The Federal Ministry for Economic Affairs and Energy (BMWE) has launched the preliminary procedure for the 2026 bidding process for CO2-Contracts for difference (climate protection contracts). BMWE supports investments by energy-intensive industry in sustainable CO2-low-production processes, including in the chemical, pulp and paper, primary steel, other metals, cement and lime, as well as ceramics, glass and gypsum.
In the pre-litigation procedure, industry will be consulted on the proposed funding rules. In addition, new projects can participate in the auction via the preliminary procedure. The 2026 bidding process is expected to start in the middle of next year.
Participation in the preliminary procedure by 1 December 2025 is a prerequisite for companies to be able to submit a bid in the subsequent bidding process in 2026. Companies that have already participated in the preparatory procedure in the summer of 2024 can participate in the 2026 preliminary procedure by means of a simple confirmation declaration.
CO2-Contracts for difference secure companies that invest in CO2 lowproduction processes against price risks. Both fluctuating CO2 and energy prices as well as cost differences to conventional production processes are compensated for over a period of 15 years. Climate-friendly production processes, which are not yet profitable on the free market due to current costs and risks, will thus become competitive and companies will receive long-term planning security.
The aim of the CO2 contracts for difference is also to drive the market ramp-up of new technologies (e.g. industrial heat pumps, hydrogen applications, plants for the capture and storage of waste CO2, storage technologies) as well as new production processes on the market. This creates learning and spillover effects on other companies and a positive macroeconomic benefit.
The CO2 contracts for difference are designed to be unbureaucratic and open to technology: companies are free to decide how they want to organise their production processes in accordance with the specifications of the energy sources used (electricity, electricity, CO2-low-hydrogen, biomass). Companies are only given milestones for the CO2 savings (60% from the third year onwards, 90% in the last year of the term of the contracts). The companies are remunerated on the basis of the actual CO2 saving. The CO2-Contracts for difference are also open in particular to medium-sized companies with smaller production facilities.
Contracts for difference are an established approach to incentivizing investments and are based on a market-based mode of operation. The United Kingdom, France, the Netherlands and Austria are also already using contracts for difference to protect energy producers or energy-intensive companies.
The bidding process is still subject to budget approval and requires approval by the EU Commission under state aid law.