Germany allocates $3 billion to decarbonisation subsidies
According to the German economy ministry, the German government has allocated up to 2.8 billion euro ($3.1 billion) for 15 industrial companies to help them decarbonise their operations under its first "climate protection contract" round.
Berlin, as part of Germany’s goal to achieve climate neutrality by 2045 will provide 15-year subsides to companies such as those in the glass, paper, and chemical sectors in exchange for them reducing their carbon emissions during production.
Over the 15-year contract period, it is expected that these 15 projects will contribute to a 17 million metric ton reduction in emissions. According to the Federal Environment Agency, Germany's CO2 emissions will total 674 million tonnes by 2023.
The contracts will compensate companies for the additional costs of eco-friendly production in industries that are currently unable to compete on a competitive basis.
Critics claim that the subsidies will be costly, won't make a significant dent in Germany’s emissions and will help energy-intensive industries better suited for other countries with lower energy prices.
Berlin claims that they provide a temporary lifeline for certain industries, until renewable energy is ramped up and energy prices are reduced.
The first round of this scheme was launched in March and included BASF, Suedzucker and German subsidiaries of Saint-Gobain, Kimberly-Clark and Wienerberger.
Robert Habeck, Economy Minister, said that Germany is the first EU state to implement climate contracts. This positions us as leaders in industrial decarbonisation.
The contracts have flexible funding mechanisms which adjust according to changes in energy and CO2 prices, said the Economy Ministry. It added that it expects to pay significantly less than the maximum amount of subsidies.
The ministry announced that the government would run a second auction later this year. It will allocate a small amount of money, in the low double-digits billions, for 2025 subsidies.
Berlin originally planned to offer a subsidy of up to double-digit billions euros. However, the programme has been put in danger by the ruling last year from the constitutional court that prevented the government using 60 billions euro's worth of debt to fund climate protection projects.
(source: Reuters)
