Climate and Transformation Fund
The Climate and Transformation Fund (Klima- und Transformationsfonds) is being bolstered with €100 billion from the Special Fund for Infrastructure and Climate Neutrality.
The Climate and Transformation Fund plays a central role in Germany’s efforts to achieve its energy and climate targets. It supports climate action in the building sector, facilitates the transformation of industry and provides relief for electricity-intensive companies. The fund’s other key priorities include climate-friendly mobility, the hydrogen economy and nature-based climate action. From 2026 onwards, the fund will also provide substantial grid fee relief to private and commercial consumers and financial support for international climate action. Programme spending is expected to total about €37.4 billion in 2026.
The fund receives an annual injection of €10 billion from the Special Fund for Infrastructure and Climate Neutrality, with the first transfer made in 2025. This additional funding is provided at the beginning of each year without being recorded as debt. Loans to the Climate and Transformation Fund from the Special Fund for Infrastructure and Climate Neutrality are posted to government accounts only when money has actually been spent. As a result, the amount disbursed from the Special Fund for Infrastructure and Climate Neutrality may differ from the amount that is borrowed for it, especially in the first half of the year.
The Climate and Transformation Fund is a special fund with its own economic plan that is adopted by the legislature on an annual basis. Its revenue must be spent in line with the purposes stipulated in the Climate and Transformation Fund Act (Klima- und Transformationsfondsgesetz). As is the case with the Special Fund for Infrastructure and Climate Neutrality, various federal ministries are responsible for the measures, projects and programmes that are carried out under the auspices of the Climate and Transformation Fund.
The budget items in the Climate and Transformation Fund are currently managed by seven federal ministries. A precise breakdown is provided here (in German): 2026 federal budget, departmental budget 60 (general revenue administration), annex 3: Economic plan for the Climate and Transformation Fund [PDF, 2 MB].
Under section 5 of the Climate and Transformation Fund Act, the Climate and Transformation Fund can build up reserves to fulfil its legal purpose. If, at the end of a year, the sum of actual revenue exceeds the sum of actual programme spending, the difference is allocated to the reserves.
Measures implemented under the Climate and Transformation Fund must be reported once a year to the German Bundestag’s Budget Committee pursuant to section 8 of the Climate and Transformation Fund Act. Among other things, the reports contain information on the impacts of funded measures on greenhouse gas emissions and on the relationship between funding and greenhouse gas reductions.
Examples of measures financed by the Climate and Transformation Fund
The “Federal funding for efficient buildings” (Bundesförderung für effiziente Gebäude) programme supports energy-efficiency upgrades in buildings. The programme pools various funding guidelines within a single overall scheme:
Individual measures: funding for heating systems and for individual upgrade measures in residential and non-residential buildings
In this programme component, KfW provides grants for the installation of climate-friendly heating systems, and the Federal Office for Economic Affairs and Export Control provides grants for individual energy-efficiency upgrade measures. Examples of individual measures include window replacement, building envelope insulation and heating system optimisation. Funding can be used for residential buildings, non-residential buildings (such as commercial and office buildings) and mixed-use buildings.
Energy-efficiency upgrades for residential buildings
This programme component provides support for energy-efficiency upgrades that bring existing residential buildings (such as separately-owned units, single family homes, multi-dwelling units and residential establishments) up to KfW Efficiency House standards. This support takes the form of low-interest KfW loans that include repayment subsidies. Repayment subsidies are higher for upgrades that meet higher Efficiency House standards.
Energy-efficiency upgrades for non-residential buildings
Similar to the funding guidelines for residential buildings, this programme component provides low-interest loans with repayment subsidies for energy-efficiency upgrades that bring existing non-residential properties (such as commercial buildings, municipal buildings and hospitals) up to KfW Efficiency Building standards.
Federal funding
Budget funding for the programme comes from the Climate and Transformation Fund. In fiscal year 2025, expenditures for the above funding guidelines totalled approximately €12.0 billion. Of this amount, about €6.1 billion was granted for individual measures, about €4.1 billion for residential buildings, and about €1.8 billion for non-residential buildings.
In addition, roughly 618,000 funding applications were approved in fiscal year 2025, with a funding volume of €9.3 billion.
Federal funding for efficient buildings: figures for 2025 Residential buildings Non-residential buildings Individual measures Total Number of approvals
14,621 738 603,134 618,133 Committed funding for newly approved applications (in € million)
1,427 444 7,420 9,291 According to the evaluation of the 2024 funding year, the programme reduced greenhouse gas emissions by about 2.6 metric tonnes of CO2 equivalents. The evaluation of the 2025 funding year is currently being carried out.
The electrification of road transport has major strategic significance in terms of climate, energy and geopolitics. Electric mobility plays a key role in making the transport sector more climate-friendly.
To increase the market share of electric vehicles both swiftly and sustainably, it is essential to achieve broad-based, dynamic levels of demand. The German government’s EV grant scheme aims to create conditions that enable a well-balanced range of income groups to participate in the expansion of the electric car market. At the same time, the grant scheme facilitates the automotive sector’s transformation towards low-emission and emission-free drive technologies and also helps to safeguard German and European technological competitiveness and industrial performance.
The grants are available for new vehicles registered in Germany from 1 January 2026 onwards. Grants are provided for battery electric vehicles, plug-in hybrid vehicles and fuel cell vehicles classed as category M1.
Households with annual taxable income of up to €80,000 are eligible for the grants. For households with children, the annual taxable income threshold increases by €5,000 per child up to €90,000. Grants of up to €6,000 are provided, depending on income and vehicle type.
Budget resources and emissions reductions
Budget funding for the grant scheme comes from the Climate and Transformation Fund.
A total of €3 billion is earmarked for the years from 2026 to 2029. With this funding, the German government aims to provide grants for up to 800,000 EVs. Target funding for 2026 is set at €550 million.
A battery electric vehicle that replaces an internal combustion engine vehicle can be expected to cut direct greenhouse gas emissions by roughly 2.4 to 2.6 tonnes of CO2 equivalents per year (based on annual kilometrage of 15,000). This figure refers to production-based emissions, i.e. the emissions are attributed to the sector where they are generated.
Further information on emissions reductions attributable to the EV grant scheme will be published in 2027.
UN Sustainable Development Goals
In the 2030 Agenda for Sustainable Development adopted by the United Nations, the international community pledged to achieve 17 Sustainable Development Goals (SDGs) that encompass the social, economic and environmental dimensions of sustainability. The 2030 Agenda is a roadmap for the future that aims to enable a life of dignity for all people around the world while simultaneously ensuring the long-term protection of natural resources and ecosystems.
From the outset, Germany has expressed its commitment to pursuing ambitious sustainability policies. This includes the adoption of a national Sustainable Development Strategy that describes in detail how Germany will contribute to the fulfilment of the 17 SDGs. (Link to the current version of the German Sustainable Development Strategy [pdf, 2,5 MB])
The Climate and Transformation Fund plays a key role in these efforts. Take a look at our tool “Digital federal budget” to find out how planned spending in 2027 will contribute to the fulfilment of sustainability targets (in German).