Struggling Finances: Local Governments Face Massive revenue deficit totaling billions of euros
In the southwestern German state of Baden-Württemberg, many municipalities are grappling with the challenge of transitioning to climate-neutral heating, as they face a lack of funds, staff, and legal planning security. This struggle is not unique to Baden-Württemberg, as other municipalities across the region share similar concerns.
Five years ago, Baden-Württemberg became the first German federal state to mandate its cities to draw up detailed plans for climate-neutral heating, with the aim of achieving its own climate goals by 2040. By the end of 2023, these plans were expected to be in place. However, the implementation of these plans has been met with challenges.
Many municipalities are calling for direct payments instead of cumbersome application processes. A survey revealed that 90% of the 112 municipalities have financing as their primary concern, while 88% wish for legal planning security. The estimated cost for the renovation of Schwetzingen, a town with 22,000 inhabitants, stands at 90 million euros.
The federal government has yet to submit a draft law for the revision of the Building Energy Act, commonly known as the "Heating Act". The European Union and the German government are currently engaged in a debate about climate goals. Despite these uncertainties, municipalities are required to implement climate goals, despite receiving unclear signals and funding concerns from the government in Berlin.
Heat expert Markus Fritz considers the state climate target of 2040 hardly achievable under the current framework conditions. He also criticizes the federal funding programs, stating that they are insufficient and slow in approval. The concrete federal financing programs, including the "Wohnungsbau-Turbo" aimed at speeding up housing construction, have been criticized by municipalities, with its implementation still in parliamentary procedure and expected to be concluded after ongoing parliamentary processes.
Municipalities are responsible for the execution of these programs, with federal oversight limited as of August 2025. The federal government, however, remains silent on the criticism from municipalities regarding the funding programs. The state government, on the other hand, is committed to ensuring that the funding programs at the federal level run longer and are financially topped up.
Despite these challenges, many municipalities in Baden-Württemberg are motivated to tackle the energy transition. The Baroque city of Schwetzingen, for instance, aims to switch from 70% oil and gas heating systems to climate-neutral heat within the next 15 years. However, many municipalities doubt whether they can achieve the goals, and only in new buildings was there a trend towards heat pumps in 2024.
In conclusion, the transition to climate-neutral heating in Baden-Württemberg's municipalities is a complex issue, marked by a lack of funds, staff, legal planning security, and unclear signals from the government. Despite these challenges, many municipalities remain committed to the cause, hoping for more support and clarity from the federal government.
