The European Commission has approved a German aid scheme valued at five billion euros, designed to support industrial companies in decarbonizing their production processes. The Commission announced this approval on Thursday, noting that the measure aims to boost Germany’s and the EU’s energy and climate goals for sustainable prosperity and competitiveness.
Projects eligible for this support must prove that they replace fossil fuels or raw materials with low-emission alternatives, such as electrification, hydrogen, or carbon capture and storage.
The select projects will be chosen through a competitive bidding process based on cost-efficiency, with the maximum aid requested per ton of avoided CO2 emissions being a determining factor. Furthermore, the projects must commit to a significant reduction in emissions: a minimum of 50 percent within four years, rising to 85 percent by the end of the 15-year contract period. The financial assistance will be provided through fifteen-year, two-way CO2 difference contracts, with annual payment amounts dependent on market developments.
The Commission assessed the scheme under EU aid rules and concluded that it is necessary and appropriate for promoting decarbonization in economic sectors not covered by the Emissions Trading System. According to the Commission, the aid creates an incentive because the recipients would not pursue such investments without public funding. Additionally, the potential repercussions on competition and intra-EU trade have been found to be limited.