A ruling by Germany’s Federal Constitutional Court has frozen €25bn of funding through Germany’s Climate and Transformation Fund (KTF) to German Rail (DB), agreed by the German cabinet in August as part of an additional €40bn to be provided for the national rail network over the four years to 2027.
€12.5bn of the KTF funding was planned to finance widescale introduction of ERTMS over the next decade, with €1.3bn planned in 2024 and rising to around €3.5bn a year by 2033. The government had planned to use KTF funds for some infrastructure projects between 2025 and 2028.
In addition, according to local media reports, a further €12.5bn planned as a capital increase by the federal government in holding company DB AG using KTF funding is now at risk
The KTF was established in 2010 by the previous federal government led by Mrs Angela Merkel. As envisaged the fund was designed to enable climate change mitigation measures without using tax revenues as it was to be funded by income from carbon emissions trading (estimated at €19bn in 2024), plus grants or loans from government.
The fund had a budget of €212bn, agreed in August, to finance various decarbonisation projects including rail infrastructure investment to assist modal shift from road to rail for freight between 2024 and 2027.
Of this around €60bn was to come from emergency pandemic expenditure funds, which had not been used. It was this reallocation of funds that conservative members of parliament objected to leading to the case at the Constitutional Court, which has ruled that this transfer of funds is unconstitutional.
Freeze
The court ruling led to an immediate freeze on all KTF expenditure by the Federal Finance Ministry whilst the overall programme of activity to be funded is reassessed. The government had originally planned to spend €57.6bn of KTF funds in 2024 for a variety of projects, an increase of more than €20bn compared with 2023.
Following the court ruling, none of this funding is now confirmed until the government agrees a new overall plan to spend whatever money it can legally put into the KTF.
The loss of this funding has led to urgent calls for clarity on DB’s overall financial position by employee representatives on the company’s main board.
Industry stakeholders, new infrastructure manager DB InfraGO, and major suppliers based in Germany such as Alstom have publicly called for rapid decisions on 2024 rail infrastructure budgets and those for the rest of the decade in order to provide certainty for future planning.
The indirect impact on rail from the reduction in KTF funding may also include the negative effect on major industrial freight customers such as the steel and chemical industries, as they now have less funding for the transition from fossil fuels that KTF was providing, and so may move less freight by rail over the medium to long term.
