Commission publishes State aid guidance on carbon contracts for difference
The European Commission has published guidance to support Member States in designing State aid schemes based on carbon contracts for difference (CCfDs), in compliance with the Guidelines on State aid for climate, environmental protection and energy (CEEAG).
A CCfD is a subsidy agreement between a granting authority and a beneficiary (for instance, a steel or chemicals plant) to help reduce greenhouse gas emissions by removing financial risks for decarbonisation projects. Typically, a CCfD ensures a certain remuneration (strike price) for every tonne of CO₂ the beneficiary avoids emitting. If the market carbon price is lower than the strike price, the granting authority pays the difference to the beneficiary. Conversely, if the market price is higher than the strike price, the beneficiary may either have to pay back the difference or keep the extra revenue.
CCfDs play an important role in achieving the objectives of the Clean Industrial Deal by accelerating decarbonisation in Europe’s industrial sectors while boosting their competitiveness.
For more information, see the European Commission’s PR.