German cabinet signs coal phase-out bill

Environmental activists wearing masks of Economy Minister Peter Altmaier and Chancellor Angela Merkel protest in front of the German chancellery in Berlin on 29 January 2020. [EPA-EFE/HAYOUNG JEON]

The German federal cabinet signed off on the country’s coal phase-out bill on Wednesday (29 January), giving its blessing to billions worth of taxpayer money to compensate for power companies’ lost revenues. EURACTIV Germany reports.

After one year of negotiations with the federal states and power plant operators, the path is now clear for the country’s coal phase-out bill.

“We are really doing it now,” Finance Minister Olaf Scholz told journalists after the cabinet meeting.

Two weeks ago, the minister-presidents of the affected states (Länder), together with Chancellor Angela Merkel, agreed to take all of the country’s lignite-fired power plants off the grid by 2038 at the latest.

The only question that remained was the decommissioning tenders for coal plant operators, and the price ceiling that will apply to compensation from the federal state.

Unlike lignite, operators of coal-fired power plants will not receive immediate compensation. Instead, they will compete in tenders for the lowest possible decommissioning premiums, refunded by the German state, and then close their plants.

For this year, the maximum bid is set at €165,000 per decommissioned megawatt (MW), but in the coming years, it will drop sharply.

In other words, it is not yet clear when hard coal will be phased out. Yet, the Association of Municipal Companies (VKU) predicts the phase-out to be in 2033.

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When Germany eventually closes its coal-fired power plants, millions of CO2 pollution credits will be flushed into the EU emissions trading system, threatening to send the EU carbon market crashing. EURACTIV Germany reports.

200 pages and 22 hours for feedback

Environmental groups have been harshly critical of the coal phase-out law. At a time when “Germany should actually be fighting for more climate protection in UN climate negotiations and the EU”, the draft is a setback, according to Stefanie Langkamp of Climate Alliance Germany.

Some former members of the Coal Commission, which had drafted proposals for the bill a year ago, turned away from it last week and accused the German government of “treason”.

They criticised the phase-out plan for not enabling a steady reduction of two gigawatts of coal-fired power plant capacity per year, as planned, but postponed the shutdown of most gigawatts until the phase-out’s final years, from 2035 to 2038.

This means that 5 gigawatts are to be taken off the grid by 2030 instead of 20, which is why the final shutdowns are to be carried out on a large scale in the eastern German Lausitz region.

Environmental associations calculated that the random closures would result in an additional 40 million tonnes of CO2 over the years.

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Shortly after Germany announced plans to shut down its lignite-fired power plants, eight members of the country’s Coal Commission voiced criticism that their work has been discredited and that these plans would result in an additional 40 million tons of CO2 emissions. EURACTIV Germany reports.

Economy Minister Peter Altmaier of the Christian Democratic Union (CDU) had justified this by pointing to the nuclear phase-out, which is to be completed by 2022.

According to media reports, this shutdown is the result of a deal with the East German states, which had refused to disable their lignite-fired power plants before the 2026 review year. And they had then promised to save an additional ten million tonnes of CO2 by proposing other technical solutions by then.

Despite environmentalists voicing criticism in recent days, cabinet ministers expressed their satisfaction on Wednesday (29 January). And they would gladly answer the questions of the critics, “even if it becomes unpleasant”, Altmaier said.

Overall, the general public had given the coal phase-out bill a lot of praise so, despite everything, Altmaier was “convinced that this is a great success”. The minister had always emphasised his willingness to discuss.

Civil organisations, however, had been surprised by the very short period of only 22 hours in which public statements about the over 200-page document were accepted.

Concessions to power plant operators

The coal phase-out law contains numerous concessions to the power plant operators with whom the German government negotiated the timetable for the phase-out to avoid lawsuits against the shutdown.

As a result, the Hambach forest, which had become a symbol of the fight against coal-fired power generation just a few months ago, will be preserved.

But German energy company RWE plans to build its open-cast mine around the forest. Around the Garzweiler open-cast mine, in North Rhine-Westphalia, 1,500 people will also be resettled.

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Financial concessions have also been made to operators: €2.6 billion will go to RWE in Rhineland, €1.75 billion to LEAG in Lusatia. But because this is not laid down in the law, compensation should be part of a public law contract.

The decision will therefore be expensive for the federal government. Because within the framework of the so-called structural strengthening law, which complements the coal phase-out law and is already in parliament, structural aid of €40 billion has been promised to the coal regions.

According to the coal phase-out law, workers in power plants who are older than 58 will be entitled to five years of adjustment money until they retire. Although no sum is mentioned in the bill, the economy ministry had in an earlier draft provided an estimate of €4.8 billion, which is to be taken over by the federal and state governments.

However, it is still unclear when the coal phase-out bill will go through the Bundestag’s readings. Economy Minister Altmaier declined to give a date, saying it was a matter for the parliament.

He hoped, however, that it would be concluded soon so that it could be passed promptly, alongside the structural reinforcement bill.

[Edited by Frédéric Simon and Zoran Radosavljevic]

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