German climate finance 2024: New data shows increase, but 2025 pledge likely out of reach

According to the latest figures published by the German government, German climate finance 2024 rose compared to the previous year. Around €6.1 billion in resources from the federal budget were available for climate finance in 2024 (including grant equivalents from low-interest loans). However, the government coalition has now pushed through drastic cuts for 2025, creating a bleak outlook on future climate finance shortly before this year’s UN climate summit COP30.

The diagram shows the composition of German public climate finance in 2024. The green or green-shaded areas show funds from the federal budget. The orange field shows funds mobilised on the capital market, primarily for loans from KfW and DEG.

In its annual report on climate finance submitted in Brussels this week, the German government reports financial resources from the 2024 federal budget of around 6.1 billion euros to support developing countries’ efforts to cut emissions and adapt to climate change. This means that, at least for 2024 (and as was already the case for 2022), the German government is fulfilling its pledge to increase these budgetary resources (plus the grant equivalents of low-interest loans) to at least 6 billion euros per year by 2025 at the latest.

A further 4.6 billion euros was provided in the form of funds mobilised by KfW and DEG on the capital market for the creation of public loans (which often require little or no budgetary resources, e.g., to subsidise interest rates for recipient countries) and other instruments. Total public climate finance in 2024 has thus reached a level of around 10.7 billion euros. Additionally, the German government reports around €1.1 billion in mobilised private investment. With this total volume, the German government is contributing to the developed countries’ €100 billion goal.

Blue numbers show funds from the federal budget (plus grant equivalents of subsidised loans); black (and bold) numbers show total public funds (i.e. including loans based on mobilised finance). The green or green-shaded areas show various budget items, such as bilateral grants or contributions to multilateral climate funds. The orange areas show funds mobilised by KfW/DEG on the capital market, from which most of Germany’s climate loans are sourced. As per Germany’s pledge, budget resources (plus grant equivalents) for climate finance should reach at least six billion euros annually by 2025 at the lates; note that mobilised finance is not part of the commitment. The promised level has already been reached in 2022 and 2024, but drastic cuts are now planned for 2025. From Oxfam’s point of view, a fair contribution from Germany would be at least eight billion euros in budget funds in 2025.

Continued imbalance between mitigation and adaptation

Alongside the total increase, finance for adaptation has also grown in 2024. The federal government states a volume of around 2.8 billion euros, reaching a 46% share of the 6.1 billion euros. While the federal government claims having reached balance between mitigation and adaptation, this only refers to climate finance from budgetary resources, not to overall climate finance. Also, the government claims that half of finance earmarked to have served ‘cross-cutting’ purposes has also contributed to adaptation. This is a somewhat questionable assumption insofar, as this category also includes numerous programmes that often serve general environmental protection and whose climate relevance is often only vaguely apparent.

Fig. 3 provides clarity here. According to this, around a quarter of the budgetary resources were used for supporting adaptation. When looking at overall climate finance (i.e., including mobilised finance via the KfW to create loans etc.), the share is even lower. This means that the German government is far from achieving the balance between adaptation and mitigation as asked for in the Paris Agreement.

Germany usually says that it has achieved a balance in the distribution of funds for mitigation and adaptation. However, this refers only to budget allocations (plus grant equivalents) as shown in the left pie chart and assumes that half of ‘cross-cutting’ finance also contributes to adaptation. When looking at total climate finance (right-hand side), only around 24% specifically aimed at supporting adaptation in 2023.

In 2021, developed countries committed to doubling their collective annual climate aid for adaptation by 2025 compared to 2019. To contribute to this goal, Germany would also have to at least double its adaptation finance so that the budgetary resources for supporting adaptation reach a level of at least €3.5 billion per year by 2025 (see Fig. 4). Adaptation finance has increased over the past few years (with the exception of 2023), and in theory Germany is on track to meet its target. However, in view of the cuts now enshrined for 2025 (see below), Germany could fall (significantly) short of the required levels.

The chart shows adaptation finance (budget funds and grant equivalents of loans) over the years. For 2025, it is shown what German adaptation finance would have to achieve if Germany were to contribute to the target set at COP26 (of doubling adaptation finance by 2025 compared to 2019) by doubling adaptation finance from Germany, both for adaptation-only and for the assumption that 50% of ‘cross-cutting’ finance would also contribute to adaptation.

Loans continue to dominate German climate finance

Just around 38% of bilateral climate finance in 2024 reached recipient countries in the form of grants. This represents a decline compared to 2023 (42 per cent) and 2022 (48 per cent). Well over half of climate finance is provided by the German government through climate loans and similar instruments (see Fig. 5).

Loans can play a role when funded projects result in direct revenue for the recipient country from which loans can be repaid – in a socially sustainable manner; however, this is not always the case, in particular for adaptation projects that rarely lead to financial return (compared to a non-climate-change scenario). Also, recipient countries, many of which have made little or no contribution to the climate crisis, ultimately pay for the financed programmes themselves, when they repay the loans. This blatantly contradicts the principles of climate justice and can further increase the debt burden for countries, especially as their overall fiscal space may also be severely impaired due to other crises (including continued effects of the Covid pandemic, or worsening climate change).

* Including smaller amounts in the form of equity and other instruments. | Only budget funds for bilateral finance are shown. Germany contributes to multilateral climate funds and multilateral development banks mostly through grants (albeit with exceptions). However, these institutions (especially the development banks) often provide loans rather than grants. Including Germany’s multilateral contributions simply as grants in this chart would therefore be inappropriate.

Approved 2025 budget likely to push German climate finance promise out of reach

The German government continues to stand by its promsie to reach at least six billion euros per year in budget resources for climate finance by 2025 at the latest. At the same time, the two coalition parties, CDU and SPD, have pushed through significant budget cuts for the Federal Ministry for Economic Cooperation and Development (BMZ), which could make it impossible to keep this promise. The German government has not commented publicly on this. However, when appling the ratio between climate finance and other development finance in the relevant budget lines from the past to the approved 2025 federal budget, only 4.4-5.2 billion euros may be available for climate finance in 2025. The outlook for 2026 is no better. This puts the German government in an embarrassing position as it would travel to the upcoming UN Climate Change Conference COP30 with the message in tow that it may well break it’s climate finance promise. Germany’s credibility and reliability in international climate policy would be seriously called into question.

Next steps for the federal government

In the ongoing budget negotiations in the German parliament, the government coalition should refrain from the planned cuts in the BMZ budget and instead ensure that resources for climte finance are significantly increased in order to reliably reach at least six billion euros per year – even though in our view, it would be more appropriate if the funds were increased to at least eight billion euros in 2026.

In a next move, the government should update its climate finance commitment for the period after 2025. By 2030, the budget resources for climate finance should be increased to at least 12 billion euros per year, as also asked for by the German Climate Alliance and the Federal Association of Development and Humanitarian Non-Governmental Organisations (VENRO), among others. This would be a more appropriate target in view of the increasing burdens caused by the climate crisis in poorer countries and also in view of Germany’s economic and financial capabilities.

The government should increase the proportion of funds allocated to adaptation to climate change. True balance (as agreed internationally) would require a 50:50 split between mitigation and adaptation – for the total of German climate finance, not just for the budgetary resourfces.

Future increases in climate finance from Germany should focus primarily on the provision of grants so as not to further exacerbate the debt burden in poorer countries. This will require correspondingly more budgetary resources in the coming years and less reliance on market funds mobilised via the KfW.

Jan Kowalzig, Oxfam