Germany Remains Committed to Climate Investments Despite Budget Crisis

Germany will remain committed to financing the energy transition with billions of dollars despite a raging budget crisis that has cast a shadow over the country's 2024 spending.

This is what Foreign Minister Annalena Baerbock told the Financial Times before the start of COP28 in Dubai.

We will always be a reliable partner," Baerbock told the FT. "That's why we agreed within the federal government that we will fulfil our international obligations."

Germany has committed to some 6 billion euros in transition funding over the next two years and another 2 billion euros for the UN's Green Climate Fund, and additional sums for the new climate damage fund that is being discussed at the COP28 meeting.

The discussions began with a quick win for the proponents of the idea. The EU pledged $245.39 million for the fund, of which Germany's contribution stood at $100 million. Still, that's small potatoes compared to the above commitments. Also compared to the budget hole the German budget suddenly acquired last month.

In mid-November, the German constitutional court ruled that the decision to take 60 billion euros in leftover pandemic funds and channel these into climate policy was unconstitutional. According to the court, the decision had violated the so-called debt brake rule that puts strict limits on new borrowing by the state.

With regard to budget 2024, this means the government needs to find a way to make up for a 17-billion-euro shortfall resulting from the court's ruling.

"We didn't act wilfully and we didn't act negligently either," Finance Minister Christian Lindner said. "But it is quite clear that this is an extremely unpleasant and embarrassing moment for a government."

This budget hole may make it harder for Germany to fulfill its climate commitments despite the official's assurances. Barbock, however, has an idea about solving the problem: reforming the debt brake rule to allow for more borrowing.

By Irina Slav for Oilprice.com

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