Climate and Transformation Fund: The all-purpose weapon of the traffic light

Climate and Transformation Fund: The all-purpose weapon of the traffic light


It was December 2021. The traffic light government had only just taken office when it quickly decided on a supplementary budget. The most important purpose: The special asset “Energy and Climate Fund” should be lavishly equipped. Because of the corona pandemic, the debt brake was suspended at the time. But 60 billion euros in credit authorizations to deal with the pandemic were not needed at all. So the traffic light government decided to seize the opportunity and shifted the 60 billion euros to the then energy and climate fund – for later use for the climate-friendly conversion of the country.

The fund has existed since 2010 and is now called the Climate and Transformation Fund (KTF). But it was the traffic light government that made the KTF what it is today with its 60 billion euro transfer. The fund is the most important special asset for the traffic light, the most important side budget for financing special expenses related to climate protection and transformation. Subsidies beyond the regular federal budget, which only leaves limited scope for investments due to the strict rules of the debt brake.

Traffic light relies on secondary budget

The Federal Cabinet has now launched the KTF’s current economic plan. The figures show that the traffic light government is relying more than ever on the secondary budget. While total expenditure of 177 billion euros was planned in the last economic plan, the federal government is now assuming almost 212 billion euros up to and including 2027. A good 57 billion euros are to flow in the coming year alone. For comparison: A total of 100 billion euros is planned for the Bundeswehr special fund by 2027.

The fund is of immense importance, especially for the green-led Federal Ministry of Economics. Robert Habeck’s ministry has more than 80 percent of the funds. Almost 19 billion euros are to flow into energy-efficient building refurbishment in the coming year. This also includes funds for “social cushioning of the Building Energy Act”, as the Ministry of Economics reports. In other words: The replacement of oil and gas heating systems provided for in the Heating Act is to be financially supported from the fund. However, the precise design of the programs is still being worked on. In addition, 800 million euros are earmarked for the heating network.

New funding purpose: subsidies for chip factories

The fund is also important in terms of industrial policy. In the next year alone, around 3.7 billion euros are to flow into the ramp-up of the hydrogen economy. The federal government is counting on industrial sectors such as steel, cement or chemicals being able to use climate-friendly hydrogen in production in the future in order to reduce CO2 emissions.

It is remarkable that investments in microelectronics are also to be funded from the KTF in the future. The business plan mentions a “new funding purpose”. And: “Semiconductor production is highly relevant for climate-neutral technologies and is therefore of great importance for a successful transformation of the German economy towards climate neutrality.”

Most recently, the Ministry of Economics announced billions in subsidies for the settlement of semiconductor plants in Magdeburg and Dresden. The money could not be raised from the federal budget, which was sewn to the brim. So the federal government is now using the special climate fund.

billion for the railways

A similar offense concerns Deutsche Bahn. It has considerable investment needs, which can only be covered to a small extent from the federal budget. For this reason, a good twelve billion euros are to be made available from the KTF for investments in rail by 2027. The secondary budget KTF as an all-purpose weapon.

The economic plan shows some financing gaps. In 2027, for example, a so-called global underspending of 7.6 billion euros was recorded. According to current planning, the money is still missing. When asked, financial politicians at the traffic light point out that subsidies are often not fully exhausted – funds that can be used later remain unexploited.

Again and again, financial experts warn that the fund could be overbooked because more and more spending on climate protection and other projects is to be financed from the KTF. According to the economic plan, however, no additional funds from the federal budget should flow into the fund until 2027.

Heating and refueling are becoming more expensive

So the income of the KTF must be increased elsewhere. The fund benefits from the proceeds from European emissions trading and from national CO2 pricing in the transport and building sectors.

Gasoline, natural gas and heating oil currently cost EUR 30 per tonne of CO2. It should be 40 euros in the coming year, 50 euros are planned for the year 2025. These increases are likely to gradually make heating and refueling noticeably more expensive. The industry association for mineral oil and energy AFM+E is expecting a plus of four cents per liter at the pumps in the coming year. At the same time, the KTF should earn around 2.3 billion more in the coming year due to the increase in CO2 pricing.

Is all this legal?

Even according to earlier plans, the CO2 price should be gradually increased. However, due to the energy crisis last year and the associated burdens, the plans were put on hold. FDP Finance Minister Christian Lindner is now talking about CO2 pricing with a sense of proportion, which must also take into account the current weakness in growth.

But Lindner also has to keep an eye on something else. And there you are again in December 2021. The Union faction has filed a lawsuit with the Federal Constitutional Court against the reallocation of the Corona loans for climate protection at the time, because it considers the procedure to be unconstitutional. The Federal Audit Office also criticized the procedure at the time. Because the debt brake was suspended due to the extraordinary emergency situation of the pandemic. So there is no connection to use the funds for climate protection.

Due to the transfer of 60 billion euros at the time, the climate fund is on somewhat shaky legs from a legal point of view. Should Karlsruhe subsequently overturn the action at the time, it would be a serious blow to the financing of the traffic light’s climate plans.


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