The German government is planning a €13.3 billion energy relief package for 2027.

The German government intends to implement an energy cost relief package amounting to €13.3 billion ($15.2 billion) for businesses and consumers by 2027, funded by the Climate and Transformation Fund (KTF), as announced by the finance ministry on Wednesday.

This package features a subsidy for electricity grid fees and assistance for energy-intensive industries through an industrial electricity price scheme and compensation measures to mitigate expenses related to carbon pricing.

By 2030, a total of €13.2 billion will be redirected from the KTF into the main budget, according to the KTF's business plan for 2027 and the government's financial planning through 2030. Energy costs have surged significantly since the onset of the Iran war, intensifying challenges for Germany's energy-intensive sectors and overall manufacturing. German firms, including automakers and steel manufacturers, had raised concerns about high energy prices putting them at a competitive disadvantage before the conflict.

The relief package is €2.5 billion greater than the amount intended for 2026, with over €5.5 billion allocated to grid charges, €5 billion for power price compensation, and approximately €2.5 billion for the industrial electricity price.

CONTRACTIONS IN CLIMATE FUND

Simultaneously, the government is cutting spending in other areas of the climate fund. The finance ministry has indicated that funding for uncommitted KTF programs will be reduced by 30%, though some projects will remain unaffected. For instance, support for the transition to electric vehicles will see a 10% reduction, or €200 million, by 2029, without impacting existing commitments.

Last week, the federal government approved its draft for the 2027 federal budget and the financial plan extending to 2030. However, this draft did not include a plan for the KTF. In 2027, €2.7 billion in emissions trading revenues that typically would go into the KTF will instead be utilized to address budget shortfalls.

Of the KTF's projected €40.3 billion expenditure in 2027, €22.5 billion has already been designated for modernization projects, according to the ministry. The economic plan is scheduled to be approved by parliament alongside the federal budget at the end of November.