European Commission stated that the scheme is necessary and appropriate to support decarbonization in the sectors covered by the ETS in line with European and national environmental objectives, and that the support has an incentive effect, as companies would not be able to make the same level of decarbonization investments without public support.
Commission explained that the scheme will have a limited impact on competition and trade within the EU, and that the amount of aid will be kept to a minimum thanks to the auction process. Germany has committed that the support will lead to overall CO2 reductions, rather than simply shifting emissions from one sector to another.
Under the plan, companies within the EU Emissions Trading System (ETS) will have the opportunity to reduce their emissions through technologies such as electrification, hydrogen, carbon capture and storage (CCS), carbon capture and use (CCU) and energy efficiency. Companies operating in the cement, lime, chemical, gypsum and glass sectors will benefit from the support. Replacing traditional steel production processes with hydrogen-based methods was also among the supported projects. The projects are expected to achieve emission reductions of 60% within three years and 90% by the end of the project.
The support under the scheme will last for 15 years and will be provided under two-way carbon differential contracts called “Climate Protection Contracts”. Companies will receive annual grants based on their proposals and how market prices, such as ETS allowances and energy inputs, compare to conventional production methods. The support is designed to cover only the additional costs associated with the transition to new production processes, but if the operating costs of these projects fall over time, the companies will be obliged to refund any excess support to the German authorities.
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