Numerous correlated electron systems exhibit a strongly scale-dependent behavior. Upon lowering the energy scale, collective phenomena, bound states, and new effective degrees of freedom emerge. Typical examples include (i) competing magnetic, charge, and pairing instabilities in two-dimensional electron systems, (ii) the interplay of electronic excitations and order parameter fluctuations near thermal and quantum phase transitions in metals, (iii) correlation effects such as Luttinger liquid behavior and the Kondo effect showing up in linear and non-equilibrium transport through quantum wires and quantum dots. The functional renormalization group is a flexible and unbiased tool for dealing with such scale-dependent behavior. Its starting point is an exact functional flow equation, which yields the gradual evolution from a microscopic model action to the final effective action as a function of a continuously decreasing energy scale. Expanding in powers of the fields one obtains an exact hierarchy of flow equations for vertex functions. Truncations of this hierarchy have led to powerful new approximation schemes. This review is a comprehensive introduction to the functional renormalization group method for interacting Fermi systems. We present a self-contained derivation of the exact flow equations and describe frequently used truncation schemes. Reviewing selected applications we then show how approximations based on the functional renormalization group can be fruitfully used to improve our understanding of correlated fermion systems.

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We study transport through a one-dimensional quantum wire of correlated fermions connected to semi-infinite leads. The wire contains either a single impurity or two barriers, the latter allowing for resonant tunneling. In the leads the fermions are assumed to be non-interacting. The wire is described by a microscopic lattice model. Using the functional renormalization group we calculate the linear conductance for wires of mesoscopic length and for all relevant temperature scales. For a single impurity, either strong or weak, we find power-law behavior as a function of temperature. In addition, we can describe the complete crossover from the weak-to the strong-impurity limit. For two barriers, depending on the parameters of the enclosed quantum dot, we find temperature regimes in which the conductance follows power-laws with "universal" exponents as well as non-universal behavior. Our approach leads to a comprehensive picture of resonant tunneling. We compare our results with those of alternative approaches.

We investigate the effect of local Coulomb correlations on electronic transport through a variety of coupled quantum dot systems connected to Fermi liquid leads. We use a newly developed functional renormalization group scheme to compute the gate voltage dependence of the linear conductance, the transmission phase, and the dot occupancies. A detailed derivation of the flow equations for the dot level positions, the inter-dot hybridizations, and the effective interaction is presented. For specific setups and parameter sets we compare the results to existing accurate numerical renormalization group data. This shows that our approach covers the essential physics and is quantitatively correct up to fairly large Coulomb interactions while being much faster, very flexible, and simple to implement. We then demonstrate the power of our method to uncover interesting new physics. In several dots coupled in series the combined effect of correlations and asymmetry leads to a vanishing of transmission resonances. In contrast, for a parallel double-dot we find parameter regimes in which the two-particle interaction generates additional resonances.

We propose a nonequilibrium version of functional renormalization within the Keldysh formalism by introducing a complex valued flow parameter in the Fermi or Bose functions of each reservoir. Our cutoff scheme provides a unified approach to equilibrium and nonequilibrium situations. We apply it to nonequilibrium transport through an interacting quantum wire coupled to two reservoirs and show that the nonequilibrium occupation induces new power law exponents for the conductance.