Germany earmarks €18.9 billion for green construction and renovation subsidies

Image: Reuters

Germany’s cabinet has approved €18.9 billion (US$20.8 billion) for subsidies in the building sector to encourage the construction of new energy efficient buildings and the renovation of existing buildings.

The investment represents the largest share of a wider €57.6 billion ($63.2 billion) package for green investments next year, up 60.2% from a 2023 target, the finance ministry said.

The investment comes as Berlin ramps up subsidies to help the country become net zero by 2045.

Renewable energy subsidies will be around €12.6 billion, while €4.7 billion will go towards expanding the country’s e-mobility charging infrastructure.

To cut the country’s reliance on Chinese imports, Germany aims to develop local production capacity for raw materials and transformation technology such as solar power components with €4.1 billion of subsidies next year.

Supporting renewable energy production in Europe has become more urgent since the United States introduced generous subsidies through its Inflation Reduction Act which could lure manufacturers away from Europe.

Some €4 billion in subsidies will go to support semi-conductors production next year as part of a €20 billion support package for the industry, including €5 billion for Taiwan’s TSMC to build a factory in Saxony.

“We are laying the foundations so that future opportunities can arise from decarbonisation and digitisation,” German finance minister Christian Lindner said in a statement.

Total investments in the Climate and Transformation Fund, a supplementary budget to push ahead the economy’s green transition dubbed in German KTF, would amount to €212 billion between 2024 and 2027, the ministry added.

The fund will be partly financed from increasing national CO2 pricing and European emissions trading expected revenue of €10.93 billion and €8.19 billion respectively.

“We have to proceed with a sense of proportion when pricing CO2, especially in view of the current weakness in growth,” Lindner said.

Germany plans to raise CO2 prices by €10 to €40 per ton in 2024, two government sources told Reuters. This would increase petrol and diesel prices by around €0.04 per litre, according to industry calculations.

The lower house of parliament must discuss the plan, in addition to the 2024 federal budget draft, in September and a final decision on the financial plan is not expected before December.