The German Federal Ministry for Economic Affairs and Climate Action (BMWK) announced 5 June the start of a funding programme which aims to make climate-friendly production processes competitive in energy-intensive industry.
The programme will utilise contracts for difference (CfDs), dubbed by the BMWK as “climate protection contracts”, modelled on hedging contracts.
According to the BMWK, it will have a budget in the “mid double-digit billion range” which will be used to hedge against unexpected price fluctuations of climate-friendly energy sources such as hydrogen.
This is intended to protect against the current risks involved in investing in these technologies in favour of more conventional energy sources.
Contract will be awarded through an auction process in which companies bid on how many tonnes of CO2 they can save per euro in subsidies by switching to a climate friendly technology.
Companies which have been awarded contracts will need to pay additional income back to the sate once its climate-friendly technology has become cheaper than conventional production.
A prerequisite to be eligible for funding is that electricity used for industrial production must be generated by 100% renewables. If hydrogen is used, it must meet criteria set out in the EU taxonomy.