Germany earmarks $3 billion for decarbonisation subsidies

Wienerberger AG

15/10/2024 10:10

* 
      Berlin to subsidise companies in exchange for emissions
cuts 
    

        * 
      Has awarded first 15 'climate protection contracts'
    

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      Critics say plan protects uncompetitive sectors, is
inefficient
    

  
       BERLIN, Oct 15 (Reuters) - The German government has
earmarked up to 2.8 billion euros  ($3.1 billion) to support 15
industrial companies in their bid to decarbonise under its first
round of "climate protection contracts", the economy ministry
said on Tuesday. 
    As part of Germany's goal to become climate-neutral by 2045,
Berlin will award 15-year subsidies to companies in sectors such
as glass, paper and chemicals in return for them reducing carbon
emissions in production.
    The 15 projects are expected to contribute to a reduction of
17 million metric tons of emissions over the contracts' 15-year
term. Germany's total CO2 emissions in 2023 stood at 674 million
tons, according to the Federal Environment Agency.
    Through the contracts, companies will be compensated for the
extra costs of green production in industries where
climate-friendly production processes cannot currently operate
competitively.
    Critics say the subsidies are costly, will make only a small
dent in Germany's emissions, and will support energy-intensive
industries that are better suited to other countries where
energy prices are lower.
    Berlin says they are a temporary lifeline to certain
industries until the ramp-up in renewable energy lowers energy
prices.
    Beneficiaries of the first round of the scheme, launched in
March, include BASF  BASFn.DE  and Suedzucker  SZUG.DE , as well
as German subsidiaries of Kimberly-Clark  KMB.N , Saint-Gobain
and Wienerberger  WBSV.VI .
    "Germany is the first EU member state to implement climate
protection contracts, positioning us as a leader in industrial
decarbonisation," Economy Minister Robert Habeck said in a
statement.
    The contracts include flexible funding mechanisms that
adjust based on energy and CO2 price changes, the economy
ministry said, adding it expected to pay out significantly less
in subsidies than the maximum earmarked sum.
    The government will run a second round of auctions later
this year, earmarking a low double-digit billion euros amount
for subsidies to be awarded in 2025, the ministry said.
    Berlin had originally planned to offer up to a
mid-double-digit billion euro sum in subsidies, but the
programme was put at risk by last year's constitutional court
ruling that stopped the government from using 60 billion euros
of debt for climate protection projects.
    ($1 = 0.9166 euros)

 (Reporting by Riham Alkousaa and Christian Kraemer; Editing by
Mark Potter)
 ((Riham.Alkousaa@thomsonreuters.com;))