On Saturday 2 December, on the of the COP28 climate summit in Dubai, German Chancellor Olaf Scholz told delegates they must make , and . However, his climate push was undermined just days later when his Economy and Climate Minister Robert Habeck abruptly cancelled his trip to Dubai to stay in Berlin and deal with Germany鈥檚 current budget crisis.
That crisis is undermining Germany鈥檚 climate diplomacy on the world stage as it threatens to derail the government鈥檚 domestic climate plans by depriving it of the funding for them. Last month, that the government鈥檚 decision to fund its green transition by reallocating 鈧�60bn ($64.74bn) in unused debt taken on during the pandemic was unconstitutional. It violated the so-called 鈥渄ebt brake鈥� that forbids German governments from taking on debt except in emergencies. While the pandemic was an emergency, the court decided that climate change, as it has been defined by the government, is not. The reallocation decision by the Social Democrat, Green and Liberal coalition government was taken to court by the centre-right opposition Christian Democrats, the party of former chancellor Angela Merkel.
The German Gfovernment now has to figure out a way to plug a 鈧�60bn hole in its budget for climate action. The crisis comes at a time when tensions within the coalition government are high as it sinks to new depths in public approval polls. The Greens are calling for the gap to be filled by new subsidies. The economically conservative Liberals are calling for stricter market-based instruments like carbon pricing. The Social Democrats are split between those two ideas. The Liberals are also calling for drastic spending cuts in other parts of the budget, such as social protection, to free up cash.
Another option is for the government to officially declare climate change an emergency akin to a pandemic and test whether the court will accept that argument. Although the EU has declared a climate emergency, as have 68 German towns, the national government of Germany has not. Meanwhile, some Green and centre-left politicians in the ruling coalition have said it is the debt brake itself, a uniquely German invention, that is the problem and that it should be legislated out of existence.
Habeck has said that the court鈥檚 ruling has delivered a body blow to Germany鈥檚 鈥渆conomic core鈥�, with millions of euros that businesses were expecting now in doubt. 鈥淲e must quickly find a way out of this,鈥� he said last week, noting that the key task at hand is to reassure local governments and businesses that green investment projects will be carried out as planned. Habeck emphasised that all of the projects that were set to receive the climate funding 鈥渕ust be implemented in the coming years鈥�.
Time is running out. Last week, a different German court ruled that the government must present emergency climate action programmes with short-term measures for transport and buildings because both sectors have repeatedly missed their emissions reduction targets, violating the country鈥檚 2021 . Germany鈥檚 expert council on climate change has said that the government鈥檚 plans for the sectors, laid out in July 2022, are insufficient to reach its goals. Germany is well off course for several of its sectoral climate targets, including on renewable energy.
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By GlobalDataWhile the government tries to find a solution, the budget crisis is costing Germany climate credibility with the rest of the world. Its own courts are both condemning it for being off track on its climate targets, and depriving it of the financing to do anything about it. J眉rgen Resch, head of the NGO Climate Action Germany (DUH), which brought the lawsuit over the missed targets, called it 鈥渁 judicial double whammy for climate protection and a resounding slap in the face for the German government for its disastrous climate policy鈥�. DUH has several other lawsuits pending regarding Germany鈥檚 missed climate targets.
The so-called 鈥渢raffic light coalition鈥�, named after the colours of the Social Democrats, Liberals and Greens, came into office 鈥� but now it is stymied both by its inability to deliver and its growing unpopularity with the public. for the government have fallen to 36%, with nearly two-thirds of Germans now saying they want a new government. for the next election, which is due at some point before October 2025, shows a surge in support for the far-right Alternative for Germany party, with a record 21% putting them in a comfortable second place after the centre-right Christian Democrats with 30%. Both parties have been appealing to the public with a promise to , with the Christian Democrats putting out advertising promising to end restrictions on the most polluting cars, for example.
All of this is on display for the rest of the world to see, as Germany calls for more ambitious action on climate from other countries at COP28. The constitutional court鈥檚 ruling was, to say the least, unfortunately timed, coming just a week before the UN climate summit. According to his spokesperson, Habeck still hopes to make it to Dubai for the end of the summit next week. It is in Germany鈥檚 interest to resolve its domestic budget crisis by then, or risk derisory laughter when it calls for more climate action from others.
