Industry demand for German decarbonisation aid exceeds earmarked volume of 5 billion euros
Clean Energy Wire
Industry demand for a German state aid scheme designed to support decarbonisation investments greatly exceeds the five billion euros earmarked for the programme, the country's economy ministry has said. The 21 bids in the auction for so-called Carbon Contracts for Difference (CCfDs) – the second to take place – came from companies from energy-intensive sectors including chemicals, glass and ceramics, gypsum, lime, metals, pulp and paper and cement producers.
The bids covered a range of technologies, including electrification, hydrogen and, for the first time, carbon capture and storage or utilisation (CCU/CCS). The volume of bids shows that companies are willing to invest in cutting emissions from their production despite a challenging business environment, including high fuel and input costs, the ministry said.
Carbon Contracts for Difference (CCfD) are designed to help hard-to-decarbonise industries to bridge the higher costs of switching from conventional to low-carbon production procedures. 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 CCfD contracts up for auction have a runtime of 15 years and compensate companies when cleaner production costs exceed conventional methods, with the aim to keep them competitive internationally. If low-carbon production becomes cheaper later on, companies pay the difference back to the state. Projects must cut emissions by at least 50 percent within four years and 85 percent by the final year, down from previous requirements of 60 percent and 90 percent, respectively.
The energy and economy ministry will now examine the bids, awarding contracts using a pay-as-bid process until the fund is exhausted. The ministry said it would select projects that can achieve the most greenhouse gas reductions at the lowest cost, with funding expected to be allocated by the end of year.
The European Commission approved the scheme under EU state-aid rules in May, saying it was "necessary and appropriate" to support the decarbonisation of industries covered by the bloc's emissions trading system.