Germany Launches Clean Industry Push Worth Up to €4 Billion

(Bloomberg) -- Germany launched the inaugural auction of as much as €4 billion ($4.4 billion) in initial funding to help steel, cement and other heavy industrial producers transition to green technologies.

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Economy Minister Robert Habeck presented details of the 15-year program of “climate protection contracts” at a news conference Tuesday in Berlin. Chancellor Olaf Scholz’s ruling coalition has set aside a total of about €50 billion for the push to cut harmful emissions and is the first European Union nation to make use of the new mechanism for the bloc.

“Today is a good day for Germany as an industrial location, for climate protection and for sustainable jobs,” Habeck said in an emailed statement.

“The subsidized plants from the first bidding round alone will save several million tons of CO2,” he added.

Under the program, the government will compensate companies in sectors like steel, cement and glass for additional expenses incurred in using cleaner technologies compared to conventional processes. Applicants present proposals for the amount of support needed, with the lowest bids receiving funding.

Germany’s ruling coalition aims to slash carbon emissions by two-thirds by 2030 on the way to climate neutrality by 2045 and cleaning up its energy-intensive manufacturing sector is crucial to reaching those targets.

Read More: EU Aims to Cut 90% of Emissions by 2040. What Does That Mean?

Germany’s BDI industry lobby welcomed the government’s move, saying state funding is needed when the transition to climate neutrality has to take place quickly.

“The higher operating costs of new industrial plants are considerable and justify intensive political support as there is still no international level playing field,” BDI President Siegfried Russwurm said in an emailed statement.

The mechanism aims to facilitate the removal of around 350 million tons of CO2 by 2045, mainly in the steel, chemicals, cement, paper and glass sectors.

The contracts are also meant to provide an incentive to develop and build new technologies and infrastructure such as production plants and pipelines for hydrogen, according to Habeck’s ministry.

To enable small and mid-sized companies to participate in the auction, bids of more than 1 billion euros are excluded in the first round.

If climate-friendly production subsequently becomes cheaper than conventional methods, the companies participating would be obliged to pay additional income to the state.

“It is important that companies now get started quickly with their decarbonization projects and can count on political support in doing so,” BDI’s Russwurm said.

The government plans another auction this summer and two more next year.

(Updates with Habeck comments, industry reaction starting in third paragraph)

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