Federal budget / 100 billion / Pledges & Commitments

Federal Budget 2025: German 6 billion climate finance pledge beyond reach?

Preparations for the federal budget 2025 will show whether the German government intends to keep its promise to increase climate finance budget allocations to at least six billion euros per year by 2025. At present, this does not look likely.

Just as the 2024 federal budget has been adopted, including heavily criticized cuts in funds for development and global poverty reduction, the federal budget for 2025 is now being drawn up. Further cuts to development assistance in 2025 are likely, and this will impact climate finance, i.e. the support for low-emissions development and adaptation to the changing climate change in low-income countries, where climate finance has been funding projects such as the expansion of decentralised, renewable energy supply, protecting harvests through cliamte-resilient cultivation approaches, drought-resistant water supply or protection against severe weather disasters – in order to preserve people’s livelihoods despite the worsening climate crisis.

Fig. 1: Climate financing 20198-2025: Will Germany keep its 2025 promise?
Figure 1: Government forecast for climate finance in 2023 and 2024

In line with government practice, the chart shows the budget allocations and the grant equivalents for concessional loans. Not shown are the loans themselves or the funds mobilised on the capital market, which are then used to provide public loans. For 2022 the figure shows the amounts achieved, for 2023 and 2024 it shows the government’s forecast, and for 2025 the German commitment is shown next to what various German NGOs consider to be a more appropriate target.

For 2022, the government had reported around 6.4 billion euros in budget funds (and grant equivalents of loans) for climate finance. The German commitment to reach at least six billion euros annually by 2025 would therefore have been fulfilled by 2022 (as the government celebrates here). For 2024, however, the German government had forecast around 5.3 billion euros, i.e. significantly less than the level reached in 2022, which was also achieved at least in part due to favorable one-off effects. So far, the government had insisted that the 6 billion goal is not in danger and dismissed its own forecast as too conservative. As its methodology has not been published, that claim is difficult to assess. However, the volumes of the relevant budget lines in the development ministry’s 2024 budget are often lower than e.g. for 2022 or 2023. When making a forecast that strictly extrapolates the changes in budget lines, allocations for climate finance in 2024 would be significantly below the official government forecast, at around 4.9 billion euros (see Table 1 here).

Budget cuts 2025: Climate finance to go down?

And more trouble is looming: The government wants to make further cuts to development cooperation worth billions for 2025 and beyond, already enshrined in the government’s financial planning for the coming years – at the instigation of German Finance Minister Christian Lindner, but obviously with the approval of the other cabinet members. Furthermore, according to reports, there is now an additional gap of up to 30 billion euros for the overall budget for 2025.

It is expected that this will lead to further cuts in the development ministry’s budget, and this would very likely also affect climate finance allocations too. The situation is more serious than in 2024 in that, despite the cuts, the forward commitment appropriations for 2024 were spared for the budget lines relevant for climate finance in the ministry’s budget. These forward commitment appropriations are particularly relevant for bilateral climate finance because they allow for bilateral commitments for multi-year projects in recipient countries. For 2025, however, there is now the real danger that these same forward commitment appropriations will be affected too, in order to implement the cuts planned for the longer term. This risks fundamentally harming German climate finance for years to come.

6 billion goal at risk: Bad signal in time for COP29?

It is not yet possible to predict by how much German development finance will be cut, and what the resulting damage to climate finance will be. However, under the current circumstances it is difficult to imagine how Germany would be able to keep its 6 billion promise, if the BMZ budget is ordered to make further cuts to overcome the funding gap described above.

It would be a first-class breach of trust if the government had to admit, at the UN Climate Change Conference COP29 at the end of the year (when the 2025 budget will be adopted), that it will not keep its 6 billion promise. This would seriously undermine the carefully crafted balance of trust between developing and developed countries established in the Paris Agreement. And: This year’s climate summit is to decide on a new global target for future climate finance after 2025. Here, Germany insists on broadening the contributor base beyond the traditional set of developed countries. Yet, any signal that at the same time Germany does not intend to fulfil its own obligations and commitments will not exactly help that cause.

Jenseits der Glaubwürdigkeitsfrage hätte das Verfehlen des Ziels auch ganz konkrete Konsequenzen: Erhebliche Mittel würden nicht bereitgestellt, um die stark gefährdeten, einkommensschwachen Länder darin zu unterstützen, die Lebensgrundlagen ihrer Bevölkerung gegen den Klimawandel abzusichern und die klimafreundliche Entwicklung zu fördern – zur Bewältigung der Klimakrise, zu der diese Länder in der Regel kaum beigetragen haben.

Beyond the credibility issue, missing the goal would also have dire consequences for people in the Global South: Substantial funds would not be made available to support vulnerable populations’ and low-income countries’ climate actions to protect livelihoods against the worsening climate crisis and to enhance low emissions development – to overcome a climate crisis they often had little to no role in causing.

Cancel the cuts, keep the promise

Für Glaubwürdigkeit und Vertrauen und angesichts der Bedarfe in den einkommensschwachen Ländern ist es unabdingbar, dass die deutsche Zusage erfüllt wird. Und zwar ohne Rechentricks. Das muss hier betont werden, weil die Bundesregierung sich schon einmal solch eines Rechentricks bedient hatte, um das damals noch geltende 4-Milliarden-Ziel für 2020 formal zu erreichen. Vielmehr braucht es statt der drohenden Kürzungen eine Aufstockung, insbesondere der Verpflichtungsermächtigungen, der für die Klimafinanzierung relevanten Titel. Dazu gehören insbesondere im BMZ-Etat die allgemeinen Titel der bilateralen Zusammenarbeit im BMZ-Etat, aber auch der Titel für Beiträge an multilaterale Klimafonds und im Etat des Bundesministeriums für Wirtschaft und Klimaschutz (BMWK) der Titel für die Internationale Klimaschutzinitiative (IKI).

For credibility and trust, and in view of the growing needs in low-income countries, it is essential that Germany keeps its promise. And do so without any accounting tricks. This must be emphasised because the government had already applied such means before, back then, to achieve the previous climate finance goal, 4 billion euros a year by 2020. Instead of the impending cuts, an increase is needed, in particular for the forward commitment appropriations of the relevant budget lines. This includes, in particular, the budget lines for overall development co-operation, in the development ministry budget, but also the budget line for contributions to multilateral climate funds, and the budget line for the International Climate Initiative (ICI) in the economy ministry budget.

The money for this can be found. The debt cap (Schuldenbremse) for strictly limiting the amount of new public debt and the main driver of the cuts, has been heavily criticized anyway, as it prevents important investments in Germany’s (economic) future. In the longer term, the federal government would also be well advised to further develop the revenue base for the federal budget in a fair manner – for example, by making the rich and super-rich (who are responsible for considerable emissions due to their extreme consumption) contribute more to societal needs, through wealth taxes and other suitable instruments.

Chancellor Olaf Scholz needs to step up

Wie auch immer: Dass Deutschland seine 6-Milliarden-Zusage einhält, ist schon unter dem Gesichtspunkt der Klimagerechtigkeit geboten – Deutschland ist einer der Hauptverursacher der Klimakrise und hat nicht zuletzt darauf auch seine im globalen Maßstab beeindruckende Wirtschaftskraft aufgebaut. Darüber hinaus braucht es womöglich mehr Aufklärung insbesondere für Bundesfinanzminister Christian Lindner, welch wichtige Zukunftsinvestition die Klimafinanzierung nicht nur für die klimasichere Entwicklung einkommensschwacher Länder, sondern in einer globalisierten Welt letztlich auch für Deutschland und seine wirtschaftliche Entwicklung ist. Gefragt ist hier jetzt das Engagement gegen die Kürzungspläne des Finanzministers insbesondere von Entwicklungsministerin Svenja Schulze, Wirtschaftsminister Robert Habeck und Außenministerin Annalena Baerbock. Und Bundeskanzler Olaf Scholz. Denn: Er war es, der das 6-Milliarden-Versprechen, ursprünglich von Ex-Bundeskanzlerin Angela Merkel gegeben, auf dem G7-Gipfel in Elmau 2022 kurz nach Übernahme der Amtsgeschäfte noch einmal erneuert hatte. Jemand soll ihn bitte einmal daran erinnern.

Be that as it may, Germany must keep its 6 billion promise as a matter of climate justice. Germany is among the countries most responsible for causing the climate crisis, upon which it has built its impressive economic wealth. In addition, especially Federal Finance Minister Christian Lindner may have a bit of learning to do how climate finance is an important investment in the future, not only for the low-income countries, but ultimately also for Germany and its economic prospects in a globalised world. It is impeative that especially Development Minister Svenja Schulze, Economy Minister Robert Habeck and Foreign Minister Annalena Baerbock step up now. And Federal Chancellor Olaf Scholz. After all, it was he who renewed the 6 billion promise, originally made by former Federal Chancellor Angela Merkel, at the G7 summit in Elmau in 2022 shortly after taking office. Someone please remind him.

Jan Kowalzig, Oxfam