Germany starts preparations for 2026 round of industry climate contracts

[UPDATE adds information on EU state aid approval process]

The German government has begun preparations for the next round of its “climate contract” support scheme for industry decarbonisation. For the first time, carbon capture and storage (CCS) and utilisation (CCU) projects will be eligible to participate, the economy ministry said.

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 to achieve, and entirely new and often expensive production methods are needed. With the help of so-called Carbon Contracts for Difference (CCfD), the government supports climate-friendly manufacturing by bridging the price gap with current carbon-intensive processes, allowing the companies to compete in international markets.

Companies must participate in the preparatory phase if they want to apply for support in the tender, which is expected to begin in mid-2026, the ministry said. During the preparatory phase, companies will also be consulted on the tender rules.

At the start of their term, the governing parties pledged to continue the pioneering ‘climate contracts’ programme of the previous German coalition government. In a first round, fifteen companies were awarded funding in October 2024. 

The previous government had opened the preparatory phase for a second round of auctions in summer 2024, but the scheme was put on hold following the collapse of the coalition. Earlier this year, the European Commission gave the green light for the scheme based on state aid rules. However, since the new government has changed some conditions for the scheme, it is now seeking approval of these changes in Brussels, the economy ministry told Clean Energy Wire. 

Last month, opposition lawmakers and economists criticised delays in launching a new round of climate contract auctions, arguing the that holdup is hurting companies seeking planning security.