Germany should use green lead markets to decarbonise industry – govt advisors
Clean Energy Wire
Carbon contracts for difference (CCfDs) alone will not be sufficient to enable a rapid decarbonisation of Germany's energy-intensive industry, the academic advisory board of the economy ministry (BMWK) said in a report. The board said "green lead markets are a better instrument" than CCfDs and recommends “giving the instrument of green lead markets clear priority." It argues that the state should encourage demand for green products (such as steel produced with hydrogen) by introducing so-called green certificates, which could also be traded. Green certificate trading – which would not see the state directly involved in the transformation of the industry – should be considered more strongly, the advisory board, comprised of 37 economists and lawyers, argues in its report.
The advisors said green lead markets "require a definition and certification of 'green' basic materials that is as transparent and internationally compatible as possible," and name the International Energy Agency's concept for "green steel" as an example to follow. "If the certificates that prove climate-friendly production are also made tradable, this potentially leads to considerable efficiency gains and enables non-discriminatory market access for foreign companies."
German ministries are currently working out the details for CCfDs that would reimburse steelmakers, chemical companies and other energy-intensive industries for the higher costs of switching from fossil fuels to green production. German industry was responsible for the emission of over 180 million tonnes of CO2-equivalents in 2021. In its pursuit of climate neutrality by 2045, Germany has set its sights on extending the energy transition to its famed heavy industry. Economy minister Robert Habeck said last year the government would use whatever state funds were necessary to support this transition through CCfDs, which are intended to provide companies – especially those in CO2-intensive industries like metals, chemicals or construction materials – with the planning security they need to switch to climate-neutral production.