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The German coalition government has agreed on a budget for 2024 that takes account of a聽momentous court ruling聽a month earlier, which declared 60 billion euros earmarked for climate and transformation projects as being booked unlawfully. Chancellor Olaf Scholz said the agreement means that Germany will stick to its key target of delivering a climate neutral transformation of the economy but added that 鈥渨e will have to use significantly less money to meet our goals.鈥� Scholz said the coalition parties had agreed on priorities in the budget as well as on spending cuts and revenue increases to meet budgeting rules, adding that this had been 鈥渦npleasant but necessary.鈥�

The country鈥檚 main financial instrument for climate action projects, the Climate and Transformation Fund (CTF), will be endowed with some 12 billion euros less in 2024 and with 45 billion euros less until 2027, the chancellor said. However, he argued that the fund would still have 鈥渁 very high total volume鈥� of 160 billion euros, meaning that central transformation projects will be covered.

The German government's announced cut to the CTF coincided with a deal reached on the final day of the UN climate conference COP28 in Dubai, which Germany and other EU governments welcomed for heralding "the end of the fossil fuel era."

The agreement made in the night on Wednesday (13 December) between Scholz鈥檚 Social Democrats (SPD), the Green Party of economy minister Robert Habeck and the pro-business Free Democrats (FDP) of finance minister Christian Lindner followed upon weeks of intense negotiations about how to reshuffle the government鈥檚 budget. The coalition鈥檚 negotiators faced the challenge of prioritising the most important expenses in the overall budget聽without having to pull the plug on key climate action measures聽promised during the past years.

Scholz said that agreeing on the 2024 budget had been made possible through a combination of reducing climate-damaging subsidies, cuts to support programmes and reduced spending in different government departments. Amongst other things, the government will introduce a tax on aviation fuel for domestic flights as well as a tax on plastics, an economy ministry document seen by 麻豆无码版 said.

Besides its determination to stick to its climate action and industry transformation ambitions, Germany would also continue to deliver necessary financial assistance to Ukraine in its defence against Russia鈥檚 invasion and will not enforce cuts that pose a danger to social cohesion, the chancellor added.

Green Party parliamentary group leaders Britta Ha脽elmann and Katharina Dr枚ge and said a good solution had been found. In the medium term, however, money to drive forward the modernisation of the country, secure international competitiveness and protect the climate," would have to be found elsewhere, they wrote in a statement. "We therefore continue to campaign for a reform of the debt brake."

The Institute for Economic Research (ifo) as a step in the right direction, but shared the concern on whether the necessary level of investment could also be made in the coming years. "It is to be welcomed that the German government has not taken the easy route of declaring a budget emergency, but has cut spending, especially subsidies, and also increased environmental taxes such as the CO2 price somewhat more," ifo head Clemens Fuest said.

The German Economic Institute (IW) , saying essential investments and long-term solution for future budgets fell by the wayside in the agreement process. The announced 45-billion-dollar reduction to the CTF "casts doubt on whether the project can succeed," the institute wrote. It called for a reform of the debt brake and long-term planning security for companies.

Through the increase in the CO2 price, as well as the cancellation of subsidies for greed fees, consumer prices would increase significantly, price comparison website check24 warned. "Unfortunately, the cuts agreed today will lead to increases in energy prices and place an additional burden on households, trade and industry in the coming year" through a domino effect triggered by the discontinuation of the transmission grid fee subsidy, Kerstin Andreae, head of the utility association BDEW, said.

Similarly, Industry federation BDI called the coalition鈥檚 deal "a tough austerity package that is going to put a burden on everyone." While it created some planning security for the economy in the short to medium run, both companies and customers would be hit hard by the envisaged savings measures, argued BDI head Siegfried Russwurm. The increase in the national CO2 price and expected increase in grid fees would let Germany鈥檚 鈥渁lready high鈥� energy costs rise further and hurt German companies鈥� competitiveness, the lobby group head said. He argued that the agreement ultimately would make Germany鈥檚 economic recovery harder than it already was.

The German Chemicals Industry Association (VCI) welcomed the fact that the agreement , but warned that there's no reason to sound the all-clear yet. "The green restructuring of the economy must not be sacrificed to the tight budget," VCI managing director Wolfgang Gro脽e Entrup said. The problem posed by energy prices had not been solved, he added.

Greenpeace criticised the fact that the special climate fund would see cuts of 12 billion euros, but that climate damaging subsidies would only be cancelled to a small extent. "The harmful company car privilege will not be abolished and diesel fuel will continue to be subsidised to the tune of billions - this is hampering ecological modernisation," Bastian Neuwirth, economist at the NGO, . Renewable energy association BEE echoed this: "A larger volume than three billion euros would have been possible here," the lobby group's head Simone Peter .