EC approves €5 billion in state aid to Germany for decarbonization of industry

Assistance will be provided through bilateral carbon contracts

The European Commission has approved a €5 billion program for Germany that will help companies subject to the EU Emissions Trading Scheme (ETS) decarbonize their production processes. This is stated in the report of the institution.

As noted, the program contributes to the country’s energy and climate goals, as well as the goals of sustainable prosperity and competitiveness of the European Union.

Germany’s program aims to help the country’s industry reduce CO2 emissions through technologies such as electrification, hydrogen, carbon capture and storage, and energy efficiency measures.

Under the scheme, the assistance will be provided in the form of bilateral carbon contracts for a period of 15 years. The beneficiaries will receive annual grants based on their proposals and the dynamics of relevant market prices, such as ETS allowance prices or energy costs, compared to conventional technologies.

As noted, this measure only covers the actual additional costs associated with new production processes compared to conventional methods. However, if the operation of the projects becomes cheaper, the beneficiaries will have to return the difference to the German authorities.

The projects supported under the program will range from fuel switching in the cement and lime industries to electrification in the chemical industry and the replacement of traditional steelmaking processes with hydrogen-based direct reduction of iron. They will be selected through open bidding.

The initiatives will have to achieve 60% emission reductions within three years of the contract and 90% by the end of the project.

As GMK Center reported earlier, German steel producers and their medium-sized processor customers are under an obligation to document their efforts to reduce carbon emissions during production. In particular, ESG reporting is becoming another burden, forcing companies to assign additional responsibilities to their staff.