Germany’s €177bn climate budget to focus on building retrofit

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The German government has unveiled plans to spend €177.5bn of the federal budget on climate action and the transformation of the country’s economy between 2023 and 2026, with a focus on increasing the energy efficiency of buildings.

The cabinet adopted its draft finance plan for the so-called ‘Climate and Transformation Fund’ on last week. The Fund is part of the federal budget and is now subject to parliamentary deliberations.

“The Fund is the most important financing instrument for economic modernisation and climate protection,” explained Finance Minister Christian Lindner.

The majority of funds will contribute to supporting “climate-friendly” building renovation (€56bn).

Space and water heating currently account for around 30% of Germany’s final energy consumption. The buildings sector also missed its 2020 and 2021 CO2 emissions targets.

Much of the funding will go towards renovating the buildings in the bottom 25% of energy performance – a plan that Brussels is currently working to make mandatory through the Energy Performance of Buildings Directive. The fund also cements a switch in priorities, away from supporting the construction of new homes to renovating existing ones.

One euro spent on renovation is ten times more efficient than if it was spent on a new home, a senior official said.

Another €35.5bn is earmarked for subsidising the renewable levy to lower electricity prices and a further €20bn will go towards decarbonising industry and implementing Germany’s hydrogen strategy.

“We fully finance the subsidisation of renewable energies from the Climate and Transformation Fund,” Lindner explained.

Germany has abolished the renewables levy consumers used to pay with their power bills to help finance the expansion of wind and solar power. Instead, the support will now be covered through the federal budget, as part of the measures put in place to alleviate the strain of electricity prices.

The plan also includes support programmes for sectors like transport (e.g. e-mobility charging infrastructure). Support for energy and resource efficiency will be relatively slim, at €3.4bn.

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