With its ruling on November 15, 2023, the Federal Constitutional Court declared the Second Supplementary Budget Act 2021 null and void. The law aimed to allocate EUR 60 billion in unutilized credit appropriations to the “Climate and Transformation Fund” (KTF), originally earmarked for dealing with the coronavirus pandemic. According to the decision by the Federal Constitutional Court, this measure is not compliant with the constitution, as it is incompatible with the so-called debt brake. The new purpose does not meet the requirements for credits taken out due to emergencies.
IKEM Director and expert on climate and financial constitutional law, Prof. Dr. Michael Rodi, explains: ‘Even if the climate crisis threatens civil liberties, as the Federal Constitutional Court has stated in several rulings, the new ruling confirms the lack of a causal link between the emergency situation and credit. The attempt to align climate protection with the debt brake in this way has predictably failed. This will have considerable negative consequences for climate protection and other important transformation processes.’
Given the enormous challenges and urgency in the fight against climate change, new ways of financing must be found. Shortly before the Federal Constitutional Court’s decision was announced, Rodi presented, in a journal article, the principles for the design of intertemporal financial planning, which would need to be established alongside a systematic investment plan. In his view, in addition to the reform of the debt brake, there are several options for legally secure and intertemporal financing of the KTF, such as within the framework of a multi-year financial plan.
In one aspect, Rodi views the decision of the Federal Constitutional Court critically: ‘According to the consistent jurisprudence of the Federal Constitutional Court, the legislature is given the opportunity for correction in the field of tax law to mitigate the negative consequences for the state budget. Even in the case of the identified unconstitutionality of these credits, the court should have found ways to mitigate the drastic consequences for the state and politics, for example, by granting the legislature time for adjustment measures.’
Prof. Dr. Rodi’s article on a set of instruments for state financing of the energy transformation has been published in the current issue of the journal Klima und Recht (11/2023).
