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Commission approves €5 billion German state aid scheme to help industries decarbonize production processes

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The European Commission has approved, under EU state aid rules, a €5 billion German scheme to help companies subject to the EU Emission Trading Scheme (‘ETS') decarbonise their production processes. The scheme contributes to the achievement of Germany's energy and climate targets as well as of the EU's sustainable prosperity and competitiveness objectives.

Under the scheme, the aid will take the form of two-way carbon contracts for difference, called ‘Climate Protection Contracts', with a 15-year duration. Beneficiaries will receive annual grants based on their bids and on the evolution of relevant market prices such as ETS allowances or energy inputs, compared to the conventional technology. The measure only covers the actual additional costs linked to the new production processes compared to conventional methods. However, if operating the supported projects becomes cheaper, beneficiaries will have to pay back the difference to the German authorities.

The Commission assessed the scheme under EU state aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities subject to certain conditions, and the Guidelines on state aid for climate, environmental protection and energy (‘CEEAG'), which allow member states to support measures reducing or removing CO2 emissions.

Executive Vice President Teresa Ribera (pictured), in charge of competition policy, said: “The scheme approved today will support ambitious projects that will significantly reduce the greenhouse gas emissions of industrial production processes in Germany. It will contribute to the EU's objective of reaching climate neutrality by 2050, while ensuring that any potential competition distortions are kept to the minimum.”

A press release is available online.

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