Germany launches first climate CFD tender with Eur4 billion on offer

Germany has launched its first tender for climate contracts for difference (CFD) offering up to Eur4 billion of support to industrial decarbonization projects, the energy ministry said March 12.

Companies are to bid in a required carbon price supplement for projects to proceed. Those with the lowest supplement to compliance carbon prices in the EU ETS will proceed.

The first tender focuses on mid-sized companies in the paper, glass, chemical, steel and metals sectors.

Support has been capped at Eur1 billion per project, with a typical 15-year support contract more likely to sum in the triple digit hundred million euros range, the ministry said.

“We want to keep industrial production and sustainable jobs in Germany,” said energy minister Robert Habeck.

Companies can use funds to switch to greener processes using renewable power or clean hydrogen, or to add carbon capture equipment to existing processes.

Pre-qualified companies can now submit bids with the first tender closing in June. A second tender focused on larger projects is to open in the summer and two tenders more are planned for 2025.

Industrial carbon target

In total, the instrument is estimated to support some 350 million mt of CO2 savings by 2045 amounting to around 20 million mt/year, which is a third of the 2030 emissions reduction target for German industry, the ministry said.

The German industry, which saw annual CO2 emissions plunge 12% on year in 2023 to around 144 million mt, needs to hit a 2030 sector target of 118 million mt under Germany’s climate law.

Platts, a unit of S&P Global Commodity Insights, assessed the Dec. 2024 EUA contract at Eur56.13/mt on March 11.

Analysts at S&P Global forecast EUAs to average around Eur54/mt in 2024, rising to a Eur82/mt average in 2025.

Basis for the contracts is a dynamic CO2 price adjusted to market trends for EUAs, clean hydrogen and electricity, the ministry said in supporting documents for the tender.

Author Andreas