Project-based carbon contracts for differences could help lower industry emissions – analysis
Clean Energy Wire
So-called Carbon Contracts for Differences (CCfDs) could be an important tool to reduce industry CO2 emissions such as those that occur in the production and use of steel, cement and chemicals, concludes the German Institute for Economic Research (DIW) in an analysis. CCfDs offer governments the possibility to reward climate-friendly technology projects and practices by guaranteeing investors a fixed price for CO2 emissions in excess of prices in the EU ETS. CCfDs thus have the advantage of lowering costs of climate-friendly investments, as well as giving creditors higher security for their loans. At the same time, introducing project-based CCfDs would send a clear signal of the government's long-term commitment to its climate policy goals, DIW says.
Industry is Germany's second largest emitter of greenhouse gas emissions - trailing the energy sector – and CO2 output has not fallen over the last ten years. Around half of those emissions are caused by companies making steel, cement and chemicals. In order to avoid that CO2 intensive industries relocate to non-EU countries as a result of CO2 pricing, so-called carbon leakage, Ursula von der Leyen has proposed introducing a "carbon border tax".