To decarbonise Europe’s basic materials sector, we urgently need policy innovation and a stable policy framework that aligns effective carbon pricing with carbon leakage protection and equity concerns.

Industry and investors need a policy framework to support the creation of markets for climate-friendly materials. Policymakers need evidence on policy that aligns carbon pricing with carbon leakage protection and equity concerns.

Germany is the main source of industrial emissions in the EU (21%). Poland faces one of the largest transition challenges due to high reliance on coal and relatively low incomes. Testing policy innovation in these countries can provide vital lessons for systemic transformation across the EU as a whole.

CFM TRACTION (Climate Friendly MaTeRials mArket CreaTIon through pOlicy iNnovation) worked in Germany and Poland to co-design national impact assessments of two innovative policy instruments supporting industrial decarbonisation:

1. Climate Contribution (for construction and automotive sector) as part of the EU ETS is a charge on carbon-intensive materials sold for final use in Europe. The Contribution is an alternative to a Border Carbon Tax, delivering the same results with fewer risks.

2. Project-based Carbon Contracts for Difference (CCfDs) are contracts between national governments and companies developing low-carbon projects, which ensure a guaranteed carbon price for the project. CCfDs create lead markets for innovative low-carbon production processes and materials.

Through engagement with policy and industry stakeholders through the the Climate Friendly Materials Platform (convened by Climate Strategies), these policies emerged as most promising.

Concrete policy proposals have been co-designed with government, industry, finance sector actors, consumer and civil society group actors, laying foundations for implementation in early 2020s.

CFM Traction will co-design policy innovation in two strategically important countries (Poland and Germany) and across Europe:

• As levers to trigger a fundamental transformation of markets
• To help catalyse systemic change at multiple scales
• Create lead markets as well as longer-term perspectives for the climate-neutral production and use of basic materials.

This project is a collaboration between Climate Strategies and WiseEuropa (Poland), delivered in collaboration with DIW Berlin (Germany).

The project is supported by EIT Climate-KIC.

More details can be found on this page.