Key figures for the 2027 federal budget: ill-advised cuts to climate finance

The recently proposed key figures for the 2027 federal budget envisage further cuts to the budget of the Federal Ministry for Economic Cooperation and Development (BMZ), both for 2027 and for subsequent years. In doing so, the federal government risks continuing its impending breach of promise on climate finance in the future. This is strategically short-sighted, as climate policy requires not less but more global cooperation, not least in Germany’s own interests.

“You can rely on Germany,” said Federal Chancellor Friedrich Merz, referring to climate finance from Germany in his speech at the UN Climate Change Conference COP30 in Belém at the end of 2025. Encouraging words, yet they stand in stark contrast to the newly planned cuts in development cooperation. Photo: Isabel B./COP30.

Caption: “You can rely on Germany,” said Federal Chancellor Friedrich Merz, referring to climate finance from Germany in his speech at the UN Climate Change Conference COP30 in Belém at the end of 2025. Encouraging words, yet they stand in stark contrast to the newly planned cuts in development cooperation.

At the 2021 G7 summit, then-Chancellor Angela Merkel (CDU) had pledged to increase budgetary allocations for supporting developing countries in tackling the climate crisis to at least six billion euros annually by 2025 at the latest. The pledge attracted considerable international attention and recognition, particularly among developing countries, which once again saw Germany as a reliable partner in the fight against climate change. The current government under Chancellor Friedrich Merz has not only regularly reaffirmed this promise but has also stipulated in the coalition agreement that Germany will continue to contribute its fair share to climate finance in the future.

Is a breach of promise now also looming in 2027?

But the federal government is doing quite the opposite. For 2025 and 2026, it is unlikely that the federal government will have kept or will keep the six-billion-euro promise due to its ill-advised cuts to the BMZ budget. To meet the climate promise in 2026, the BMZ budget falls short by around 1-1.5 billion euros.

In 2027, the BMZ’s total expenditure is set to fall by a further 600 million euros compared to 2026, to just 9.5 billion euros. In the years that follow, the trend will continue downwards over the years to 9.1 billion euros in 2030. As the budgetary allocations for climate finance largely come from the BMZ budget – specifically from the general headings for bilateral and multilateral development cooperation – it must be expected that climate finance will also be affected by these cuts. At the same time, several multilateral climate funds are due to be replenished; these funds play a vital role in supporting low-income countries in tackling the climate crisis.

The exact extent of the planned cuts to climate finance cannot currently be accurately estimated at this early stage in the annual budget process due to a lack of detailed information.[1] Nevertheless, it is to be expected that the newly planned cuts would continue the breach of promise into the coming years and presumably even exacerbate it. In doing so, the German government would further damage the already often strained balance of trust in international climate policy between the rich industrialised nations and the low-income countries affected much more severely by the climate crisis. This is all the more true given that the last two UN Climate Change Conferences, COP29 and COP30 (with Germany’s approval), resolved to increase support for low-income countries to at least 300 billion US dollars annually by 2035 (from $137 billion in 2024) and, in doing so, to triple both support for adaptation to climate change and funding via the multilateral climate funds operating under the Paris Agreement. This is just as incompatible with the cuts Germany has already made to development cooperation in 2025 and 2026 and even more so with the further cuts now planned for 2027.

Keep your word? Reverse the cuts!

To reclaim leadership in climate finance, the German government would have to scrap the planned cuts for 2027 and instead provide for a significant increase in development cooperation. For climate finance alone, the BMZ budget would need an increase of the aforementioned 1-1.5 billion euros compared to 2026, in order to have a reasonable chance of meeting the German six-billion-euro pledge.

The 2027 federal budget should also include provisions for substantial commitments to some of the most important multilateral climate funds, including the Fund for Responding to Loss and Damage (whose first formal replenishment period begins in 2027), the Green Climate Fund (whose third formal replenishment is also due in 2027), as well as the Adaptation Fund and the Least Developed Countries Fund (two funds that do important work but have not been adequately funded for years).

But that is not all: If Germany is indeed to continue contributing its fair share to climate finance in the future (as agreed in the coalition agreement), the 6-billion-euro pledge must not only be fulfilled in the short term, but it should also be updated for the future, as it had been calibrated to 2025 and the previous 100-billion-euro goal. Now, however, the task is to define the fair share of the new international 300-billion-euro climate finance target. The ongoing cuts do not fit into this picture at all.

Good reasons for climate finance

The cuts in development cooperation – and thus in climate finance – may bring short-term savings (which are, however, negligible in relation to the total volume of the 2027 federal budget), but they are extremely unwise in the medium to long term. Climate finance serves to support low-income countries and is not an act of charity, but a binding obligation under international law – as stipulated by the Paris Agreement. However, there are also plenty of other good reasons for climate finance: supporting climate action in low-income countries is also an important instrument for regional and even global stability in the face of climate change, as it enables countries severely affected by climate change to adapt to these changes and protect the livelihoods of their populace. It also advances climate-friendly development and thus creates new markets for green technologies. And it builds trusting international partnerships in geopolitically challenging times. It therefore serves the economic, foreign and security policy interests of Germany (and other industrialised nations). Ultimately, climate finance is an investment in the common good, including that of societies in the Global North. This has probably not yet fully sunk in with many finance ministers, heads of state and government, and even certain chancellors, despite their hopeful words (“You can rely on Germany.”). This needs to be changed during the upcoming negotiations on the 2027 federal budget.

Jan Kowalzig, Oxfam

[1] The Federal Government’s 2027 budget framework sets out planned total expenditures for all parts of the government, including the BMZ budget for 2027 (and subsequent years). Yet, it does not yet specify the specific allocations for individual headings within the ministry’s budget. In any case, for climate finance (as for bilateral development cooperation as a whole), it is not so much the planned expenditure under the respective headings as their commitment appropriations that provide information on what (usually multi-year) funding commitments can be made via the 2027 federal budget. This will only become clear with the publication of the full federal budget (including the BMZ budget) – scheduled for 8 July 2026.