Germany Launches €5 Billion Contracts for Difference Round to Decarbonise Heavy Industry

Germany's Federal Ministry for Economic Affairs and Energy has opened its 2026 bidding round for carbon contracts for difference, expected to channel up to €5 billion this year to support decarbonisation investments in energy-intensive industries. The announcement marks the third round of Germany's 15-year CCfD programme launched in 2023.

Under the CCfD scheme, companies in energy-intensive industries submit bids specifying the level of government support needed to avoid one tonne of CO2 emissions, based on the cost gap between low-carbon and conventional fossil-based production. Successful bidders receive a variable subsidy covering the actual additional cost, with the gap expected to narrow over time as clean technologies become more competitive and the EU Emissions Trading System carbon price rises. If clean production ultimately becomes cheaper than conventional methods during the programme's 15-year timeframe, companies are required to repay the difference.

Germany has introduced several changes to the 2026 round following industry feedback, making the programme more technology-neutral and flexible. The CO2 reduction requirements have been eased: companies now need to achieve at least a 50% emissions cut after four years with at least an 85% reduction in the final year, compared to the prior requirements of 60% after three years and 90% in the final year. The programme now also supports carbon capture, utilisation and storage technologies for process emissions that are difficult to abate, as well as industrial steam projects focused solely on generating heat.

Germany's CCfD programme targets sectors including steel, chemicals, cement, and other heavy industries where electrification alone cannot eliminate emissions in the near term. The programme is designed to address the high upfront costs and investment risks that prevent industrial companies from committing to decarbonised production processes even when long-term competitiveness is expected to improve. The 2026 round builds on lessons from the prior two rounds, and the Ministry signalled it expects the evolved framework to attract broader participation across industrial sectors.

Key figure — €5 billion expected to be channelled through Germany's 2026 CCfD round