Concerns are being raised over significant cuts to climate protection contracts proposed by the German Federal Ministry for Economic Affairs and Climate Action. The cuts, spearheaded by Minister Katherina Reiche (CDU), have drawn criticism from the Social Democratic Party (SPD), who argue the reductions undermine crucial industrial decarbonization efforts.
Sebastian Roloff and Jakob Blankenburg, the SPD’s economic and environmental policy spokespeople, expressed their lack of understanding regarding the drastic reduction in budgetary authorizations for the years ahead, as outlined in the draft budget for 2026. These authorizations are instrumental in supporting industry’s transition to climate neutrality through what are known as Contracts for Difference (CfDs).
The Contracts for Difference program, initially lauded as a proven mechanism, provides financial support and a degree of risk mitigation for CO2-intensive industries during the shift to climate-neutral production. Sectors benefitting include steel, chemicals, cement, glass and paper. Under the previous government framework, the 2024 budget allocated €22.6 billion for commitments spanning 2025 to 2041. This figure has now been reduced to a total of €6.9 billion between 2027 and 2047.
SPD representatives warned that the cuts jeopardize vital planning certainty, particularly for companies which were unsuccessful in the initial round of funding in 2024. The Contracts for Difference model operates on the principle of the state compensating companies for additional costs incurred during the transition to climate-neutral processes, with the company subsequently repaying funds once the investment becomes profitable.
