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German KfW programmes Energy-efficient Construction and Refurbishment: public budgets benefit up to fivefold from "promotional euros"

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For every euro that went into the promotion of energy-efficient construction and refurbishment in Germany in 2010, public authorities collected four to five euros in revenue. These figures have recently been calculated by the Jülich Research Centre and have now been published in a report. The study compared the expenditure on KfW's promotion with the budget revenues generated and lower budget costs in different scenarios.
  • Jülich Research Centre report published
  • In 2010 KfW financings initiated investments of EUR 22 billion
  • Every "promotional euro" provided generates additional budget revenue of four to five euros
  • Current interest rate in the KfW Energy-efficient Refurbishment Programme of 1% effectively p.a. in combination with repayment bonuses of up to 12.5% of total investment amount

"The Jülich Research Centre study proves that promoting energy-efficient construction measures pays off not only for the environment and the climate. It also strengthens the economy and the labour market. This benefits the state in the form of additional tax revenues and social security contributions and reduces the cost of unemployment", said Dr Norbert Irsch, Chief Economist of KfW Bankengruppe.

The Federal Government makes budget funds available to KfW under the CO2 Building Rehabilitation Programme through the Federal Ministry of Transport, Building and Urban Development (EUR 1.4 billion in 2010). This programme provides builders with reduced-interest loans or investment bonuses with which they can build or convert their houses or flats into energy-efficient homes.

These expenditures from federal funds compare with additional budget revenues and lower costs resulting from the positive investment and labour market impacts of the promotional programmes. For 2010 they had the following positive impacts on the German economy and the state:

KfW's promotional loans of EUR 8.9 billion initiated investments worth EUR 21.5 billion. This has primarily benefited regional tradespeople and construction contractors to whom the construction and converting contracts are usually awarded. As a result, these firms have created or safeguarded some 340,000 jobs for one year.

The construction investments and employment effects that were created have had a double impact on public budgets. On the revenues side, additional contributions and taxes paid by the companies and employees amounted to EUR 5.4 billion. New hires have also reduced public expenditure on unemployment and social benefits. Cost savings resulting from declining unemployment have provided public authorities with additional funds of up to EUR 1.8 billion. Taken together, the additional revenue and reduced costs add up to as much as EUR 7.2 billion in income for the public accounts. Thus, in 2010 the EUR 1.4 billion made available in budget funds had the following leverage effect: each "promotional euro" that was allocated put up to five euros in income into the state coffers.

For 2012 the federal budget funds allocated to the CO2 Building Rehabilitation Programme are scheduled to be increased to EUR 1.5 billion (2011: EUR 936 million). The same amount has been budgeted annually until 2014, giving real estate owners planning certainty. Already these reliable and sufficient margins enable KfW to significantly improve and lower interest rates, for example to 1% p.a. in the Energy-Efficient Refurbishment Programme in combination with repayment bonuses of up to 12.5% of the investment amount.

The report is available online at www.kfw.de/research (in German).