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BASF Among Firms to Get German Subsidies Worth €2.8 Billion

By Eva Brendel and Kamil Kowalcze
A tanker barge passes the BASF SE chemical plant on the banks of the River Rhine in Ludwigshafen, Germany, on Wednesday, July 19, 2023. With water regularly receding to levels that impede shipping from late summer through the fall, companies up and down Europe's most important trade route are rushing to adapt, underscoring how the climate crisis is hitting even advanced industrial economies. (Ben Kilb/Bloomberg)

(Bloomberg) -- Germany allocated subsidies worth €2.8 billion ($3.1 billion) in the first round of a program designed to help manufacturers shift to cleaner energy.

Funds will go to producers of chemicals, glass and metals, among other sectors, the economy ministry said Tuesday. They’re being disbursed as part of Germany’s “climate protection contracts,” which aim to help its energy-intensive industrial base fund the shift to cleaner technologies.

A second bidding round will follow later this year, with the government planning to provide a “low double-digit billion amount” in total for the decarbonization plans. With Germany still reeling from the crisis that hit two years ago, policymakers have faced calls to do more to support industry and bring down energy costs.

“This instrument is new in Europe, we are pioneers,” Economy Minister Robert Habeck said at a press conference in Berlin. “We give companies a commitment for 15 years that they will be reimbursed the difference to fossil production costs for the technology they choose.” 

The funds were mainly aimed at small and medium-sized companies in energy-intensive sectors, but larger listed corporations such as Suedzucker AG and BASF SE also received subsidies to the tune of €228 million and €310 million respectively. A total of 15 projects were selected in the first bidding round. Once production using clean energy becomes cheaper than conventional methods, subsidized companies are supposed to pay additional income back to the state.

Around 130 projects have already been submitted for the second round, for which the bidding process is scheduled to start this year, according to the economy ministry. Projects for carbon capture and storage — which still need a regulatory framework in Germany — will be considered in the second round as well, Habeck said.

The money will come from Germany’s climate and transformation fund and is already earmarked, Habeck said. However, parliament has not yet approved the government’s budget for 2025, with a decision expected in November.

©2024 Bloomberg L.P.