February 12, 2019 (06:08)

“Coal compromise” reached in Germany

On January 25, 2019, the so-called “coal compromise” was reached  in Germany between representatives of government institutions, political forces, business and non-governmental organizations. It became a precedent  of an integrated approach in addressing complex political, economic and social issues surrounding the closure of the coal industry in Germany, as a result of commitments under the Paris Climate Agreement and the requirements of European legislation for reducing CO2 emissions.

The Governmental Commission for Development, Structural Adjustment and Employment (Kommission für Wachstum, Strukturwandel und Beschäftigung), the so-called “coal commission” on January 25 approved the report and suggestions on the withdrawal of Germany from coal generation, the closure of thermal power plants and structural adjustment of  coal mining regions  along with social rehabilitation of workers. The relevant action plan or “road map” of the government, drawn up for a 20-year period, involves government financial commitments amounting to  EUR 40 billion. In addition, the federal government undertakes responsibility for the financial support of companies which will bear direct losses in the result of implementing government decisions (owners of coal deposits and coal-fired power plants), and also plans to reduce the costs imposed on households and industry by eliminating fees for the use of electricity grids. Instead, compensation from the federal budget to operators of transmission systems and distribution companies is foreseen.

Germany thus became the first state to adopt a strategic document on closure of coal industry in line with commitments under the Paris Climate Agreement and the requirements of the European legislation on CO2 reduction. A relevant draft law is planned to be prepared by the end of April 2019, and all issues between the state and the coal business entities should be agreed upon by mid-2020. Germany rejected using modern technology to create so-called “clean” coal-fired power plants, since the ratio of financial costs and long-term benefits from them is considered to be unjustified. Instead, it is planned to focus on the economic restructuring of coal mining regions, increase of generation through renewable energy (sun, wind, biomass) and retraining of personnel. The specified strategy will allow the leading EU country to significantly reduce the total cost of CO2 emissions (2 – 2.5 times increase in their value is expected) and give impetus to the development of low carbon industries.

The main points of the achieved “coal compromise” are:

1) The planned date for the complete cessation of the use of coal in Germany is 2038. In case of successful implementation of reforms and favorable conditions for electricity prices, economic stability and employment of personnel it is possible to schedule this occasion for 2035 (the corresponding revaluation should be made not later than 2032).

2) The Federal Government undertakes to carry out a detailed monitoring of the “coal” transformation and to publish the reports in 2023, 2026 and 2029. Reduction of coal generation is expected to be gradual: from the base level (2017 with a capacity of 42.6 GW) to 30.1 GW as of 2022, 17 GW – until 2030 and the closure of all coal-fired power plants by 2038. Accordingly, programs for structural adjustment in coal mining regions should be implemented and social rehabilitation of workers should be conducted.

3) In order to prevent the expected increase in electricity prices (up to 20%), starting from 2023, special compensation for households and enterprises will be introduced in the form of elimination of fees for the use of electricity grids for them. The federal budget will provide compensation to operators of electricity networks in the amount of about EUR 2 billion annually. In addition, it is proposed to introduce an additional subvention for energy-intensive enterprises by 2030.

4) By April 2019, the federal government has to draft a law on state support of “coal transformation” amounting to  at least  EUR 1.3 billion  from the federal budget for a period of up to 20 years and at least EUR 700 million  from federal state budgets where applicable. Individually, by June 30, 2020, a program to support companies that own brown coal fired power plants in relation to their closure earlier than the termination of operation is planned to be signed (in particular, RWE).

5) All employees over the age of 58 will receive severance pay and retirement pension contributions, and those under 58 – opportunities for retraining and placement. A separate agreement will regulate the issue of preserving the Hambach forest and settlements near coal mines.

 

Picture: One of Germany’s largest opencast mines, located in North-Rhine Westphalia. [Bert Kaufmann/Flickr]

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