The German government has launched the preliminary procedure for the 2026 bidding process for the CO2-Contracts for Difference (CfD, climate protection contracts), aiming to decarbonise industrial processes. The €6bn initiative targets energy-intensive industries, including steel, other metals, glass, chemicals, pulp and paper, cement and lime, ceramics and gypsum. It will consist of subsidies for the costs to transition towards cleaner production methods under 15-year contracts. Contracts will be awarded through competitive auctions, with projects with the lowest amount of subsidy per tonne CO2 saved having the priority.
Companies are free to decide how they want to organise their production processes in accordance with the specifications of the energy sources used (electricity, low-carbon hydrogen, biomass) but selected projects will be required to achieve binding milestones for emission reduction (60% from the third year onwards, 90% in the last year of the term of the contracts). The CO2 contracts for difference aim to drive the market ramp-up of new technologies (e.g. industrial heat pumps, hydrogen applications, plants for the capture and storage of waste CO2, storage technologies) as well as new production processes on the market. The initiative allows for the first time CCS technology projects to apply. Bidding is planned for mid-2026, with the auction being planned for 1 December 2026.
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