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EU Greenlights Germany’s €2.2bn Plan for Industrial Decarbonization Through Hydrogen and Electrification

By April 10, 2024 3   min read  (517 words)

April 10, 2024 |

EU Greenlights Germanys E2.2bn Plan for Industrial Decarbonization Through Hydrogen and Electrification e1712756917875

The European Commission has endorsed Germany’s ambitious €2.2 billion initiative aimed at advancing the decarbonization of industrial operations via green hydrogen and electrification. This approval paves the way for direct grants to be awarded to small and medium-sized companies seeking to replace fossil fuel dependency in their production processes with cleaner alternatives.

Under the EU’s state aid regulations, the €2.2bn support package will be utilized to encourage companies to transition their industrial processes to electricity or to substitute fossil fuels with renewable hydrogen or hydrogen-derived fuels. This move is integral to Germany’s commitment to fostering a net-zero economy transition.

“The measure will be open to companies relying on the use of fossil fuels as energy source or feedstock for their production processes in the industrial sector in Germany,” highlighted the Commission in a press release. Projects qualifying for this scheme must demonstrate a potential to cut greenhouse gas emissions by at least 40% from current levels, with the possibility of receiving up to €200m in aid per beneficiary by the end of 2025.

This funding is part of Germany’s new Bundesförderung Industrie und Klimaschutz (BIK) funding guidelines, translating to Federal Promotion of Industry and Climate Protection. “In future, BIK will support investments in all industrial sectors that reduce CO2 emissions by at least 40% compared to previous emissions by converting their processes from fossil fuels to electricity or renewable hydrogen,” Germany’s Ministry for Economic Affairs and Climate Action stated.

Furthermore, this scheme is designed to complement the recent €4bn Carbon Contracts for Difference (CCfD) program launched by Germany, aiming to subsidize heavy industry’s shift to low-carbon processes. The €2.2bn initiative is set to “fill the gap for smaller-scale decarbonisation projects.”

The European Commission’s decision was influenced by the scheme’s alignment with the EU’s REPowerEU plan and the Green Deal Industrial Plan, deemed “necessary, appropriate and proportionate” to expedite the green transition. Margrethe Vestager, the Commission’s executive vice-president in charge of competition policy, affirmed, “This €2.2bn scheme… will help accelerate the green transition. The measure will also help Germany to reduce its dependence on imported fossil fuels faster, while ensuring that potential competition distortions are kept to the minimum.”

Additionally, the approval follows the European Council’s enactment of the Renewable Energy Directive (RED) in 2023, mandating renewable hydrogen to constitute 42% of hydrogen used in industrial processes by 2030, escalating to 60% by 2035. This landmark decision underscores the EU’s dedication to replacing grey industrial hydrogen with renewable alternatives, further exemplified by the Commission’s recent approval of a €350m German renewable hydrogen auction aimed at supporting the production of up to 75,000 tonnes of green hydrogen.

This €2.2 billion scheme will support industries in investing further into the decarbonisation of their industrial processes. This will help accelerate the green transition. The measure will also help Germany to reduce its dependence on imported fossil fuels faster, in line with the REPowerEU Plan, while ensuring that potential competition distortions are kept to the minimum.

Margrethe Vestager, Executive Vice-President in charge of competition policy

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