How the judgment by the German Federal Constitutional Court on the German debt brake entrenches climate injustice
As a major emitter of greenhouse gasses, Germany has a fundamental responsibility to show solidarity with developing countries suffering from the effects of climate change. This obligation is clear from the common but differentiated obligations that underpin the climate framework. Consequently, Germany must deploy its policy and fiscal instruments in furtherance of actions. One key instrument that has a large impact on the Federal Government’s ability to honour these obligations relates to the debt brake: this is the constitutional formula that determines how much the government can borrow in relation to the performance of the economy. In this contribution, I argue that Germany’s adherence to its debt brake undermines its international climate obligations but also exacerbates global inequalities, particularly affecting vulnerable nations in the Global South.
The German Federal Constitutional Court’s task is to balance needs between competing constitutional objectives. However, in the ruling of 15 November 2023 regarding the debt brake and the constitutionality of the supplementary budget agreed by the Bundestag, (intended to increase the climate transformation fund), the Federal Constitutional Court failed to sufficiently strike such a balance.
The intersection of fiscal policy and climate justice has become increasingly critical as nations grapple with the consequences of climate change. In Germany, the implementation of the “debt brake”, a constitutional mechanism aimed at limiting national debt, poses significant challenges to the country’s obligations under international climate agreements. In particular, the judgment by the German Federal Constitutional Court fails to account for the long-term nature of climate change as an emergency, thereby necessitating a re-evaluation of fiscal policies to align with international law and ethical responsibilities. By failing to recognize the urgency of climate action as an exceptional circumstance warranting increased fiscal flexibility, the Court’s decision reflects a narrow interpretation of constitutional obligations that prioritizes financial constraints over moral and legal responsibilities toward global climate justice. This limits Germany’s ability to contribute towards the achievement of climate justice, a state of affairs that affects global south citizens than anywhere else in the world; and for which Germany owes legal and moral responsibility.
Basic information on the debt brake and the judgment by the Federal Constitutional Court
The so-called debt brake is stated in Articles 109 and 115 of the German Basic Law. The purpose of the debt brake is to limit Germany’s national debt. It defines binding rules for reducing the budget deficit, which both the federal and state governments must comply with. It aims to achieve these goals in the following ways: A distinction must be made between the structural and conjunctural components of the debt brake: the structural component limits the federal government’s ability to take on new debt to 0.35% of nominal gross domestic product per year, while the conjunctural component allows additional debt to be taken on during an economic downturn, which must be repaid when the economic situation improves.
There is also an exception clause that allows the Bundestag to suspend the debt brake with a simple majority in the event of a natural disaster or other extraordinary emergency situations that are beyond the control of the state. Based on this provision, the debt brake was suspended from 2020 to 2022. In accordance with this provision, the federal government has also belatedly increased the 2021 budget by 60 billion in the form of a credit authorization in order to use it to deal with the coronavirus pandemic and its effects. As the funds were not needed for the originally intended purpose (to deal with the pandemic and its effects), the German government reallocated the funds retroactively in 2022 with the approval of parliament. The money was now to be transferred into the Climate and Transformation Fund. In other words, to be used for the purpose of climate protection. On 15 November 2023, the German Federal Constitutional Court held that the federal government cannot reallocate budget funds to deal with the pandemic and its consequences and use them for purposes of climate protection.
The global South and Climate Change
The Global South is particularly affected by climate change. Firstly, due to their geographical location. Many developing countries are located in regions that are more vulnerable to natural disasters such as floods or periods of drought. The East African region is currently experiencing a prolonged period of drought. The situation is still life-threatening, particularly in northern Kenya, many parts of Somalia, southern Ethiopia and northern Uganda. The lack of rain has been catastrophic for many people in East Africa. There has been little or no rain for five consecutive rainy seasons. Malawi is another good example of this. The country is currently experiencing its greatest decade of food insecurity, as 90% of cultivated land is dependent on regular rainfall. Between January and February 2024, rainfall has now provided a small improvement. The consequences of the drought are serious and dramatic. The soil was too dry to grow cereals or vegetables. For small farming families, this meant no harvest and not enough to eat. Many families who live from farming have already lost up to 70 per cent of their livestock – often their only source of income and food. Climate change is increasing the frequency and intensity of these events. In addition, most developing countries are heavily dependent on agriculture. This in turn is strongly influenced by the climate. Changes in rainfall and temperatures can affect crop yields, leading to food insecurity and economic instability. This is particularly problematic considering that developing countries often have limited resources and infrastructure to adapt to the effects of climate change.
Overall, climate change intensifies existing challenges and inequalities in developing countries and presents a serious threat to their sustainable development or even their political stability. It is therefore crucial that global efforts are made to mitigate climate change and help affected countries to adapt.
The special responsibility of the Global North
There are a number of arguments in favour of the Global North, including Germany, having a special responsibility in the fight against climate change. This responsibility is due to both current and historical factors. Firstly, it must be said that countries in the global North, such as Germany, have been responsible for 92 % of global greenhouse gas emissions for centuries. Industrialization and uninterrupted economic growth have been driven by the use of fossil fuels at the expense of the environment. These historical emissions have contributed significantly to current climate change. Germany has a long tradition of industry and has been one of the leading economic powers in Europe. However, this industrial development has also led to significant emissions of greenhouse gases, particularly through the burning of coal, oil and gas to generate energy and the use of motor vehicles and other means of transport.
The principle of Common but Differentiated Responsibility (CBDR) is a key principle in international environmental law. It states that all countries are jointly responsible for climate protection; they bear different responsibilities due to their different historical emissions and stages of development. Even though the principle is not legally binding per se, it must be mentioned in this context. The reason for this is that this principle is the basis of all relevant Multilateral Environmental Agreements (MEAs), which in themselves are binding under international law (more on this below). With regard to the UNFCCC and the Paris Agreement, however, the role of the CBDR must be viewed differently. Within the climate change regime, the concept of common but differentiated responsibilities qualifies as a legally binding principle given its explicit inclusion in both instruments.
Specific obligations of the Global North and Germany under international law
Germany is a party to the UN Framework Convention on Climate Change of 1992, the Kyoto Protocol of 1997 and the Paris Agreement of 2015. The international climate obligations Germany has, arise (unless new international agreements are concluded in the future) from the Paris Agreement, for example. The special feature of the Paris Agreement is that it does not impose targets on countries, but allows countries to make national contributions to reducing global warming voluntarily, depending on their economic and political capabilities. The aim of all states is to limit global warming to 1.5 degrees Celsius by the end of the century compared to the pre-industrial age. The contribution an individual country wishes to make is defined in the NDCs (Nationally Determined Contributions). This individualized determination of contributions is in line with the CBDR. However, it is not yet possible to predict how these international legal obligations will impact Germany’s national budget. Due to the growing findings of climate research, ever greater burdens in the double-digit billion range are to be expected.
Germany itself has not submitted any NDCs, but is part of the EU NDCs. Within this framework, the EU has set itself the goal of achieving climate neutrality up to 2050. Achieving climate neutrality will require high levels of investment in the following areas in particular: pushing ahead with the energy transition, i.e. phasing out fossil fuels and switching to renewable energies; improving energy efficiency; the mobility transition; restructuring agriculture and forestry in order to reduce emissions and preserve biodiversity in these areas too; industrial transformation through innovation of more sustainable technologies and processes. By combining these measures, Germany can fulfil its obligations under international law as part of the Paris Climate Agreement. Depending on how climate change progresses, the future costs for Germany up to 2050 will be between 280 and 900 billion euros.
In addition, Germany has obligations under international law from the so-called Loss and Damage Fund. The fund was set up at the 27th UN Climate Change Conference in 2022. Specifically, it was agreed that climate-related damage and losses incurred by vulnerable states will be financed by other states parties. The fund is currently only filled with 700 million US dollars. Germany participated with a contribution of 100 million US dollars. It is assumed that this 700 million covers less than 0.2 % of the actual requirement. In fact, it is estimated that climate change causes over 350 billion US dollars in damage every year. According to the principle of the CBDR, Germany will also have to make large additional contributions every year. This in turn will lead to an additional burden on the federal budget of a now unspecified amount. Germany is obliged under international law to make regular payments into this fund.
Climate justice and racism
Climate justice and racism are intertwined issues, as the impacts of climate change often disproportionately affect marginalized communities, particularly those that are racially and economically disadvantaged. Here are some key points that highlight the connection between climate justice and racism. Climate justice demands an urgent reckoning with environmental racism and the outsized role of developed countries in perpetuating climate injustice. Historically, industrialized nations have driven the bulk of global carbon emissions, reaping economic benefits while offloading environmental costs onto marginalized communities, both domestically and globally. This inequity manifests starkly in environmental racism, where communities of colour disproportionately bear the brunt of pollution, hazardous waste, and climate impacts like extreme weather events. Despite contributing the least to the climate crisis, these communities suffer the most, a direct consequence of systemic inequities rooted in colonialism and economic exploitation. Developed countries have a legal, moral and practical obligation to address this disparity, not only by drastically reducing their own emissions but also by providing substantial support to vulnerable nations and communities for adaptation and resilience. This includes financial aid, technology transfer, and capacity-building measures tailored to the needs of those disproportionately affected. Failure to fulfil these obligations perpetuates a cycle of injustice, undermining global efforts towards a sustainable and equitable future.
The current judgment on the debt brake in conflict with these obligations
Two things are particularly interesting with regard to the 2023 judgment of the German Federal Constitutional Court on the Supplementary Budget.: Firstly, the court states that climate protection measures are not covered by the debt brake exemption. The exceptions to take on new debt state that the limit actually provided for can be exceeded in exceptional emergency situations. In this context, the climate crisis is not regarded as such an exceptional situation, as it is of long duration, with no end in sight. Climate protection measures must therefore always be financed from the regular budget.
In addition, the debt brake (Art. 115 of the Basic law) and climate protection (Art. 20a of the Basic Law) are constitutional interests of equal rank. The debt brake was interpreted exclusively in the light of the financial constitution. International law components were also not sufficiently taken into account, which runs counter the principle of international law-friendliness of the Basic Law.
The need for an interpretation of the German Basic Law that is favourable to international law
The judgment does not sufficiently moderate the existing tensions between the two constitutional objectives in question. Furthermore, the judgment blocks the making of necessary investments. Investments of both a national and international nature. Countries, such as Germany, which have a major responsibility to combat global climate change in accordance with the principle of Common but Differentiated Responsibility and internationally binding MEAs, must reorganize their national legal regimes. This means that loans mustbe taken out that are necessary to fulfil obligations under international law. Furthermore, it is a judgment that is not supportive of global climate justice. On the contrary: it reinforces existing inequalities and injustices at the expense of the global players who are already most affected by the consequences of climate change without having contributed to the current state of the global climate situation. National legal regimes, such as the German Basic Law, including the debt brake, need to be interpreted in a way that is favourable to international law. This is the only way to ensure that globally relevant issues such as climate change are sufficiently recognized in fiscal policy. In any case, the loser of the court decision is the Global South, which can expect fewer support payments in the fight against climate change. And this despite the fact that it has hardly contributed to the current climate situation.