Last week “Arendalsuka” was held, a democratic venue for everyone who is engaged in the Norwegian community. The event discusses relevant topics in the community and their goal is to strengthen the power in our democracy. This year, a new term was debated at Arendalsuka, Carbon Contracts for Difference (CCfD).

“Everyone” agrees that Norway needs to take a lead on hydrogen-based fuels in the maritime industry. A group of experts propose a new type of contract, Carbon Contracts for Difference (CCfD), that covers the difference between fossil fuels and zero-emission alternatives. CCfD have been broadly discussed as a potential instrument to support energy-intensive industries in developing and deploying zero-emission fuels.

CCfD explained

A Carbon Contracts for Difference will in the transition period cover the difference between fossil fuels and zero-emission fuels on new ships and ferries until it is more cost beneficial for the industry to transition to zero-emission fuels.

The government pays the difference between fossil fuels and zero-emission fuels until the new CO2 tax makes it beneficial to choose zero-emission fuels.

This pressures the Norwegian government to increase the CO2 tax, says Rotevatn.

Last year the Carbon Contracts for Difference was launched by a panel of experts, lead by Bjørn Kj, Haugland in Shift. The rapport says:

The Carbon Contracts of Difference is proposed as a support scheme for projects where the cost efficiency is dependent on the CO2 tax and has a great uncertainty of how the tax will develop. This makes the CCfD especially suitable for supporting emissions reducing projects in quota required sectors. Carbon Contracts of Difference could also be suitable for supporting projects that use new low-carbon processes and solutions, that have higher operational costs than conventional technology. This especially applies if the additional costs cannot be compensated in other ways.

Can save our head start

Several of Norways projects on zero-emission bulk and cargo ships on hydrogen are stumbling and in danger of being delayed for several years. The reason is uncertainty in hydrogen supply and high fuel costs.

The Green Shipping Program has an overview of around 50 hydrogen projects in Norway, but the uncertainty on costs for hydrogen technology and hydrogen-based fuels, and if it can be delivered slows down the development. This may lead to Norway losing its head start.

Sveinung Rotevatn, the Norwegian minister on climate and environment, says that CCfD on high fees on CO2, is an excellent combination and could be the solution.

CCfD is an important support scheme. It binds us to the commitment of increasing the CO2 tax to 2000 NOK per tonne. If we do not increase the tax, then we will be sitting the the cost difference longer into the future, says Rotevatn.