The European Commission gave the green light on 14 April 2026 to a €1.3 billion German funding scheme for the rewetting of farmed peatlands. The so-called Palu scheme (Palu-Förderrichtlinie), a funding programme developed by the Federal Environment Ministry (BMUKN), is the central instrument of the ministry for peatland protection and is being implemented under the government's broader Natural Climate Protection Action Programme (Aktionsprogramm Natürlicher Klimaschutz, ANK).
The programme connects peatland protection with economic perspectives and is, due to its comprehensive scope and funding volume, unprecedented in Germany. As it covers almost all drained peatland areas, it is the Federal Environment Ministry's key instrument for peatland protection.
Rewetted peatlands act as natural water reservoirs, retaining water in the landscape, recharging groundwater and buffering against both drought and flooding
A strategy built over several years
The Palu scheme is the latest and most significant step in a series of policy instruments the German government has put in place since 2022 to tackle greenhouse gas emissions from drained peatlands.
The Federal Cabinet adopted the National Peatland Strategy (Nationale Moorschutzstrategie) on 9 November 2022, setting a target to reduce CO₂ emissions from peatland soils by at least 5 million tonnes per year by 2030 as a contribution towards Germany's climate neutrality goal for 2045. The strategy, which covers ten areas of action, commits to protecting intact peatlands, rewetting drained ones, and transitioning to climate-compatible land management. Its areas of action include the protection and restoration of near-natural peatlands, agricultural use of peatland soils, peat extraction and use, and peatland protection on federally owned land. On land owned by the federal government, which includes many drained peatland soils used mainly for military purposes, the strategy requires full rewetting where possible.
The scale of the challenge — and the investment — is illustrated by one figure from the strategy: although peatlands cover only around 5% of Germany's total land area, they store as much carbon as all of Germany's forests combined.
In March 2023, the Federal Cabinet adopted the National Water Strategy (Nationale Wasserstrategie) Bundesumweltministerium, a broader water management framework that also addresses the role of rewetted peatlands in retaining water in the landscape and strengthening the natural water balance. Rewetted peatlands act as natural water reservoirs, retaining water in the landscape, recharging groundwater and buffering against both drought and flooding — functions that are lost when peatlands are drained for agriculture.
Also in March 2023, the Cabinet adopted the Natural Climate Protection Action Programme (Aktionsprogramm Natürlicher Klimaschutz, ANK), committing €4 billion from the Climate and Transformation Fund by 2026 to measures including peatland rewetting, floodplain restoration and urban greening. The Palu scheme is the ANK's flagship measure for farmed peatlands. For 2026 alone, a total of €821 million has been budgeted under the ANK.
What the Palu scheme covers
The scheme funds the rewetting of drained peatland soils and the establishment of paludicultures, covering advisory services for landowners and managers, the rewetting process itself, compensation for the loss of land value resulting from rewetting, and compensation payments to farmers for lost income for a number of years. The processing and marketing of paludiculture products is also eligible for subsidy, with a target of saving 2.25 million tonnes of greenhouse gas emissions per year.
Aid is provided as direct grants covering up to 100% of eligible costs. Beneficiaries who join within the first year receive a 20% speed bonus. Eligible beneficiaries include landowners, land managers and owners of drainage infrastructure. The scheme runs until 31 December 2029.
The programme also permits peatland photovoltaics as an additional permitted land use following rewetting. Participation is voluntary. Rewetting is to be supported through the development of new value chains for peatland products and pilot regions that will lead the way.
