I’m hearing that there is progress on a series of projects in Germany supported by carbon contracts for difference, which could help the EU respond to the US’s Inflation Reduction Act (that Brussels criticised because it boosts American companies specifically).
The EU is seeking to erode the linkage of electricity prices to natural gas prices. As of this week it’s consulting on its electricity market design.
Germany, the largest economy in the EU, confirmed to CarrZee in 2020 it’s considering offering carbon contracts for difference as one option to protect industries that make big investments to cut emissions and help the bloc achieve ambitious greenhouse-gas targets for 2030 and 2050.
“Carbon contracts for difference are one possible option for encouraging investment in low-carbon technologies and we are looking into it,” the Federal Ministry for Economic Affairs and Energy said in an emailed response to questions at the time. “However, there are a number of issues related to such an instrument, namely the associated cost and state-aid questions.”
CCfDs issued by countries or the EU Innovation Fund would pay out the difference between the price of EU emissions allowances and the contract price, thus ensuring a guaranteed carbon price would protect the green-hydrogen-production project, for example, from competition from otherwise-cheaper fossil fuels.
Those investors prepared to be protected by lower carbon prices would win subsidies. Those projects needing higher carbon prices as protection would fail to win subsidies. An auction would decided who wins and who doesn’t.
For more on “contracts for difference,” search for that term on CarrZee.org, see the following and read Montel’s story below that, which seems to focus on power-sector contracts for difference, which guarantee a minimum electricity price:
This green transition has been slowed by war.