(Bloomberg) — Germany’s climate and transformation fund will face a deficit of up to 10 billion euros ($10. 8 billion) next year, according to sources familiar with the matter, casting doubt on the country’s resolve to reduce greenhouse fuel emissions.
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The extra-budget fund shortfall threatens key projects in solar energy and hydrogen, said the sources, who asked to be known because the data is confidential.
“Lately it is impossible to provide conclusive data on this matter, as it depends on various parameters and estimates that need to be updated,” the German Finance Ministry said, commenting on the size of the funding gap.
Chancellor Olaf Scholz’s coalition has been forced to reshuffle its finances after a high court ruled last year that it was unconstitutional to transfer more than €60 billion earmarked to combat the Covid-19 pandemic to the weather fund. Although the 2024 budget was eventually passed, it only came after the government recreated a debt brake, raising concerns about the investment that needs to be made to meet Germany’s goal of reducing carbon emissions by 65% by 2030.
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“The core problem remains that Germany should actually be investing massively this decade to accelerate the climate transformation, secure cheaper energy and transform our industry from a world based on cheap Russian gas,” said Jens Burchardt, a Berlin-based partner with Boston Consulting Group and the founder of the firm’s Center for Climate and Sustainability. “However, there currently seems to be a lack of political consensus in favor of this.”
Economy and Climate Minister Robert Habeck has promised subsidies to support the decarbonization of key industries, but the fund’s resources — projected to total €49 billion this year — are limited. He has already pledged about €16 billion from the fund to help chip-makers Intel Corp., Infineon Technologies AG and Taiwan’s TSMC set up production sites in the country.
“The first procedures for the preparation of the 2025 budget are underway and the government’s procedure will begin soon,” the Economy Ministry said in a statement.
Still, on average, only 56% of the available money is drawn down from the climate fund each year, offering the potential for some room to maneuver.
Amid those uncertainties, investment for key projects has yet to be resolved.
For example, the government needs to build 40 to 50 new hydrogen- and gas-fired power plants to fill an energy gap as it phases out coal. The bill for investments and operating subsidies can amount to between €20 million and €40 million. In the coming years, according to sources close to the matter, 8 million euros have been set aside in this year’s budget.
Habeck is also looking to help ailing solar manufacturers — squeezed by Chinese imports — with specific local or environmental criteria in tenders. Support for bolstering production capacity could add up to €1 billion, Handelsblatt reported on Friday. The coalition wants to decide on a national solar package before Feb. 21.
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