Federal Minister Robert Habeck has handed over the first carbon contracts for difference to companies today at an event in the Federal Ministry for Economic Affairs and Climate Action. These companies can now begin work on their transformation projects. The companies receiving funding hail from across Germany, and include both SMEs and larger industrial corporations. They are set to be pioneers in the transition to CO2 -neutral production.

Federal Minister Robert Habeck said: “The first carbon contracts for differ-ence are now signed. This makes Germany an international pioneer, as the first Member State of the European Union to use carbon contracts for differ-ence as an efficient means to fund and drive forward the decarbonisation of industry. Fifteen forward-looking projects that are taking clear and concrete steps towards decarbonisation can now start. The carbon contracts for dif-ference give companies the one thing they need above all else when it comes to carrying out transformation in a challenging economic environment: planning security for their investments. Carbon contracts for difference can ensure that the State remains flexible over the years, only paying out the amount of funding that companies actually need in order to implement de-carbonisation in an affordable way.”

The 15 companies will receive a maximum of €2.8 billion in total to reconfig-ure their manufacturing processes to reduce the carbon dioxide they emit. The funding will be paid out in arrears, i.e. once the companies have achieved their annual targets for greenhouse gas reductions. The carbon contracts for difference have a 15-year term. The contracts are tied to developments in energy and carbon dioxide pricing, and thus also serve as a hedging instru-ment for the companies: the amount of funding provided depends on how prices from energy providers and EU emissions trading allowances develop. Current expectations indicate that the actual amount of funding disbursed will be substantially smaller than the €2.8 billion maximum payment. The maximum amount of funding available to each project varies and depends in particular on the technology in use and the manufacturing processes in the sector in question.

The winning projects in the first round of the carbon contracts for difference can save up to 17 billion tonnes of CO2 equivalents across the term of the contract. Many companies want to make use of new technologies to decar-bonise, and many want to use hydrogen as well. The companies receiving funding come from a wide variety of sectors, including glass and ceramics, paper and cellulose, and chemicals.

The carbon contracts for difference are intended to initiate modern, climate-friendly manufacturing processes in energy-intensive sectors of industry. They balance out additional costs in situations where climate-friendly man-ufacturing processes cannot yet compete with conventional processes. By putting innovative processes into use in the switch to carbon-neutral manu-facturing, these companies are taking on a role of leadership in their sectors and thus go above and beyond their own carbon dioxide reductions to play an important role in the overall journey to climate neutrality.

The funding programme is making use of a new style of auctioning proce-dure: the usual individual review of the projects has not been done, as the companies are expected to submit bids that will enable the implementation of new technologies while staying competitive in the market. The first round of bids for the carbon contracts for difference started on 12 March 2024. Companies were given a four-month period in which to submit bids for this round.

As the evaluation of the first round of bids was taking place, preparatory proceedings began for the second round of the carbon contracts for differ-ence on 29 July 2024. Companies had until 30 September 2024 to submit their project plans for the second round of bids. The second round of bids is also to start before the end of the year. Once the second round has been started, there will – as in the first round – once again be several months’ time for companies to prepare and submit final bids.

More information about the carbon contracts for difference and the second round of bids can be found at https://www.klimaschutzverträge.info.