According to Reuters, Germany’s government presented proposals on Friday for so-called contracts for difference (CfDs), instruments that support steel, cement, lime, and ammonia companies fund the transition to low-carbon technologies.
Companies that commit to reducing carbon dioxide emissions by more than half using advanced technology, according to a draft plan seen by Reuters, will be given the green light to operate on the basis of 10-year CfDs.
Although still in its early stages, the proposal demonstrates how Europe’s largest economy will benefit from CfD payments, which require companies to compete in auctions and guarantee a minimum strike price for low-carbon goods.
The state lowers or partially funds higher maintenance costs through CfDs, reducing the uncertainty surrounding the production of emissions permit prices and thereby assisting planning and access to finance.
Germany hopes to create green hydrogen derived from wind and solar renewables to generate synthetic fuel for the industry, electricity, and transportation sectors, according to the draft.
“The proposal involves bridge technologies including the partial use of natural (fossil) gas and green hydrogen (from renewable energies) in direct reduction (steelmaking) or ammonia plants where the share of green hydrogen would increase substantially during the CfD run-time,” according to the draft.
On Thursday, Germany’s top court requested that a climate law be updated by the end of 2022, requiring faster carbon reductions.