Advisors to Germany’s economy ministry on Wednesday warned that the ministry’s plan to offer some industrial companies subsidies in exchange for them cutting carbon emissions must not be implemented as it would distort the market.
Recall that Germany’s Economy Minister, Robert Habeck last year said that he was planning to set up such contracts from 2023 and the government which wants the country to become carbon neutral by 2045 is looking for ways to cut emissions in its steel, cement and chemicals industries.
Habeck reportedly wanted to award companies in energy-intensive industries 15-year subsidies in return for reducing carbon emissions in their production.
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However, a report released by the scientific advisory board to the ministry on Wednesday said such contracts were associated with numerous challenges as they would be very complex and would deeply affect company decisions and distort the market.
“Because the state is not the better entrepreneur, this can be associated with considerable efficiency losses and financing risks,” the report read.
State subsidies for such shifts were unsuitable because no one knows how climate-friendly technology would develop and when the costs would fall.
Story was adapted from Reuters.
