Concept Study Project-based Climate Protection Contracts for Greenhouse Gas-Neutral Industrial Production

In its National Hydrogen Strategy, the German government has decided to develop and implement a pilot programme for Carbon Contracts for Difference (CCfD) for emission-intensive industries. Project-based CCfDs for industry with a view to a national pilot programme are currently being discussed under the term “climate protection contracts”.

The target groups are industrial sectors that can only optimise their existing production processes to a limited extent with regard to their CO2 emissions, so that either completely different or significantly modified processes are necessary to achieve decarbonisation. This leads to the need for considerable investment. In addition, the climate-friendly production processes are often significantly more expensive to produce (variable operating costs) than the market-standard, emission-intensive production processes. This is due to various factors: an insufficient CO2 price, a homogeneous product price, as well as higher operating costs due to energy source changes are the decisive points. In addition to the cost difference resulting from the factors mentioned, the risk due to price fluctuations of these factors is also very relevant. Climate protection contracts offer the possibility of significantly bringing forward the market introduction of such processes by cushioning these cost differences and risks.

The concept study commissioned by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) and prepared by IREES together with its partners Fraunhofer ISI and Öko-Institut focuses on short-term testing of project-based climate protection contracts within the framework of a national pilot programme. Central aspects of the pilot programme are discussed with regard to conceivable design options and recommendations are made with a view to testing within the framework of a pilot programme.