Carbon Contracts for Differences: their role in European industrial decarbonization

Summary

In this policy brief, we focus on the implications of CCfDs and their role within such policy package. We do believe that CCfDs are a very powerful tool for helping European industry transformation during the first stages of the transition period towards a low-emission economy, and that the current discussion about a green recovery (Neuhoff et al, 2020) provides a great opportunity for their quick implementation. Indeed, CCfDs already play an important role in the considerations of domestic and European policymakers. As such, CCfDs have been specifically mentioned in the national German hydrogen strategy (BMWi, 2020) and in drafts of the forthcoming Green Deal Recovery Package as tools to bridge the cost gap between conventional and decarbonized hydrogen.

We explain in detail what CCfDs are and how they can help create a successful business case for low-carbon technologies; we assess their economic implications; revise practical aspects with regard to their implementation; and lastly, analyse their connection with the Recovery Funds.