The German government has reduced the funds allocated for climate and transformation projects by billions, as the three-party coalition finally agreed on a budget for 2024.

The country’s highest court last month annulled the government’s plan to repurpose €60 billion ($65.4 billion) originally meant as an emergency Covid-19 fund, leaving a €17 billion gap in its next year’s budget. After weeks of negotiations, the coalition government reached on Wednesday an agreement on a draft 2024 budget. 

In a press conference, German chancellor Olaf Scholz stressed that the government is “sticking to its goals,” including continuing to advance the country’s climate-neutral transformation. However, “we have to get by with significantly less money to achieve these goals,” Scholz added.

Among the plans to save €17 billion next year is cutting climate-damaging subsidies and spending in some ministries, including the transport, environment and labour ministries. The government will reduce funds for a climate and transformation fund (CTF) by €12 billion in 2024 and by €45 billion in the financial planning up to 2027. 

The CTF was designed to provide support for energy transition and climate protection, including for developing electric mobility through the expansion of charging infrastructure, expanding the hydrogen industry, and promoting energy efficiency. Despite the cut in funding, CTF “still has a very high total volume” of €160 billion, the German chancellor noted. 

Economy minister and vice chancellor Robert Habeck added that the “central pillars” of the CTF framework will not be affected, such as the development of a hydrogen infrastructure, lower prices for power customers through the German Renewable Energy Act (EEG) levy, and the promotion of heat transition.

“All of these central pillars will remain intact and will trigger the investments that we have promised and that we hope for, and will provide an impetus for Germany’s economic renewal,” Habeck said.

The government is also planning an earlier end to its EV subsidies, though it is yet to reveal further details. Currently, new and used battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs) can claim up to €4,500 in purchase subsidies for vehicles priced up to €40,000. For vehicles priced between €40,000 and €65,000, buyers can get €3,000 in incentives.

From 1 January 2024, the German government subsidies will be capped at vehicles priced at €45,000 and under, with €3,000 available for private BEV and FCEV purchases only.