The European Commission has approved, under EU State aid rules, a €4 billion German scheme made available in part through the Recovery and Resilience Facility (‘RRF') to help companies, which are subject to the EU Emission Trading System (‘ETS'), decarbonise their industrial production processes.
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The measure contributes to achieving Germany's climate and energy targets, as well as the EU's strategic objectives of the European Green Deal.
The scheme notified by Germany, with a budget of €4 billion, will be partially funded through the RRF, following the Commission's positive assessment of the German Recovery and Resilience Plan and its adoption by the Council.
The scheme aims at helping the German industry reduce greenhouse gas emissions in their production processes.
The projects supported under the scheme will range from the construction of melting tanks for glass production using electricity to the replacement of traditional steel production processes by direct reduction hydrogen-powered plants.
The beneficiaries of the measures will be companies active in sectors subject to the EU ETS, such as the chemistry, metal, glass or paper sectors.
In order to be eligible, projects will need to achieve a 60% emission reduction in 3 years and a 90% emission reduction in 15 years compared to the best available conventional technologies based on the ETS benchmarks.
The projects that will benefit from the aid will be selected through an open competitive bidding process and will be ranked on the basis two criteria: (i) the lowest aid amount requested per ton of carbon dioxide (CO2) emissions avoided (i.e. the primary criterion), and (ii) the speed at which the projects can achieve significant CO2 emission reductions.
Under the scheme, the aid will take the form of variable annual grants under two-way contracts for difference, so-called ‘Climate Protection Contracts', with a 15-year duration.
Each year, beneficiaries will receive a payment or pay an amount to the State, based on the beneficiaries' bids and the evolution of relevant market prices, such as carbon or energy inputs, compared to the conventional technology.
On this basis, the measure only covers the actual additional costs linked to the new production processes compared to conventional methods.
If operating the supported projects becomes cheaper, beneficiaries will have to pay back the difference to the German authorities. As a result, the total aid disbursed under the scheme may be significantly lower than €4 billion, which is the maximum budget. ■