Germany is facing renewed scrutiny over its international climate commitments as proposed changes to export finance rules could reduce climate assessments for projects backed by its export credit agency Euler Hermes by about 40 per cent.
The draft framework, which is open for consultation until October 9, has drawn criticism from Oil Change International (OCI) and German environmental groups Deutsche Umwelthilfe (DUH) and Urgewald. The groups argue that the changes could make it easier for German companies to obtain state-backed support for fossil fuel and nuclear power projects overseas.
Germany pledged in 2021 to end international public finance for fossil fuels. However, OCI estimates that the country has approved about $1.5 billion in fossil fuel finance since joining the Clean Energy Transition Partnership (CETP), making it one of the largest contributors to continued fossil fuel financing among signatories.
The proposed rules would allow Euler Hermes to remove around 40 per cent of the climate assessments it currently conducts, according to OCI.
Germany’s existing export credit framework categorises projects based on their compatibility with the Paris Agreement’s 1.5°C temperature goal. Since 2023, projects subject to climate review have been placed into green, white or red categories, with projects considered incompatible with the 1.5°C pathway excluded from export credit cover.
The government has also set a goal of reducing the greenhouse gas footprint of its export credit guarantee portfolio to net zero by 2050.
Gas fired power projects are at the centre of the debate. Under existing guidelines, some gas plants can qualify for export support if they meet conditions related to hydrogen conversion or carbon capture and storage.
Existing gas fired plants can remain eligible if they are technically capable of shifting to up to 50 per cent hydrogen by 2030 and 100 per cent by 2035, provided there is no major expansion of capacity or significant extension of their operating life.
Support can also be available for existing gas plants equipped with carbon capture, utilisation and storage technology, subject to conditions including the use of best available technology and permanent storage of captured carbon dioxide.
In certain cases, gas turbines may receive export support during a transitional period if they are demonstrably at least 50 per cent hydrogen ready, meet 1.5°C compatibility requirements including Scope 3 emissions, and provide significant short term emissions reductions without creating long term fossil fuel dependence.
A simple switch from coal to gas is not considered sufficient on its own under the guidelines.
DUH and Urgewald argue that the proposed framework could nevertheless expand opportunities for state backed financing of fossil gas projects, including activities related to exploration, extraction, transport and storage.
The groups also said the draft could permit support for existing nuclear power plants on security grounds.
The proposed framework would substantially increase support for renewable energy, according to the groups, but they remain concerned about the continued availability of public finance for fossil fuel projects.
DUH and Urgewald said companies had submitted applications seeking more than €1 billion in public funds for gas plants abroad since 2023 and that 15 Letters of Interest had been filed for gas projects worth another €3 billion.
However, German government data present a different picture regarding LNG related projects. A government response published by the Bundestag on August 26 said that between November 2023 and June 2026, no Letters of Interest or applications had been submitted to Euler Hermes, PwC or the government for LNG terminals, components or LNG tankers.
One request concerning an LNG project in Argentina’s Río Negro province had been received for an eligibility assessment related to raw material support but it did not result in an application for a United Loan Guarantee.
Climate pressures add to economic debate
The export finance debate comes as Germany’s government attempts to balance climate policies with efforts to revive the country’s economy.
Chancellor Friedrich Merz has called for Germany to continue reducing climate risks while adapting to their consequences. The country experienced an intense heatwave in late June, with temperatures exceeding 42°C and setting new national records.
Wildfires, crop losses and low river levels that disrupted shipping have added to the economic impact of extreme weather. A Greenpeace study estimated that the economic cost of the summer’s extreme conditions could reach at least €36 billion.
An expert commission also warned in May that Germany could miss its legally binding 2030 greenhouse gas emissions targets.
India Germany climate cooperation continues
The debate over Germany’s overseas export finance is unfolding alongside closer climate cooperation between Germany and India.
At the fourth Indo German Environment Forum in New Delhi on September 1, Union Environment Minister Bhupender Yadav said climate change, biodiversity loss, pollution and resource depletion required coordinated international action.
India and Germany are exploring cooperation in areas including renewable energy, energy storage, green hydrogen, energy efficiency, sustainable manufacturing, circular economy and climate adaptation.
The two countries also signed a Joint Declaration of Intent on the conservation and sustainable use of internationally important wetlands and agreed to expand cooperation on climate adaptation and wetland protection.
German Environment Minister Carsten Schneider highlighted India rapid expansion of renewable energy as an example for other regions, while stressing the importance of combining sustainable development with economic growth.
The contrasting pressures on Germany export finance policy underline a broader challenge ensuring that international public finance accelerates the clean energy transition without creating new long term dependence on fossil fuels.