Thread by @JoernRichstein

News🔥 on Germany's double-digit billion€ #CCfD/#KSV program for climate-neutral industry.
The binding call-of-interest starts NOW, deadline in 2 months, a precondition to participate in the 1st tender.
bmwk.de/klimaschutzver…
Quick thread with infos & academic background 1/

Carbon contracts-for-difference (#CCfD, in German #Klimaschutzverträge, #KSV) are a policy instrument to guarantee a fixed carbon price to innovative low-carbon industrial projects, for each ton of emission reductions below the conventional benchmark technology. 2/

This is done via a project-specific two-sided contract-for-difference on the EU ETS price and EU BAT benchmarks as baseline (as first proposed in 2017 here: diw.de/documents/publ…, and peer-reviewed in comparison to one-sided CfD/price floor here: sciencedirect.com/science/articl…) 3/

In the German case, next to CO2 price uncertainty, energy-price uncertainties are also hedged by the contract by indexing the contract to price changes so as to limit uncertainties and costs to industry and the public (as proposed here: climatestrategies.org/publication/ca…). 4/

Contracts are awarded in a competitive tender. In principle calls can be open for all industrial activities covered by the EU ETS, such as energy-intensive industries such as steel, cement and bulk chemical production, but also other sectors (e.g. large-scale high-temperature).5/

Only technologies with 60% reductions (compared to the conventional baseline) by end of 3rd year, and 90% reductions by the end of the 15 year contract are eligible. There’s also a minimum size of 10 kt CO2-eq/year. (as measured by the emissions of the conventional baseline) 6/

There's a lot of technical details to write about (how does CO2 & energy-price hedging work in detail; how does the tendering process work;what are the benchmarks, payment ceilings), but for now here the links to the official government information (pending state aid approval) 7/

For now all infos on German #CCfDs can be found here (in German), Funding guideline, Standard contract, Forms to participate in call-of interest, as well as a handbook and Excel-Tool w. examples can be found here:
bmwk.de/Redaktion/DE/A…
Updates here:
bmwk.de/klimaschutzver… 8/

Together with numerous colleagues from @FraunhoferISI, @irees (@Friedrichsen_N), @PIK_Climate (@FalkoUeckerdt ) and @oekoinstitut, we @DIW_Berlin (@KarstenNeuhoff) have been have been scientifically accompanying this gov program (@v_schonfeld @BMWK). 9/

Early key contributions to the CCfD debate were made by: @OJSartor & @bataille_chris: iddri.org/sites/default/…
Timo Gerres & @P_Linares: climatestrategies.org/publication/ca…
@o_chiappinelli & @KarstenNeuhoff papers.ssrn.com/sol3/papers.cf…
@AgoraEW: agora-energiewende.de/veroeffentlich… 10/

Predecessors to CCfDs and similar concepts include: @camjhep & @Dieter_Helm ‘s broader Carbon Contracts: researchgate.net/profile/Camero…,
@HeleendeConinck & Heleen Groenenberg’s CO2 price guarantee: sciencedirect.com/science/articl…
If you know further or I forgot to mention, please comment. 11/

Similar concepts one-sided contract concepts (with non-industry policy goals, but to stabilise CO2 prices via policy commitment) were also proposed by @kneuhoff & Roland Ismer: doi.org/10.3763/cpol.2…, and @GeorgZachmann: bruegel.org/sites/default/…. 12/

Maybe of interest to: @KWitecka, @FraPe0101,@rebeccawdell, @valenvogl, @PhilDHauser, @JigarShahDC, @lars_zetterberg, @JMRootzen, @RENEWIndustry, @danielestenson, @shaylekann, @JuliaChMetz 13/

Personally, I’m immensely happy this program to support deep emissions reductions in industry is coming, and that together with many others I could do my part, academically, as well as applied, to help realise it. End/

Further addition, @valenvogl's comparison of ccfd with other policies for early clean steel commercialisation: tandfonline.com/doi/full/10.10…
(I forgot and Valentin was to polite to mention it).