European Commission Gives Germany Green Light For $4.3 Billion Carbon CFDs

European Commission Gives Green Light To Germany For $4.3 Billion Carbon CFDs - Carbon Herald
Photo by Norbert Braun on Unsplash

The European Commission has signed-off on a $4.3 billion (€4 billion) package to fund a carbon pricing mechanism that will allow heavy industry in Germany to decarbonize.

The system involves the adoption of Carbon Contracts For Difference (CCFD’s) which are expected to be rolled out in spring 2024.

With current prices in the EU ETS sitting at just $65 (€60) – a level deemed insufficient to cover the current costs of decarbonizing – industry adoption of projects to reduce emissions have not grown as fast as the EU and governments had hoped.

These new CCFDs will create a path for channeling funds to companies that are willing to decarbonize sooner than their peers, providing an incentive to those who would help achieve the block’s 2030 goal to reduce 55% of emissions.

With the amount hovering around $4.3 billion it’s clear it won’t be sufficient to provide support for most of heavy industry. An amount of $54 billion was touted in mid-2023.

But according to a report in Euractiv, there will be additional bidding rounds which will likely utilize additional funds that are yet to be determined.

Relevant: Germany Votes To Increase Its Carbon Price By 50%

With contracts set to have a 15-year duration some parallels can be drawn with the Inflation Reduction Act in the U.S. which has supercharged decarbonization and climate tech innovation in a variety of sectors.

One of the winners on both sides of the Atlantic will likely be the hydrogen industry. Even though Germany recently scaled down its plans to build a fleet of hydrogen plants, the technology is still seen as a vital part of the country’s energy future.

With the German CCFD plan receiving a stamp of approval from the EU’s competition commission it’s possible that more countries will develop plans to jumpstart their decarbonization efforts, building on what many industry stakeholders have been asking for – a predictable price on carbon.

Read more: Germany In Talks To Import Green Hydrogen From Algeria Via Pipeline

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