The German government has allocated up to €2.8 billion ($3.1 billion) to support 15 industrial companies in their efforts to decarbonize, as part of its inaugural round of “climate protection contracts,” the economy ministry announced, according to a Reuters report.
This initiative is a key component of Germany’s ambition to achieve climate neutrality by 2045.
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Under these contracts, which last for 15 years, the government will provide subsidies to companies in energy-intensive sectors, such as glass, paper, and chemicals, in exchange for commitments to reduce carbon emissions during production.
The 15 selected projects are anticipated to collectively lower emissions by 17 million metric tons throughout the contracts. In 2023, the Federal Environment Agency reported Germany’s total CO2 emissions at 674 million tons.
The funding aims to offset the additional costs associated with adopting greener production methods in industries that currently cannot compete with conventional processes.
However, critics argue that these subsidies are costly, will only marginally impact overall emissions, and favor energy-intensive industries that might be better suited to operate in countries with lower energy prices.
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The government contends that these subsidies serve as a temporary support mechanism until renewable energy production scales up and reduces energy costs.
Beneficiaries of this initial funding round, which began in March, include BASF, Suedzucker, and the German subsidiaries of Kimberly-Clark, Saint-Gobain, and Wienerberger.
The contracts feature flexible funding mechanisms that adjust in response to fluctuations in energy and CO2 prices, with the economy ministry indicating that actual subsidy payouts are expected to be significantly lower than the maximum amount allocated.
Looking ahead, the government plans to conduct a second round of auctions later this year, with a low double-digit billion euro amount set aside for subsidies to be awarded in 2025.
This follows a constitutional court ruling last year that prevented the government from utilizing 60 billion euros in debt for climate protection initiatives, which had initially aimed for a mid-double-digit billion euro funding level.
