German economy minister Katherina Reiche has unveiled a €6 billion federal funding initiative to accelerate the decarbonization of the country’s energy-intensive industries, according to a report by Reuters. This marks a significant policy milestone, as carbon capture and storage (CCS) will be integrated into Germany’s climate protection contracts for the first time.
The move reflects Berlin’s attempt to balance ambitious climate targets with industrial competitiveness, amid mounting concerns over high energy costs, weak demand, and structural vulnerabilities in Europe’s industrial base.
Targeting hard-to-abate sectors
The funding program focuses on the chemicals, steel, cement, and glass industries, which account for a large share of Germany’s industrial carbon emissions. These sectors face growing pressure to decarbonize rapidly while maintaining global market positions, particularly in the face of international overcapacity and shifting trade dynamics.
Companies interested in participating have until December 1 to submit project proposals. The first competitive auction round for projects is scheduled for mid-2026, pending parliamentary budget approval and clearance under EU state aid rules.
CCS takes center stage
This latest funding round expands Germany’s 2024 decarbonization scheme, making CCS eligible as a decarbonization pathway. CCS involves capturing carbon directly at the source, permanently storing it underground.
Under the program, 15-year contracts will be offered to participating companies. The government will subsidize the extra costs of switching to cleaner production methods, insulating firms from volatile energy and carbon price swings during the transition.
Projects will compete in auctions, with priority given to those that deliver the greatest carbon savings at the lowest cost per ton. Participants must meet binding emissions reduction milestones throughout the contract period, ensuring measurable contributions to Germany’s 2045 net-zero goal.
Industry welcomes CCS and flexible framework
Industry associations have broadly welcomed the inclusion of CCS and the flexible structure of the funding program. They emphasized that a pragmatic climate policy balancing ambition with economic realities is essential if Germany is to preserve its industrial base while achieving decarbonization targets.