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Hydrogen and decarbonisation: Germany gets European backing with 4 billion plan

The European Commission has given the green light to Germany's ambitious €4 billion state aid scheme, partly funded by the Recovery and Resilience Facility (RRF), which aims to boost decarbonisation in key sectors of industry. This scheme, framed within EU state aid rules, aims to support companies subject to the EU Emission Trading System (ETS), to significantly reduce greenhouse gas emissions in their industrial production processes.

The allocated budget will be used to finance projects ranging from the construction of melting tanks for glass production using electricity to the replacement of traditional steel production processes with hydrogen-fuelled direct reduction plants. These measures, backed by bi-directional contracts for difference, known as "climate protection contracts", will be spread over 15 years and will be selected through an open competitive tendering process.

To be eligible, projects will have to achieve 60% emission reductions in 3 years and an impressive 90% in 15 years compared to conventional technologies, based on ETS benchmarks. Funding will be distributed through variable annual grants, covering only the actual additional costs associated with the new production processes compared to conventional methods.

The European Commission assessed the measure under strict EU state aid rules, ensuring that the scheme is necessary and appropriate to support decarbonisation in critical sectors and that it has an "incentive effect". In addition, it emphasised the importance of the aid generating real CO2 reductions and not simply shifting emissions from one sector to another.

Margrethe Vestager, executive vice-president in charge of competition policy, said: "This €4 billion aid scheme will support ambitious projects that will significantly reduce greenhouse gas emissions from industrial production processes in Germany. It will contribute to the EU's goal of achieving climate neutrality, while ensuring that any possible distortion of competition is kept to a minimum."

In this context, Federal Minister for Economic Affairs and Climate Protection Habeck called the decision "pioneer for energy-intensive industry ", highlighting the development and innovation opportunities for energy-intensive sectors. "The new process ensures sustainable value creation with innovative, climate-friendly technologies and sustainable jobs in Germany. This will also facilitate the development of the hydrogen infrastructure," Habeck added.

The climate protection agreements are intended, above all, to trigger the market transformation that is urgently needed: the climate protection agreements provide an incentive for the necessary new technologies and the necessary infrastructure, such as hydrogen production plants and pipelines, to be developed and built in Germany now. Expertise is also being developed in the financing, construction and operation of climate-friendly plants, as well as markets for climate-friendly end products (green lead markets). Climate protection agreements thus secure Germany's strength as an industrial and innovation location.


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