Germany launches 5-billion-euro second round of industry transition support scheme

The German economy ministry has launched the 2026 round of a state aid scheme to support investments by energy-intensive industrial companies in low-carbon production processes, particularly in the chemical, metals, cement, lime, glass, paper and ceramics sectors, earmarking up to 5 billion euros.  

The Carbon Contracts for Difference (CCfD) scheme helps companies bridge the price gap between low-carbon and conventional procedures, allowing businesses to compete in international markets. Once climate-friendly production is cheaper than conventional measures, however, companies will have to pay the difference to the state. Carbon capture and storage or utilisation (CCS/CCU) projects are eligible in this auction round, if they mainly concern process emissions, or emissions difficult to avoid, like in cement production, said the ministry. 

Germany aims to become climate neutral by 2045, but cutting emissions in basic material industries such as steel, cement, paper, glass and chemicals is difficult, and new, often expensive production methods are required.

The government has reviewed the subsidy, rebranding it “CO₂ Contracts for Difference” (previously “climate contracts”), and adapted some of the rules: Projects must reduce emissions by at least 50 percent compared with the baseline after four years (previously 60% after three years), and by at least 85 percent in the final year (previously 90%). Companies had to participate in the preparatory phase in 2025 to be eligible for the auction. 

The reformed scheme still needs state aid approval from the European Commission, which the economy ministry said it expects soon. Opposition lawmakers and economists had criticised delays in launching the second round of auctions, arguing that the delay was hurting companies seeking planning security.

The current governing parties agreed at the start of their term to continue the pioneering ‘climate contracts’ programme, after it had hung in the balance following the previous coalition’s collapse. Fifteen companies were successful in the first round in October 2024.