Germany launches a program that will make tens of billions of euros available for firms facing considerable energy costs, with an aim to help its challenged industrial sector fund a shift towards carbon-neutral production techniques.
The program, according to sources, is expected to have a volume of around 50 billion euros ($53.45 billion) over the next 15 years, coming as European industry faces pressure due to soaring costs for raw materials, energy and labor.
The money will be sourced from a so-called climate and transformations fund, being fed by revenues from emissions trading and other sources, although the economy and finance ministries both pointed to ongoing talks over Germany's budget, suggesting details have yet to be finalized.
Additionally, the program aims to serve as a countermeasure against initiatives in other regions, particularly the U.S., that could lure companies away from the continent by offering generous subsidies and more favorable legislation.
The so-called climate protection contracts are a key component of Germany's response to these challenges, hoping financial support can help manufacturers of steel, cement, paper and chemicals decarbonize their production.
"We are in a period of prolonged recession, in an extremely challenging period economically," Economy Minister Robert Habeck told journalists.
He said that Germany was subject to harsher requirements when it comes to budget and keeping debt under control while other parts of the world, ranging from the United States to Asia, were offering investment incentives.
"Nevertheless, it can't be right to not provide investment incentives and investment impulses in this phase. We're rather observing a weakness in investment and in innovation in Europe and in Germany," Robert Habeck said.
A report by German industry association BDI on Monday said that 16% of surveyed companies were actively moving parts of their production overseas while an additional 30% were considering doing so.
The auction process would be open to firms that emit 10 kilotons of CO2 or more annually, which effectively open it up for thousands of mid-sized companies operating in Europe's largest economy.
These include numerous makers of specialty chemicals, the sector particularly vulnerable to energy costs that came under extreme pressure when gas prices spiked in 2022 following reduced supplies from Russia.
"This is an important signal for businesses and gives them the investment security they need now," said Joerg Rothermel of chemicals lobby VCI, which has long warned that high energy costs could harm local production.
"It is particularly positive that small and medium-sized enterprises are also to be taken into account in this funding program."