Germany increased its international climate finance to a new all-time high in 2022. In total, the German government provided 6.39 billion euros in budget funding last year for climate change mitigation and adaptation in developing countries. The figure has now been reported to the EU Commission, which gathers the data for the entire EU. That means that the target of investing 6 billion euros of public funds in climate finance, which Chancellor Olaf Scholz had pledged to achieve by 2025, has already been met three years ahead of schedule. It also means that Germany is delivering on its fair share of the 100 billion dollars a year pledged by the industrialised countries for addressing climate change in developing countries and emerging economies.
Development Minister Svenja Schulze commented, “The new figures show that Germany is stepping up its efforts to address climate change in all parts of the world. We stand by our international commitments. That sends an important signal, not only in terms of climate action but also in terms of Germany’s reputation as a reliable partner. The key thing now is for other industrialised countries to deliver on their fair share of our joint pledge to mobilise 100 billion dollars a year for tackling climate change in developing countries and emerging economies. It is vital that this promise at last be honoured. It is not just a crucial issue of trust between industrialised countries and developing countries but it would also help us to get other countries like China and the Gulf states on board in taking responsibility for climate finance.”
Economic Affairs and Climate Action Minister Robert Habeck said, “We can only restrict global warming if all the countries stick to their commitments and keep stepping up their efforts to mitigate climate change. We industrialised countries have committed to solidarity with and support for developing and emerging economies. Ultimately, it is a question of empowering the countries of the Global South to meet their own climate obligations. We are making a vital contribution by significantly raising the amount we are providing towards international climate finance. We are following words with deeds. We will actually reach our target three years early. Going forward, we intend to put more of our funding into leveraging private capital and thus boosting its effectiveness.”
In providing 6.39 billion euros of budget funds for international climate finance, the German government has exceeded last year’s total by around one billion euros. Some 44 per cent, roughly 2.8 billion euros, is focused on the important aspect of adaptation. That puts the German government on track to deliver its contribution towards the internationally agreed target of doubling financing for adaptation between 2019 and 2025, bringing it up to 40 billion US dollars. In 2022, funding was channelled, for example, into many more development projects for food and nutrition security that focus on climate change as a root cause of droughts and hunger and promote solutions like climate-smart agricultural methods.
The international 100 billion dollar commitment includes both budget funds and also other funds leveraged using public funds. If the market funds and private resources mobilised in this way are included, then German climate finance in 2022 amounted to around 8.8. billion euros. This was the first time that privately mobilised funds reached a level of nearly 500 million euros (compared with 170 million euros in 2021). In addition to this, the German government protected climate projects worth around 271 million US dollars through its export credit guarantees for developing countries and emerging economies.
Most of the funding is invested in climate projects agreed on between Germany and its partner countries at their bilateral negotiations. This partnership-based, decentralised approach means that the projects implemented are truly in line with partner countries' interests and development plans. In 2002, the Development Ministry put climate change mitigation and adaptation efforts high on the agenda of its negotiations with partner countries. Many partner countries reacted positively and so it was possible to agree on many more climate projects that will receive German support. That includes new Climate and Development Partnerships with Rwanda, India, Peru and Kenya. New plurilateral partnerships for a socially just energy transition (Just Energy Transition Partnerships) with South Africa, Indonesia and Viet Name also came into effect in 2022.
Some of Germany's climate finance is also channelled through multilateral funds such as the Green Climate Fund, the Global Shield against Climate Risks and the Global Environment Facility. The largest single item is the 270 million euros allotted to the KfW’s PtX Development Fund, which supports developing countries in claiming their fair share of the new global value chains emerging in the green hydrogen industry.
The International Climate Initiative (IC) is another important instrument forming part of the German government’s international climate finance commitments; it classifies 100 per cent as climate finance. The ICI funds initiatives to promote climate and biodiversity projects in developing countries and emerging economies. In this way the ICI is reacting to relevant developments in climate negotiations and supporting countries in making their NDCs more ambitious, greening their financial sector, expanding their use of renewable energies and decarbonising industry.
Of the German government’s international climate funding, 86 per cent is delivered by the German Development Ministry, on the basis of agreements with its partners across the globe. The rest comes mainly from the International Climate Initiative, which is coordinated by the German Ministry for Economic Affairs and Climate Action and in which the German Foreign Office and Environment Ministry are also involved.
Some project examples
Jordan: The Development Ministry is supporting Jordan in its efforts to adapt to climate change and is providing 65 million euros through the KfW Development Bank for the construction of a desalination plant on the Red Sea. The aim is to improve water supply over the long term for the population, which includes millions of displaced people. The plan is to desalinate 300 million cubic metres of sea water and
transport it to the north of the country so as to meet the drinking water needs of 4 million people there (40 per cent of the country’s population). The plant will require enormous amounts of electricity, which is to be mainly provided through renewable energy source such as photovoltaics.
Global Environment Facility (GEF): The GEF is the world's largest funder of biodiversity protection, nature restoration, pollution reduction, and climate change response in developing countries. Germany has supported the GEF since its establishment. The Development Ministry has committed 700 million euros for the current replenishment period (GEF-8).
Global Shield against Climate Risks: The BMZ has joined with the Group of the 58 most vulnerable countries, the Vulnerable Twenty (V20), to launch the Global Shield against Climate Risks. It offers vulnerable people and countries financial protection against climate-related losses and damages. In 2022, Germany provided 170 million euros of start-up funding for the initiative.
30 by 30 Zero Scale Up Climate Finance: Under the International Climate Initiative, the BMWK is providing support totalling 50 million euros for the 30 by 30 Zero programme being implemented by the International Finance Corporation (IFC) in South Africa, Mexico, the Philippines and Egypt. The project focuses on combining blended finance and technical support to achieve a 30 per cent increase in the proportion of climate-related lending in those partner countries.
Just Energy Transition Partnership (JETP) with Indonesia: Under the energy transition partnership forged last year, the German government is supporting Indonesia with all aspects of a sustainable transformation of the energy sector and the decarbonisation of the country’s major consumers of energy. This includes investments in the energy infrastructure, instruments for promoting renewable energies and energy efficiency, upskilling measures and vocational education and training. In 2022, the German government provided Indonesia with over 360 million euros under the JETP.