Assessing Safeguards for Hydrogen Sustainability in Germany's Carbon Contracts for Difference

This research paper by the NewClimate Institute evaluates the Klimaschutzverträge (KSV) scheme, a German financial instrument designed to support industrial decarbonisation. The study examines whether the KSV adequately addresses sustainability risks and opportunities related to hydrogen production and use, specifically focusing on the distinction between green and low-carbon hydrogen, resource efficiency, and the impact on exporting nations.

• The KSV scheme may inadvertently provide indirect subsidies for "low-carbon" hydrogen production, despite the German National Hydrogen Strategy (NHS) prohibiting direct public funding for such production. This occurs because projects can include hydrogen production costs within their bid prices, even though the KSV focuses on the use of hydrogen in industrial projects.
• A revised draft of the KSV Funding Directive proposes removing the emissions reduction criterion for bid evaluation. The authors argue this would reduce the competitive advantage of green hydrogen compared to "low-carbon" hydrogen, and they recommend maintaining a higher minimum emissions reduction threshold for "low-carbon" hydrogen.
• There is uncertainty regarding whether transport emissions from upstream hydrogen are accounted for in the KSV bidding mechanism. If these emissions and energy losses are not reflected in bid prices, it may fail to incentivise the use of hydrogen produced near the project location.
• While hydrogen produced in Europe is subject to EU environmental and social regulations, imported hydrogen may bypass these certifications unless explicitly required. The study recommends that Germany implement a holistic sustainability standard for all hydrogen types, regardless of origin, to ensure social and environmental safeguards and promote value addition in exporting countries.

APA

NewClimate Institute (2025). Assessing Safeguards for Hydrogen Sustainability in Germany's Carbon Contracts for Difference. http://www.newclimate.org/resources/publications/assessing-safeguards-for-hydrogen-sustainability-in-germanys-carbon

Chicago

NewClimate Institute. Assessing Safeguards for Hydrogen Sustainability in Germany's Carbon Contracts for Difference. 2025. http://www.newclimate.org/resources/publications/assessing-safeguards-for-hydrogen-sustainability-in-germanys-carbon.

Wikipedia

{{cite report |author=NewClimate Institute |title=Assessing Safeguards for Hydrogen Sustainability in Germany's Carbon Contracts for Difference |date=11 February 2025 |url=http://www.newclimate.org/resources/publications/assessing-safeguards-for-hydrogen-sustainability-in-germanys-carbon |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{newclimateinstitute2025assessing, author = {{NewClimate Institute}}, title = {{Assessing Safeguards for Hydrogen Sustainability in Germany's Carbon Contracts for Difference}}, institution = {NewClimate Institute}, year = {2025}, month = feb, url = {http://www.newclimate.org/resources/publications/assessing-safeguards-for-hydrogen-sustainability-in-germanys-carbon}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }