Who needs to worry now?

Following the decision of the Federal Constitutional Court on the Climate and Transformation Fund: how financing the transformation of companies and the economy needs to continue. An evaluation by Ove Petersen.

Following the November 2023 decision of the Federal Constitutional Court, the Climate and Transformation Fund, and with it the federal budget, faces a 60 billion euros shortfall. Since then, there has been great unrest in all elements of the economy and industry that have set out on the path towards climate protection. The bottom line is that it is not only the debt brake that goes under in the process, but climate protection also has constitutional status – and both could easily be reconciled.

People in Germany have a right to climate protection – and the state has a duty to pursue this with vigour. This was confirmed by the Federal Constitutional Court only two years ago. The very same court has now ruled that the debt brake must be complied with and the Federal Government may not simply shift funds authorised to deal with an emergency into another fund and use them over several years. Yet this does not change the requirement for climate protection.

And of course, both can go hand in hand. This is because complying with the debt brake and the climate targets are both essentially justified in the same way: we must not simply pass on the burden either of the debt or of containing the climate catastrophe to future generations.

This now prompts the question: how do we combine the goal of climate protection with the necessity to not incur excessive debt? The answer: everything in conflict with both of these objectives must be eliminated. In particular, environmentally and climate-damaging subsidies, which the Federal Environment Agency assesses at 65 billion euros a year, from diesel privileges to energy tax exemptions on aviation fuel, must be cancelled as far as possible and the funds freed up diverted to climate-friendly transformation. This means that the transition to the technologies, jobs and energy supply of the future must gain significant ground.

We need hydrogen production and electrolysis to be able to integrate renewables into the energy system. A strong mechanical engineering sector is needed to achieve this and, of course, the further expansion of wind and solar energy to supply us with cheap and sustainable energy. We need decarbonised processes to make industry resilient and fit for the future. And we need investment on the consumer side: in producing green steel, in climate-friendly fuel for aviation and shipping, and hydrogen for heavy goods transport. Otherwise, there will be insufficient customers for green energy.

Renewable energies, industry transformation and decarbonising all sectors are what will secure Germany’s position as a business location. This will give much longer and more sustainable benefit to companies and the country than, for example, the diesel privilege; something that boosts a technology that before too long no one in the world will be buying anyway.

So, the companies that are driving the transition to a fossil-free economy should not have anything to be worried about. It’s the ones who depend on climate-damaging subsidies that need to be looking over their shoulders.

After all, failing to invest more in climate protection is just as unconstitutional as failing to comply with the debt brake or the budget rules. And the next constitutional action has already been lodged in Karlsruhe. The allegation: the government is failing to adhere to its own climate protection programme.