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<\/p>\nThe European Commission has approved, under EU State aid rules, a \u20ac5 billion German scheme to help companies subject to the\u00a0EU Emission Trading Scheme (\u2018ETS’)\u00a0decarbonise their production processes. The scheme contributes to the achievement of Germany’s energy and climate targets as well as of the\u00a0EU’s sustainable prosperity and competitiveness objectives.<\/p>\n
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The German scheme<\/strong><\/p>\n The scheme notified by Germany, with a budget of \u20ac5 billion, is aimed at helping the German industry reduce carbon dioxide (\u2018CO2<\/sub>‘) emissions in their production processes thanks to technologies such as electrification, hydrogen, carbon capture and storage (\u2018CCS’), carbon capture and use (\u2018CCU’), and energy efficiency measures. It follows a scheme approved by the Commission in\u00a0February 2024.<\/p>\n The projects supported under the scheme will range from fuel switches in the cement and lime sector to electrification in the chemical sector, and the replacement of traditional steel production processes by hydrogen direct reduction processes.<\/p>\n The beneficiaries of the scheme will be companies active in sectors subject to the\u00a0EU ETS, such as the chemistry, plaster and glass sectors. The projects will need to achieve a 60% emission reduction in three years and a 90% emission reduction by the end of the supported project, compared to a reference system based on the ETS benchmarks.<\/p>\n The projects that will benefit from the aid will be selected through an open competitive bidding process, and will be ranked on the basis of the lowest aid amount requested per tonne of avoided CO2\u00a0<\/sub>emissions.<\/p>\n Under the scheme, the aid will take the form of two-way carbon contracts for difference, called \u2018Climate 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.<\/p>\n The Commission’s assessment<\/strong><\/p>\n The Commission assessed the scheme under EU State aid rules, in particular\u00a0Article 107(3)(c)\u00a0of 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\u00a0Guidelines on State aid for climate, environmental protection and energy\u00a0(\u2018CEEAG’), which allow Member States to support measures reducing or removing CO2\u00a0<\/sub>emissions.<\/p>\n The Commission found that:<\/p>\n