Germany’s €5bn ($5.4bn) Contracts for Difference (CfD) scheme to support industrial sectors to decarbonise with hydrogen, carbon capture and electrification has been approved by the European Commission.
The Climate Protection Contracts are a 15-year two-way carbon CFD aimed at supporting fuel switching and electrification in sectors like cement, chemical and steel production.
Projects will be subject to the EU Emissions Trading Scheme (ETS) and musy cut at least 60% of emissions in the first three years and 90% by the end of the support.
Each will be selected through a competitive bidding process and ranked based on the lowest aid amount requested per tonne of CO2 avoided – meaning only the cheapest technologies will succeed.
The system will only cover the actual additional costs linked to the new production processes – however, if operating with the cleaner technology becomes cheaper, beneficiaries will have to pay back the difference to the German Government.
European Commissioner Teresa Ribera said the German measure will support projects that will “significantly reduce” the greenhouse gas (GHG) emissions of industrial processes.
However, the scheme will be implemented by the next Federal Government after the incumbent coalition headed by Olaf Scholz fell apart late last year.
It comes as the second round of the Climate Protection Contracts after the first bidding process signed 15 contracts worth €2.8bn ($3bn) last October.
