German climate finance

The German 2014 federal budget: climate financing secured, development aid cut?

Rösler blocks emission trading, therefore Schäuble cuts development aid. © BMF, Foto: Jörg Rüger

The “key figures” that were presented this week for the 2014 German federal budget represent a de facto cut in development aid funding by nearly €250 million from 2013 – even though the budget of the Ministry for Economic Cooperation and Development will remain virtually untouched.

This is due to the disastrous revenue situation of the Energy and Climate Fund (EKF), which is financed by the auction proceeds of emissions trading. Since the prices of pollution rights have long been at rock-bottom (mainly due to the refusal of the federal government to remove billions of surplus certificates from the market), revenues have been considerably lower than previously expected. It is likely that not more than €900 million will be available in 2014 – down from an anticipated €2 billion.

What is the federal government doing? It is not fixing emissions trading, but is simply masking the problem by shifting planned expenditures from the EKF to the individual budgets of the ministries. This includes €231 million for climate financing that will no longer be coming from the EKF, but from Section 23 – the budget of the Ministry for Economic Cooperation and Development. Yet the ministry’s budget will not be seeing a commensurate increase, but will actually be cut by €14 million. The bottom line is that €245 million less will be available for development expenditures (to which the federal government considers climate finance to be integral) in 2014.

It is interesting to note that despite the cut, climate finance in 2014 is, as planned, set to remain at the same level as 2013, at roughly €1.8 billion. If this budget item is not reduced, the money will have to come from somewhere else – possibly from areas that are central to the fight against poverty, such as basic education, health care and food security. In short, climate finance is cannibalizing development funding.

It was foreseeable that it would come to this – if climate finance is going to increase, as the federal government has promised repeatedly, without the provision of dedicated funds on top of the development aid budget, sooner or later there will not be enough money for both. The currently worsening situation is not due to an increase in climate finance (as mentioned, 2014 should be no more than 2013), but to the declining revenues from emissions trading.

There are four possible reasons why climate finance is not being cut in 2014: firstly, the German government has already pledged the funds internationally and cannot go back on its promise. Secondly, the bulk of the 2014 funds are already earmarked for partner countries through earlier (2011, 2012 and 2013) bilateral commitments – the expenditures are thus unavoidable. Thirdly, the German Climate Technology Initiative (DKTI) has also relied on EKF funds to date – and as a relatively new instrument, it would not exactly exude reliability if it were to be dismantled after only two years. And finally, the transition to renewable energy perhaps carries more weight in a federal election year than alleviating poverty in the global South – the climate, and thus climate finance – is simply more en vogue.

Jan Kowalzig / Oxfam