Free money won’t soothe Germany’s climate pain – EURACTIV


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Germany’s ‘klimageld’ scheme has never got off the ground despite government pledges – but a new study says that might not matter.
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News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.
Residents of poorly connected rural areas above the age of 60 are among the ones burdened heavily by carbon pricing in Germany, the study points out. [Matthias Balk/picture alliance via Getty Images]

Germany has long discussed a compensation scheme to ease the cost of climate action for lower-income households, and to increase public buy-in for going green, but a new study has found it might not accomplish either.
Known as ‘Klimageld’ (climate money), the mooted scheme would transfer some revenues from the national carbon tax to lower-income households. It was promised by the outgoing federal government, but failed to materialise during its three years in office.
The concept remains popular. It is a talking point among Germany’s major parties during their election campaign, and is endorsed by NGOs and research institutes.
But a meta-study by the Kiel Institute for the World Economy found that such a scheme would fail to help key parts of the population.
One of the authors, climate economist Sonja Peterson, said that while ‘climate money’ may be a “very transparent and easy” option, its “core problem” is that “it fails to deliver for specific groups that are disproportionately affected by the cost of energy transition.”

Commuters, Altbau inhabitants, the old all left out

Some of these groups identified by Peterson include car commuters, inhabitants of Altbau buildings – built between 1949 and 1990 with poor energy ratings – and people over 60 in rural areas, all of whom make up significant parts of the German electorate.
Many German commuters – who numbered 20.4 million in 2024 – would still not be able to afford to switch to an electric car despite receiving climate cash. Charging infrastructure in rural areas also remains underdeveloped.
Living in an energy-inefficient Altbau building is also costlymost are unrenovated and use gas and oil heating, which is subject to Germany’s carbon tax. The proposed climate cash wouldn’t go far enough to help these people move or renovate, the report says.
The over-60s, meanwhile, are an enormous demographic in Germany – making up 42.1% of the 59.2 million electorate. With buy-in on the ‘just transition’ relatively low among this group, the nudge effect the climate cash is designed to have would likely be futile.

Untargeted policies can backfire

Free money for climate action has created problems in other EU countries.
A state-reimbursement of 110% on energy-efficient building renovation in Italy, dubbed the “superbonus”, was cancelled after its cost had accumulated to 160 billion euros in just four years.
The scheme incentivised Italian homeowners to maximise their 10% windfall by choosing more costly yet greener renovation options.
Instead, the study concludes that a “strong social policy geared towards people’s needs” was just as important for the energy transformation’s success, and lists several examples: lowering the cost of electricity, the expansion of public transport networks, and state aid for refurbishing the most energy-inefficient buildings, among others.
Peterson says that the next German government should focus on the most cost-effective measures and “proceed with caution”.
Some of these actions are likely to happen regardless of who takes power after February’s election. The main parties are all pledging to cut power prices, including as of Monday the CDU. The centre-right party is currently leading the polls.
[DC/OM]
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