Germany’s Federal Ministry for Economic Affairs and Energy has announced that it has officially launched the 2026 bidding process for carbon contracts for difference (CCfDs), aimed at accelerating industrial decarbonization across energy-intensive sectors. The government has allocated up to €5 billion for the new auction round.
The program covers several energy-intensive industries including steel, chemicals, cement, lime, glass, paper, and ceramics. The initiative is designed to support investments in low-carbon production technologies and help companies transition away from conventional high-emission processes.
CCfDs to support long-term investment security
Carbon contracts for difference are intended to compensate companies for the additional costs associated with low-emission production technologies compared to traditional production methods.
The contracts will run for 15 years and will account for both carbon prices and developments in energy markets.
Government introduces more flexible framework
According to the ministry, the revised framework is intended to strengthen industrial competitiveness while supporting climate objectives through a more flexible and technology-neutral approach. The adjustments follow feedback received after the first bidding round held in 2024.
The government has relaxed some of the original requirements to provide greater operational flexibility. Companies are now required to reduce emissions by at least 50 percent after four years, compared to the previous target of 60 percent after three years. In the final contract year, emissions must be reduced by 85 percent instead of the earlier 90 percent requirement.
CCUS and industrial heat projects included
Projects involving carbon capture, utilization, and storage (CCUS) technologies are now eligible for support, particularly in sectors with difficult-to-abate process emissions.
The revised framework also allows projects focused solely on industrial steam and process heat generation to participate.
Competitive auction model retained
Funding will continue to be allocated through a competitive auction mechanism. Projects will be selected based on the lowest required level of public support, with the aim of maximizing the efficiency of public spending.
Only companies operating installations covered by the EU Emissions Trading System (EU ETS 1) are eligible to participate. In addition, only companies that completed the preparatory procedure at the end of 2025 can submit bids. Applications for the 2026 auction round must be submitted by September 7, 2026.