Insecure future for German ‘climate contract’ industry decarbonisation scheme – media report

The break-up of the coalition government and insecure funding mean that it is unclear whether Germany’s pioneering ‘climate contract’ subsidy scheme to slash industry emissions can be continued, reports business daily Handelsblatt. The programme is financed through the federal Climate and Transformation Fund (CTF), whose funds are closely linked to next year’s federal budget, wrote the newspaper.

The coalition government of chancellor Olaf Scholz’s SPD, the Green Party and the Free Democrats (FDP) broke up before an agreement on the 2025 budget was found in parliament, and it is unlikely that a majority can be found before a new government takes office. As the conservative opposition Christian Democrats (CDU) – which current polls suggest could lead the next coalition – is critical of the scheme, it could be cancelled, writes Handelsblatt.

A spokesperson of the economy and climate ministry told Clean Energy Wire that the ministry is “currently intensively examining the implementation options for the further planned steps and is continuing to drive forward the process of climate contracts even in the current situation.” The spokesperson did not answer the question of whether the next round of auctions could still take place.

In October 2024, the economy ministry awarded 2.8 billion euros in support guarantees in the first round of auctions. Climate contracts are supposed to promote the emergence of more climate-friendly manufacturing procedures for products such as paper, glass, steel or chemicals by bridging the price gap to current CO2-intensive procedures to allow companies to compete on international markets over a period of 15 years. However, once clean production is cheaper than conventional procedures, companies will have to pay the difference to the state. In total, the government has earmarked a mid-double digit billion-euro amount for the climate contracts, but did not say how much would be available for the upcoming round, which was to focus on carbon capture and storage technologies.

Gernot Engel from the law firm Luther, which advised seven of the 15 successful bidders in the first tender round, told Handelsblatt that “companies are queuing up” for the scheme, preparing for the next auction rounds. If these did not materialise, the companies would be at a competitive disadvantage, he said.