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The Federal Constitutional Court of Germany ruled on Wednesday that the government's plans to transfer $65 billion (60 billion euros) from unused emergency COVID funding to Germany’s new Energy and Climate Fund is unconstitutional and the climate fund should be reduced by that amount.
The ruling is a blow to the coalition government led by Chancellor Olaf Scholz and could put Germany’s spending plans in jeopardy.
Scholz’s government has authorized the borrowing of 60 billion euros, granted in response to the pandemic but not needed in the 2021 fiscal year, to the Energy and Climate Fund, to be used in subsequent fiscal years. The transfer was carried out retroactively in February 2022 for the then-concluded 2021 fiscal year. The Energy and Climate Fund has since been renamed the Climate and Transformation Fund.
The authorization is incompatible with the constitution, the Federal Constitutional Court said today after ruling on a challenge brought by 197 conservative members of Parliament.
The authorization to borrow the unused Covid funds into the climate fund “does not satisfy the constitutional requirements for emergency borrowing,” Germany’s top court said.
“The Court’s decision means that the volume of the Climate and Transformation Fund is reduced by EUR 60 billion. Insofar as the state has entered into obligations that it can no longer service as a result of this reduction, the legislator must compensate for this through other means,” the court added.
Germany’s government approved in August investments in green energy worth $63 billion (57.6 billion euros) for 2024, a 60% increase compared to this year’s targeted spending.
For the period 2024 through 2027, the cabinet agreed to boost the investments in the so-called Climate and Transformation Fund to $230 billion (212 billion euros), an increase of around $33 billion (30 billion euros).
The special fund was created to help the energy transition and green investments in Europe’s biggest economy on its road to net zero.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com