Germany has announced a new initiative aimed at providing subsidies worth approximately €50 billion ($53.4 billion) to energy-intensive manufacturers to transition to climate-neutral technologies. The government initiative, which still requires approval from the European Union, will be open to companies that emit at least 10 kilotons of carbon annually, including manufacturers in the steel, chemicals, cement, paper and glass sectors.
The proposal, according to Germany’s Economy Minister Robert Habeck, is targeting the most carbon-intensive companies. By implementing the initiative, the German government anticipates reducing carbon emissions by 350 million tons by 2045, which is approximately a third of the industry's goal. The country aims to reduce carbon emissions by two-thirds by 2030 and achieve net-zero by 2045. To achieve these goals, industry decarbonisation is vital, but Germany has been struggling to make significant progress in this direction. Habeck's previous plan to promote heat pumps over conventional boilers has faced internal challenges.
Additionally, Germany's steel sector alone is responsible for nearly 30% of industrial carbon emissions. Under the new program, the government would cover the cost difference between the production of conventional and green steel. A similar initiative will be applied to other industries. The subsidies will be awarded based on an auction-like system, with companies presenting proposals for the amount of aid needed. The proposals with the lowest offers will receive funding. As a result of this structure, the precise size of the program has not yet been determined. The economy ministry has said that the amount would be "in the mid double-digit billion range."
The plan mirrors instruments similar to those used by the Netherlands. Even though Habeck has said that there is a fundamental agreement in place, the European Commission still has to approve Germany's initiative. The commission has to ensure that the program does not generate overfunding when combined with other programs and check whether it is directed at operational expenditure. In response to earlier criticism of the proposal, the economy ministry has increased accessibility to medium-sized companies. Details will be released on Tuesday, and it will take approximately two months to implement the auction, according to the ministry.