CO₂ contracts for difference: Participation in the preliminary procedure is a prerequisite for funding

Companies can apply for funding in the preliminary procedure for the Climate Protection Contracts program until 1 December 2025. The funding from the Federal Ministry for Economic Affairs and Energy (BMWE) is aimed at both traditional energy-intensive industries (including chemicals, paper, cement and glass) and SMEs that want to convert their production processes to be climate-friendly. This is based on the model ofcarbon contracts for difference. Funding is provided for transformation projects that aim to use climate-friendly technologies such as renewable energies, hydrogen or carbon capture and storage (CCU/S).

The funding guideline has been significantly enhanced for the 2026 round and opened up to SMEs in particular. Participation in the preliminary procedure is a mandatory requirement in order to be able to submit a bid in 2026 and thus receive funding. Eligible companies should familiarize themselves with the new regulations at an early stage in order to secure competitive advantages.

What are CO₂ contracts for difference?

CO₂ contracts for difference are state subsidies from the BMWE. The aim is to incentivize energy-intensive companies to switch to climate-friendly technologies, which are currently still associated with high costs.

CO₂ contracts for difference guarantee a fixed CO₂ price over a period of 15 years. The state agrees a base price with the participating companies. If the market price is lower, the state pays the difference; if it is higher, the company is reimbursed. This is intended to create planning security, promote new technologies and strengthen the competitiveness of the industry.

In order to receive such funding, eligible companies must go through three phases: A preparatory procedure, the competitive bidding procedure and, after successful participation in phase 2, the grant relationship begins. Once the grant notice has been issued, construction and trial operation of the subsidized plant can begin. However, the CO2 contract for difference does not begin until the start of the subsequent operation.

Adjusted funding conditions for 2026

Following the first funding round in 2024, the BMWE has revised and adapted the funding guidelines for 2026. The aim is to make the program more accessible and attractive for SMEs by reducing the minimum annual greenhouse gas emissions. In addition, companies should be able to react more flexibly to unforeseen events and developments, for example by allowing greater deviations from planned emission reductions.

There are several relevant changes with regard to technologies and energy sources: For example, the hurdles for the use of hydrogen have been lowered. In contrast to the first bidding process, technologies for capturing CO₂ for later storage or use (known as carbon capture utilization and storage) are also eligible for funding. Another change is that the production of industrial steam can now be subsidized under certain conditions.

Participation in the preliminary procedure for the 2026 bidding process now possible

Interested companies must participate in the ongoing preliminary procedure by December 1, 2025. To do so, they must submit a complete pre-application by the deadline using the forms provided. December 1, 2025 is a material cut-off date; pre-applications received after this date will no longer be considered. Participation in the preliminary procedure entitles companies to participate in the subsequent bidding procedure. Companies that have already participated in 2024 can take part in the 2026 preliminary procedure by submitting a simple declaration of confirmation.

In the preliminary procedure, companies will also be given the opportunity to ask questions about the bidding process. The bidding process is scheduled to start in mid-2026. It is currently still subject to budgetary approval and requires approval by the EU Commission under state aid law.

Conclusion

Companies should check now whether their transformation projects are eligible for funding, take part in the preliminary procedure and prepare specifically for the 2026 bidding process. Those who understand the funding mechanisms and take a strategic approach can not only secure financial support, but also strengthen their competitive position in the increasingly climate-neutral industrial sector.