Energy sector warns German government of misusing special fund 'to plug budget gaps'

German energy groups sent a stark warning to the country’s incoming government not to misuse a massive new infrastructure fund “to plug budget gaps” instead of investing in the transformation of the energy and economic structure.

The lower house of parliament, the Bundestag, in March and before electing Friedrich Merz as chancellor, approved constitutional changes enabling the new government to channel €100bn ($113bn) into climate action as part of a €500bn special infrastructure fund, and take up unlimited debt for defence spending.

The spending – to be stretched over a decade – gives the Merz administration unprecedented leeway in its financial planning, but in theory comes with strings attached, such as using the funds only for future-oriented projects that strengthen Germany’s economy and help it reach its climate goals.

But there are first signs that the new government, and finance minister Lars Klingbeil from the Social Democrats (SPD), are already considering using the infrastructure fund for creative budget financing to make ends meet, Germany’s energy and water industries federation (BDEW) and its federation of municipal utilities (VKU) cautioned last week.

Current information from the finance ministry indicates that previous measures from the regular budget will in future be financed from the so-called climate and transformation fund (KTF) instead, in particular to push down electricity taxes – which has been a promise by incoming economics and energy minister Katharina Reiche from the Christian Democrats (CDU).

"Of course, the budget will be lacking revenue if the state lowers the electricity tax. But this relief must come from the regular budget, not from the KTF,” VKU managing director Ingbert Liebing said.

“The KTF is a promise for the future – not a nest egg for the Federal Finance Minister. … The additional billions from the special fund are intended for progress – not to plug budget holes."

Using special funds for unintended purposes has already been extremely harmful to the failed previous government.

Money made available in the future to the climate and transformation fund must be used as a priority for additional investments in power plants, heating networks, the hydrogen ramp-up and digitalisation, which are “the backbone of a future-proof energy supply”, BDEW chairwoman Kerstin Andreae demanded.

“The special fund was created to enable additional investments in the transformation of our energy and economic structure – not to reclassify existing expenditures or to finance electricity price subsidies.”