Contracts for difference are financial instruments used to hedge against price fluctuations. An agreed price is valid for the contractually agreed period for both buyer and seller.

Carbon contracts for difference are an innovative instrument for promoting investment in climate-friendly technologies. They are concluded between companies and the state and create security for future income from the investment, e.g. in a wind power plant.

The contracts also serve to compensate for fluctuating prices in the trading of emission rights and thus mitigate risks associated with investments in currently still expensive and less profitable low greenhouse gas processes.

The German government recently launched a program for carbon contracts for difference in energy-intensive industries. This is a building block for achieving the CO2 reduction targets and creates incentives for significant emission reductions. The corresponding funding guidelines are currently being finalized.