BERLIN -A plan by Germany’s economy ministry to offer some industrial companies subsidies in exchange for them cutting carbon emissions should not be implemented as it would entail market intervention, advisors to the ministry said on Wednesday.
Economy Minister Robert Habeck last year said he was planning to set up such contracts from 2023. The government wants Germany to become carbon neutral by 2045 and is looking for way to cut emissions in its steel, cement and chemicals industries.
Reuters reported in November that Habeck wanted to award companies in energy-intensive industries 15-year subsidies in exchange for reducing carbon emissions in their production.
But a scientific advisory board to the ministry recommended against implementing such contracts, saying they would be overly complex, deeply affect company decisions and distort the market.
“This can be associated with considerable efficiency losses and financing risks,” it said in a report, also noting that no one knew how climate-friendly technology would develop and when the costs would fall.
Such contracts would also favour existing companies at the expense of new entrants or potential foreign competitors, the report found. This might make them suitable for limited use for startups or pilot projects, it added.
The board said that, as a means of accelerating the shift toward greener industry, the government should instead focus on creating a market for climate-friendly products by setting quotas for them in government buildings and infrastructure or consumer items.
It cautioned that such green market regulations would take time to bed in and should only be prescribed for goods consumed domestically to avoid the risk of international trade conflicts.