Germany Launches €6bn Bid Round for Heavy Industry's Green Transition
The German government has initiated a significant step towards decarbonising heavy industries. It has launched the first phase of a bidding process for carbon dioxide contracts for difference (CfD), with €6bn earmarked to support the switch to cleaner production methods. This follows the selection of companies for the first round of Germany's Climate Protection Contracts in March 2024.
The CfD bidding process allows companies to apply for funding to reduce their CO2 emissions. Successful applicants will be required to cut emissions by 60% within three years and 90% by the end of the 15-year contract. The funding can be used for various low-carbon technologies, including hydrogen-based production systems, electric furnaces, industrial heat pumps, biomass, or other renewable energy sources.
Heidelberg Materials has already begun implementing carbon capture, usage, and storage (CCUS) projects. It has launched a CCUS project in France and partnered with Linde to build a large-scale CCUS facility for cement production. Other companies known to be considering participation in the CfD bidding process include EnBW, RWE, Uniper, and Vattenfall.
However, not all companies are proceeding with their plans. ArcelorMittal has abandoned its plans to convert its German plants to hydrogen-based green steel due to unfavorable market conditions and high costs. The final decision on which companies will receive funding will be made through a competitive auction in 2026, based on their CO2 reduction efficiency and cost-effectiveness.
Despite this setback, progress is being made in the industry. BASF has begun producing green ammonia at its Ludwigshafen plant, reducing its natural gas consumption.
The German government's CfD bidding process marks a significant milestone in supporting heavy industries' transition to cleaner technologies. With €6bn available, companies are encouraged to invest in low-carbon methods, with the government covering some of the extra costs. The first phase of the bidding process has begun, and the final decisions will be made in 2026, based on companies' CO2 reduction plans and cost-effectiveness.
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