The German 2014 federal budget: climate finance commitments to be cut

Rösler blocks emissions trading, therefore Schäuble cuts development aid. © BMF, Photo by Jörg Rüger

If the German federal government follows through with its plans, the promised increase in financial support for poor countries for climate protection and adaptation to climate change will soon come to an end. That, at any rate, is apparent from the draft of the 2014 federal budget that the government presented shortly before the parliamentary summer recess.

The changes are well-hidden – after all, the budget of the Federal Ministry for Economic Cooperation and Development (BMZ) is set to remain at last year’s level, and that of the Federal Ministry for the Environment (BMU) is even slated to increase. And these two individual budgets account for the bulk of Germany’s climate finance.

So what exactly has happened? Prices in emissions trading have been at rock-bottom for months due to the huge surplus of certificates, and this has caused a shortfall in the planned revenues for the federal government’s Energy and Climate Fund (EKF). The government relies on the EKF not only to finance renewable-energy transition programs, but also a part of the German commitments to international climate finance.

Decreasing revenues from emissions trading

The 2014 budget draft will now officially take significantly lower revenues for the EKF into account. The auctioning of CO₂ certificates is expected to raise €924 million in 2014. The government’s draft for 2014 has earmarked a further €655 million in the federal budget as an emergency measure to subsidize the EKF in 2014. Together, this amounts to less than half of the once-anticipated annual revenue of €3.3 billion.

EKF spending in 2014 will therefore be slashed or reassigned – and the latter also affects international climate aid from the EKF. €231 million will be transferred to the development budget, while €180 million will have to come out of the environment budget. This shift is appears to be only an accounting measure, because even without the EKF’s revenue bottleneck, the money would be allocated by the respective ministries that “manage” – i.e., spend – the funds of the international EKF budget item. However, only the budget of the BMU will be topped up to accommodate the additional spending, while that of the BMZ is set to be cut by €13 million. In other words, the BMZ will have a total of €244 million less at its disposal than in 2013.

Lowering the volume of commitments for 2014

Nevertheless, the payments planned for 2014 for the climate sector will remain stable. So everything is fine, at least from a climate point of view? Not at all, since in addition to cannibalizing development aid, the government draft sets up severe cuts for the future. The EKF has also always contained commitment appropriations to permit multi-year pledges for bilateral climate aid, which then result in actual disbursements during the implementation of projects in the following years. In recent years, approximately €500 million annually were earmarked in this manner. Not only does the 2014 plan for the EKF no longer contain these commitment appropriations, they are also nowhere to be found in the individual budgets of the BMU or BMZ. Only the old items will more or less continue there. This also means that nearly half a billion euros less will be available next year for new bilateral climate commitments than the almost €1.9 billion of the year 2013.

While expenditures can remain roughly the same for 2014, cuts will be inevitable in the years to come. In theory, this could be compensated by significantly higher allocations in future budgetary years, but these are probably unlikely. The prospects for Germany to make a fair contribution to the developed countries’ pledge to raise $100 billion in climate finance for poor countries by 2020 are gloomy indeed. We can only hope that the current budget draft will be scrapped after the elections, and that the future government will honor Germany’s previous commitments.

Jan Kowalzig, Oxfam