finance check to ensure that funds are spent for the intended purpose.

In addition, the Finance Ministry has established an Investment and Innovation Advisory Board that provides recommendations regarding the implementation and monitoring of investment projects. The advisory board provides a multidisciplinary perspective on investments in order to facilitate optimal implementation. The board members are independent experts who have wide-ranging experience in diverse sectors, including business, academia, local government, labour unions, impact investing and the management of large-scale infrastructure projects. The board – which works on a voluntary basis – provides the Finance Ministry with semi-annual progress reports that contain recommendations and assessments relating to investment projects.

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What is meant by “additionality”?

When the Basic Law was amended, a stipulation was included that the special fund is subject to the criterion of “additionality”. Investments from the special fund are “additional” when the core budget’s investment ratio is at least 10% (adjusted, in particular for expenditure-side financial transactions). Investments in stipulated target sectors that exceed this 10% investment ratio can be financed by the special fund.

In this way, the German government is ensuring that its investment spending is higher than in previous years.

The special fund accounts for only a part of overall federal investment spending. In the years up to and including 2029, the German government plans investments totalling over €250 billion from the core budget, and additional investments totalling €329 billion from the Special Fund for Infrastructure and Climate Neutrality and the Climate and Transformation Fund.

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Where does the money for the special fund come from?

The special fund is financed through borrowing. To make this possible, the German Bundestag and Bundesrat amended the Basic Law with a two-thirds majority in March 2025. This gave the Federation a borrowing authorisation totalling €500 billion. Investments from the special fund can be approved throughout a period of 12 years. The related interest payments are covered by the federal budget. Repayment of the loans is slated to begin no later than 1 January 2044.

The borrowing is carried out by the “Federal Republic of Germany – Finance Agency” (Bundesrepublik Deutschland – Finanzagentur). The Finance Agency’s sole shareholder is the Federation, represented by the Federal Ministry of Finance. The Finance Agency manages the Federation’s debt portfolio. This includes issuing federal securities such as federal bonds.

Further information on federal borrowing is available on the Finance Agency’s website.