The industrial sector accounts for one-fifth of Germany's total emissions and is hence of key importance for achieving climate neutrality targets. The required technologies for transformation are close to technical availability, but cannot yet compete on the market under the current framework conditions and low CO2 prices. However, in view of the long lifetimes of facilities in the primary industry, investments are needed today in order to achieve the long-term goal of climate neutrality. “Carbon Contracts for Difference” are being discussed as an instrument to ensure investment security for the required technologies and to boost their market ramp-up.
Against this background, Agora Energiewende initiated the project "Carbon Contracts for Difference for Industrial Transformation", which is being carried out jointly with the Wuppertal Institute, Future Camp and Ecologic Institute. The aim of the project is to develop concrete design options and financing models for “Carbon Contracts for Difference” for the transformation of the steel, cement and chemical industries through intensive stakeholder dialogs. A core element is the creation of calculation tools with which the transformation costs of the following key technologies can be mapped in detail:
- Iron direct reduction in the steel industry, initially natural gas-based and later hydrogen-based
- Electrification of heat supply in the chemical industry
- Ammonia production using green hydrogen
- Carbon Capture and Storage (CCS) in cement production
The Wuppertal Institute supports as technical advisor the preparation of the calculation tools and the discussion with the industry stakeholders. In terms of content, the project ties in with the two studies "Climate Neutral Industry" (2018) and "Climate Neutral Germany" (2020), which analyse the required technical solutions and define transformation paths.