Government continues to promote fossil fuels with billions of euros

06.06.2025

Source: E & M powernews

According to a study, the black-red federal government is planning climate-damaging subsidies amounting to 9 to 15 billion euros a year.

For the two non-governmental organizations (NGOs) Germanwatch and Klima-Allianz Deutschland, the new German government's subsidy plans in the energy sector are a zero-sum game for climate protection. This is shown by an analysis carried out by the consultancy Forum Ökologisch-Soziale Marktwirtschaft (Fös) on behalf of the two NGOs.

According to an evaluation of the coalition agreement, the new federal government consisting of the CDU/CSU and SPD is planning energy policy measures that will cost the state budget between 9 and 15 billion euros annually, but which would have a counterproductive effect on climate policy, according to a statement.

The analysis criticizes the fact that the planned subsidies roughly correspond to the 10 billion euros per year earmarked for the Climate and Transformation Fund (KTF) - in fact, the additional money would be spent on the existing fossil fuel economy, not on overcoming it.

"The coalition agreement between the CDU/CSU and SPD contains numerous measures that cement or even expand existing climate-damaging subsidies," says Swantje Fiedler, Scientific Director at Fös and co-author of the study. "The majority of the new subsidies and climate-damaging incentives are accounted for by the energy sector with 5.9 to 9.8 billion euros and the transport sector with around 1.9 billion euros."

The subsidies in the energy sector include the planned reduction in electricity prices by five cents per kilowatt hour. According to the report, up to 4.4 billion euros a year could be attributed to fossil fuels alone. In addition, between 1.9 and 5.4 billion euros per year will be spent on the expansion of up to 20,000 MW of gas-fired power plant capacity. According to Fös, the latter entails a considerable risk of fossil lock-in effects - i.e. long-term investments in CO2-intensive infrastructures.

Industry, agriculture and transport will also receive billions

Subsidies are also to be continued or expanded in industry. As an example, the Fös cites compensation for high electricity prices for industry of up to 660 million euros and compensation payments under the new EU Emissions Trading System ETS 2 of up to 860 million euros per year.

Further benefits are also planned for agriculture, including the exemption from ETS 2 and the reintroduction of the agricultural diesel rebate. These add up to up to 1.6 billion euros per year and, according to Fös, contradict the climate targets in the agricultural sector.

In the transport sector, the coalition agreement provides for a reduction in the air traffic tax and an increase in the commuter allowance to 38 cents per kilometer from 2026. Both measures will primarily relieve the burden on higher-income households and promote CO2-intensive forms of transportation. According to Fös, the additional tax incentives would cost around 1.9 billion euros per year.

The analysis comes to the conclusion that the planned measures largely have the character of a zero-sum game. The authors therefore call for a reform of the subsidy policy. Instead of open-technology tenders for new gas-fired power plants or blanket tax breaks, targeted, temporary and ecological instruments are needed. As an example, they cite investment aid for renewable technologies or targeted relief for climate-friendly applications such as heat pumps.

The analysis "Environmentally harmful subsidies and incentives in the coalition agreement" can be downloaded from the website of the Forum Ökologisch-Soziale Marktwirtschaft.

Author: Stefan Sagmeister