Industry shows big interest in German government’s climate protection contracts

Many industrial companies have submitted proposals for low emission investments to the German government's scheme to reimburse them for the extra costs associated with climate-friendly methods of production, reports the paper Frankfurter Allgemeine. Referred to as climate protection contracts or carbon contracts for difference (CCfDs), the scheme will cover the difference in running costs for the sustainable production of, for example, glass, metals, and chemicals for up to 15 years. Production with renewable energy or green hydrogen is more expensive than with oil or gas, and the scheme is an attempt to encourage businesses to transition to climate-friendly production methods. For the first round of applications there were 17 bids totalling 5.3 billion euros. Assuming all projects meet the necessary criteria, those which require the least amount of money to save a tonne of carbon dioxide will be chosen. Robert Habeck, climate and economy minister, earmarked 4 billion euros for the first round.

The climate protection contracts will be financed through the climate and transformation fund which is supplied by the carbon dioxide price on fossil fuels. “The money will likely be distributed at the beginning of October, thereby bringing the first round of the climate protection contracts to a close,” said the climate ministry in a paper seen by Frankfurter Allgemeine. Habeck already announced a second round worth up to 19 billion euros in contracts this autumn, with a further two planned in the coming year.

Economists have praised the scheme, reports Frankfurter Allgemeine, and the chemical industry has previously come out in support of the climate protection contracts, calling them “an important building block for change” for the industry. Environmental NGO Greenpeace criticised the scheme, however, arguing it should be limited to companies avoiding carbon dioxide emissions in the first place, and should steer clear of “dangerous and superficial solutions” like carbon capture and blue hydrogen.

A survey from earlier this year found that 63 percent of companies cited high energy prices as a reason not to decarbonise. A report published in May by the government found that the climate-friendly production of cement and steel should reach price parity by the mid-2030s, and become cheaper than conventional production by 2045.