Germany is set to augment funding for climate protection initiatives and semiconductor production by approximately €20 billion ($22 billion), raising the total to over €200 billion. Sources familiar with the matter have revealed that Chancellor Olaf Scholz and his cabinet are poised to endorse this additional funding on Wednesday, spanning until 2027. The plan will subsequently be submitted to Parliament for approval. The sources, who spoke on the condition of anonymity, shared these details.
The additional resources will be directed towards the Climate and Transformation Fund, an entity overseen by Economy Minister Robert Habeck from the Greens party. This fund, distinct from the regular federal budget, primarily targets climate protection measures. Noteworthy endeavors encompass sustainable building renovations, incentives for the replacement of fossil fuel-based heating systems, and expansion of Germany’s hydrogen infrastructure.
The augmented funding reflects a broader trend in Europe, where governments are striving to expedite the reduction of harmful emissions to meet the continent’s ambitious climate objectives.
A portion of the funds will also support Germany’s semiconductor manufacturing efforts, with some of the allocation directed towards the expansion of the rail network, as one source mentioned.
The Climate and Transformation Fund permits Minister Habeck to advance green transition investments, while simultaneously enabling Finance Minister Christian Lindner, who aligns with the business-friendly Free Democrats, to uphold a constitutional limit on new net borrowing. The fund is financed through its own reserves and income, with a portion of around €60 billion originating from aid initially designated for addressing the repercussions of the Covid-19 pandemic. This move has faced opposition in Germany’s top court.
The fund generates revenue from European emissions trading and Germany’s carbon pricing mechanism. According to the sources, the government has agreed to increase the carbon price levy to €40 per ton in the coming year, up from the current €30.
A recent report by the Frankfurter Allgemeine Zeitung newspaper suggested that the government planned to boost the fund’s cash reserves to slightly less than €200 billion.
Source: Bloomberg