Merz pledges support for Germany’s energy-intensive industry in transition to net zero

Germany’s chancellor Friedrich Merz has pledged to support the country’s chemicals, mining and energy industries in their transition to climate neutrality. “This country must remain an industrial nation,” he said during a conference by the Industrial Union of Mining, Chemistry and Energy (IGBCE).

“Mining, chemicals and energy are the industries that play a central role in Germany's value chains – they are essentially the driving force behind our economy.”

Merz agreed with energy-intensive industry leaders that the sector needs more time to transition to climate-neutral production, and that regulations should not “unnecessarily burden” it with costs not faced internationally. The chancellor said the EU mechanism to have importers pay if their product has a higher carbon footprint than their European counterparts – the Carbon Border Adjustment Mechanism, CBAM – requires improvements before it comes into full force in 2026.

"We will have to allocate allowances beyond the planned date so that industry has a chance to get used to this process," Merz said. The chancellor likely referred to the allocation of free allowances to certain energy-intensive industry businesses. The EU emissions trading system (ETS) – which puts a cap on how much CO2 industry and the energy sector can emit – prescribes the gradual phase out of free allowances and ends these for all industries by 2034, as CBAM takes effect. "Until this mechanism is functioning properly, it makes no sense to burden our industry in Europe with even higher costs," Merz said.

The IGBCE and other industry representatives have argued that, as free allowances are reduced, the high cost to purchase them could deprive industry of the funds necessary to invest in new climate-friendly facilities.

Industry leaders in Germany support the transition to climate neutrality, but insist on substantial financial and regulatory support.