Delays on transition support scheme creates uncertainty for German industry
Handelsblatt
Opposition lawmakers and economists have criticised continued delays of a new round of auctions in Germany’s pioneering ‘climate contracts’ scheme to provide state support for industry decarbonisation, arguing this is hurting companies in need of planning security, reported business daily Handelsblatt.
“A clear commitment to climate contracts as part of the political toolkit for driving forward the transformation would give companies the investment security they so urgently need,” Thilo Schaefer, researcher at the German Economic Institute (IW), told Handelsblatt. “Many companies are prepared to invest in the transformation. What is missing are reliable signals from the government.”
In a reply to a parliamentary enquiry by Green Party lawmaker Julian Joswig, the economy ministry said that it would soon communicate “details on a next round of auctions and the assessment of the [climate contracts] instrument.” The ministry did not say when a next round could start, wrote Handelsblatt. MP Joswig said it was “incomprehensible” the second round of auctions has not been launched at a time “when industrial companies urgently need planning security for the transformation.”
Germany aims to become climate neutral by 2045, but CO2 reductions in basic material industries such as steel, cement, paper, glass and chemicals are difficult, and entirely new and often expensive production methods are often required. At the start of their term, the governing parties had agreed to continue the scheme set up by the previous coalition government.
With the help of so-called Carbon Contracts for Difference (CCfD), the government aims to promote the emergence of more climate-friendly manufacturing processes by bridging the price gap to current carbon-intensive procedures, allowing the companies to compete in international markets. Once climate-friendly production is cheaper than conventional procedures, however, companies will have to pay the difference to the state. In a first round, fifteen companies were successful in October 2024.
The previous government had launched the preparatory phase for a second round of auctions in summer 2024, but the scheme had hung in the balance following the collapse of the coalition. Earlier this year, the European Commission gave the green light for the scheme based on state aid rules.
