EU approves €5bn in subsidies for climate measures in German industry

The European Commission has approved German subsidies worth €5 billion ($5.9 billion) to assist businesses in the industrial sector in their efforts to reduce greenhouse gas emissions.

The "decision supports industry in making the shift to cleaner production while keeping a clear focus on efficiency and fairness," said EU Commission Vice-President Teresa Ribera on Thursday.

Under the scheme, financial support will be available to projects that involve "fundamental technological changes and replace fossil fuels or raw materials with low-carbon alternatives," the commission said.

Eligible technologies include electrification, the use of hydrogen or biomethane, carbon capture and storage, and similar innovations.

Aid payments will only cover the extra cost of switching to a cleaner alternative, and "if these become cheaper to operate, beneficiaries will have to reimburse the difference," the commission said.

State aid in the EU has to be approved by Brussels and is strictly regulated to ensure fair competition between companies from economically strong member countries and those from less affluent regions.

The plans by the German government show "how we can move forward on decarbonization while preserving a level playing field and ensuring that competition continues to work for Europe’s long-term prosperity," Ribera said.

Beneficiaries will be selected based on the cost efficiency of the planned technological changes, the commission said, which is "measured as the aid requested per tonne of avoided CO2 emissions."

Industrial sectors that are covered by the EU's emissions trading scheme (ETS) can be supported under the state aid scheme. These sectors include steel and other metals' production, plaster, glass, ceramics, paper, pulp, cement, lime and chemicals.

The European Union has set itself the goal to be climate-neutral by 2050, and aims to reduce net greenhouse gas emissions by 2030 by at least 55% compared to 1990 levels.