Germany plans to launch long-term subsidy scheme to cut industry emissions


Germany seeks to launch a subsidy program for industries in April to help them transition to carbon-neutral production, according to a document released on Tuesday, as Europe's largest economy explores measures to make industry carbon-neutral by 2045.

Economics Minister Robert Habeck announced last year that he was planning to establish so-called "climate protection contracts" from 2023, with 15-year subsidies for energy-intensive industries such as steel, cement, and chemicals in exchange for cutting carbon emissions in their production.

Under the scheme, companies can apply for subsidies through an auction process, during which they demonstrate how much capital they require to transition to green production. Businesses with low-cost plans would be first in line for the subsidies, according to a draft of the program's funding guideline.

"To speed up the process, companies should be asked as early as April, if possible, to express their interest and to provide initial information about their projects," the economy ministry draft said, adding that the plan progress would determine the start of the first bidding round.

The auction procedure would thus reduce bureaucracy and provide governmental support to industry quickly and efficiently, the draft said, adding that contracts would be modeled on hedging contracts to minimize price risks.

The size of the subsidy is measured by the additional expenses of the climate-friendly system that the enterprises plan to install in comparison to conventional production.

According to the plan, subsidized enterprises would repay the state if climate-friendly production became cheaper than traditional output.

Last month, economic ministry officials advised the government not to adopt this subsidy proposal, saying that it would be unnecessarily complex, impact company decisions, and distort the market.

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