2027 federal budget: Breaking Germany’s climate finance promises?

Due to ill-advised cuts to development finance in Germany’s draft 2027 federal budget, the government risks breaking its 6-billion-euro climate finance promise. The shortfall seems to amount to at least one billion euros.

The government’s budgetary framework published in May had already raised fears that the latest cuts to development cooperation would lead to a further reduction in Germany’s financial contributions to support low-income countries in climate change mitigation and adaptation.

The draft 2027 federal budget, the details of which are now available, gives substance to these fears – and allows an estimate on Germany’s 2027 climate finance provisions. For some budget headings, their expected contribution to climate finance can be deduced directly; this is the case, for example, with the payments due in 2027 to various multilateral climate funds such as the Green Climate Fund (GCF). For some other (smaller) budget headings, there are historical figures available. The majority of climate finance, however, comes from a range of headings dedicated to general development cooperation. Here, the potential contributions to climate finance can be extrapolated, based on the assumption that the proportion of climate finance within the total volumes of the relevant budget headings in 2027 will correspond to those of previous years.

We can thus estimate that the expected budgetary resources (including the grant equivalents of low-interest loans) for climate finance in 2027 could total between 4.6 and 4.9 billion euros. This is a projection which, by its very nature, cannot be an exact forecast. However, we consider the assumptions and empirical values used to be robust. We are confident that the estimate broadly reflects the expected level of climate finance. Details of the estimate can be found here (in German only).

The chart shows Germany’s budget allocations for climate finance for the years 2020–2024, as regularly reported by the federal government to Brussels, as well as our projection for 2025–2027. According to the federal government’s commitment, budget allocations for climate finance are to reach at least six billion euros in 2025-2027 per year. According to our estimates, this target might not be reached in any of these years—including 2027.

Accordingly, the federal budget for 2027 may therefore be short of at least one billion euros needed to fulfil the commitment – which has been in place since 2021 and has been repeatedly reaffirmed by the current federal government – to provide at least six billion euros in budgetary funds annually from 2025 onwards to support low-income countries in climate change mitigation and adaptation to climate impacts.

Germany as reliable partner – as if!

The German government has, in effect, built a potential breach of promise into its 2027 federal budget. Even for 2025 and 2026, it is quite possible that Germany will not honour its commitment. The federal government is thus threatening to erode international trust especially in the poorest countries – those suffering most from the climate crisis – and to send a disastrous signal to the international community. This will also hamper negotiations at the upcoming UN Climate Change Conference, COP31. As it is, developed countries are already under fire for failing to meet their obligations and commitments. With its draft federal budget for 2027, the German government is further fuelling the widespread mistrust in the Global South.

Climate finance could also continue to decline in subsequent years, as the budget of the Federal Ministry for Economic Development and Cooperation (BMZ) is set to shrink further, according to the medium-term financial plan. A prominent example of the German government’s disgraceful abdication of global responsibility is the next replenishment of the aforementioned Green Climate Fund (GCF) due in 2027. For the last funding period, the German government had committed two billion euros. For the next four years, the draft budget provides for at best 1.65 billion euros.

In order to fulfil Germany’s climate finance commitment by 2027 at the latest, funding in the federal budget (for example, for bilateral technical and financial cooperation or for the International Climate Initiative (IKI)) would need to be increased by a total of at least one billion euros. There are plenty of ways to finance this, including the phasing out of environmentally harmful subsidies (which often tend to benefit higher-income earners anyway) or tax reforms to make the rich and the super-rich take on greater responsibility for the common good – a clear majority in Germany would support this.

The cuts to development cooperation – and thus to climate finance – may bring short-term savings (which, however, are negligible in relation to the total federal budget) but are extremely unwise in the longer term. Climate finance is not merely a matter of diplomatic commitments made, but also a vital instrument for global stability in the face of climate change, as it enables countries severely affected by climate change to adapt to these impacts. It creates new markets for green technologies. And it builds trusting international partnerships in geopolitically challenging times. It therefore also serves Germany’s economic, foreign and security policy interests. Anyone who needs further arguments will find them here.

It is to be hoped that Members of the Bundestag take their time to reflect on the important role of climate finance and Germany’s global responsibility and will resolutely counter the threat of Germany breaking promises made – by showing courage and foresight in the negotiations on the 2027 federal budget and not simply signing off on the planned cuts to development cooperation, but reversing them.

Jan Kowalzig, Oxfam