Catalyzing the transition to a climate-neutral industry with carbon contracts for difference [Commentary]

To achieve global emission reduction targets, speeding up industrial decarbonization is crucial, as it accounts for around a quarter of global energy-related CO2 emissions. Net-zero goals imply that deep decarbonization technologies must be deployed comprehensively across industry. Addressing this issue, Germany opened the first tender round for its carbon contracts for difference (CCfD) program (in German "Klimaschutzverträge") on March 12, 2024. The scheme is among the first large-scale programs worldwide to structurally support, drive technological learning in, and derisk innovative deep decarbonization projects in industry. It supports clean solutions in energy-intensive industries such as steel, chemicals, cement, glass, and pulp-and-paper but also cross-cutting applications such as process heat. The first auction has closed and is expected to conclude contracts worth up to 4 billion euros (i.e., the maximum total payments). The second auction may reach 19 billion euros, expected in 2024/2025, with further tenders planned.