All-purpose weapon of the traffic light
What does the climate fund actually do?
November 15, 2023, 5:05 p.m
The traffic light wants to invest around 212 billion euros in climate protection and the transformation of the economy. Part of this should come from the excess Corona funds, the Federal Constitutional Court overturns the project. There is now a lack of money for projects – but what does the climate fund actually do?
The Climate and Transformation Fund is an all-purpose weapon of the federal government – for billions of dollars in investments in climate protection and the restructuring of the economy. The traffic light coalition made up of the SPD, Greens and FDP created a new economic plan for the fund in the summer. An important part of the financing has now been provided by the Federal Constitutional Court (BuVerfG) tilted. But what is actually behind the climate and transformation fund?
The Climate and Transformation Fund (KTF) is a “special fund” separate from the federal budget and the central instrument for investments in the energy transition and the climate-friendly restructuring of the economy. The fund is primarily fed by billions in revenue from European emissions trading and national CO2 pricing for the areas of transport and heating. Companies that market gasoline, diesel, heating oil and natural gas must purchase pollution rights. The CO2 price is intended to provide an incentive to switch to more climate-friendly alternatives – for example to electric cars or a heat pump.
The special fund also has a billion-dollar reserve at its disposal. In addition, a “global additional revenue” of 9.3 billion euros is planned. This means that the expenses have not yet been fully covered. Behind the scenes, however, the federal government is pointing out that the fund is solidly financed because many funds have not been disbursed in the past. Although the KTF also finances itself from its own resources, these are currently far from sufficient to finance all projects.
How does the CO2 price rise?
The CO2 price for fossil energies in the transport and heating sectors is expected to rise more than previously planned in the coming year and beyond – in order to strengthen the fund’s income. An allocation from the federal budget is not planned until 2027. The background is also a tense situation in the federal budget.
Specifically, the CO2 price is expected to rise to 40 euros per ton on January 1, 2024, and then to 50 euros per ton in 2025. To achieve this, the Fuel Emissions Trading Act must be changed. Previously, a CO2 price of 35 euros was planned for next year – it is currently 30 euros. The coalition had postponed an increase in the CO2 price from the beginning of 2023 due to the energy crisis. Even with the 40 euros, the federal government remains below the CO2 price originally decided in 2020, which had actually planned for 45 euros for 2024.
The national CO2 price also applies to companies, although there are compensatory measures for companies if CO2 pricing leads to a disadvantage in international competition. The further price path is unclear. The background is that the EU emissions trading system is to be expanded to include the transport and building sectors from 2027. This then also has consequences for the national system. The financial plan of the KTF economic plan shows revenues of around 21.9 billion euros in 2027, which indicates a significantly increasing CO2 price.
What does this mean for consumers?
Filling up with petrol and diesel and heating with oil and gas are becoming more expensive anyway. An increase in the CO2 price by 10 euros per ton would make fuel more expensive by around 3 cents per liter, according to ADAC data. That’s less than 2 percent. Whether and how much the increase will be passed on as of the reporting date depends on the oil companies. In the past, however, when the price was increased there were usually clear price jumps. Although fuel prices have largely returned to normal after the extreme values of last year, they have recently risen significantly.
And when it comes to heating? According to calculations by the comparison portal Verivox (as of August 2023), with a CO2 price of 40 euros per ton, the CO2 costs for a household with gas heating and a consumption of 20,000 kilowatt hours in the coming year will be 191 euros. That is 24 euros more than with a CO2 price of 35 euros. For a household that heats with oil, the additional costs for 2000 liters of oil amount to 31 euros.
What are the fund’s priorities?
The program expenditure is expected to be around 57.6 billion euros in 2024 – around 21.6 billion euros above the target expenditure for 2023. According to the federal government, the funding priorities are the decarbonization of industry, the expansion of renewable energies and e-commerce. Mobility and energy-efficient building renovation.
According to the draft, around 18.8 billion euros will be allocated to “federal funding for energy-efficient buildings” next year – almost two billion more than in 2023. The background is the planned heating law and the state funding for heating replacement – but details are still unclear. The federal government has also pointed to the rising CO2 price regarding the need to replace the heating system. According to the Ministry of Construction, around 500 million euros will be made available in the coming years to support municipal heat planning.
In order to renovate the partly dilapidated rail network and thus increase the punctuality of the trains, a further component of 12.5 billion euros is to come from the KTF by 2027. In addition, the railway has its own contribution of three billion euros. According to the Ministry of Transport, an additional 11.5 billion euros are earmarked for rail in the draft for the 2024 federal budget and the financial planning up to 2027. That’s not enough to achieve the coalition’s goal – by 2027 the railways should receive a total of up to 45 billion euros more. That is why, according to the ministry, the federal government is now examining whether the federal government can strengthen the railway’s equity capital beyond 2024. However, the EU Commission must agree to this. In total, around 211.8 billion euros are to be made available between 2024 and 2027 for the tasks of the Climate and Transformation Fund.
How much money is missing for projects?
The cabinet approved the KTF economic plan for 2024 in August. Since then, expenses have been added, and at the same time the reserves at the end of 2023 could be larger than expected due to lower outflows. On the basis at that time, the deletion of 60 billion euros could result in a shortfall of around 20 billion euros for the planned expenditure in 2024.
What can the federal government do after the decision? BuVerfG do?
The traffic light has already placed a budget freeze on the climate fund. With the so-called “budgetary block”, Finance Minister Christian Lindner is subjecting large parts of the KTF, which currently has a value of around 100 billion euros, to his approval. Economics Minister Robert Habeck, in whose department the KTF is located, confirmed that “all promised commitments” would be kept. For this purpose, a new economic plan is being drawn up. This could include a mix of price increases and savings. The traffic lights could turn on both the CO2 price in order to get the missing funds – this would have a direct impact on the consumer at the gas pump and when heating. Savings would come at the expense of projects such as the expansion of the rail network.