German coal regions to be allocated €40 billion as part of coal phase-out plan

Industry and business associations welcomed the decision, and the nature conservation organisation BUND also considered the law to be "positive", but warned against what they call a "road construction orgy". EPA-EFE/FELIPE TRUEBA [Felipe Trueba/ epa]

Germany’s federal cabinet has presented a bill to allocate €40 billion to some federal states so they can prepare for structural changes related to phasing out coal. But it remains unclear when power plants will actually be shut down. EURACTIV Germany reports.

Exactly 214 days after the so-called coal commission presented its recommendations to the federal government, the cabinet agreed on Wednesday (28 August) on the Structural Reinforcement Bill.

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With negotiations having lasted eight months and the outcome already postponed once, the German Commission on Growth, Structural Change and Employment (the so-called “coal commission”), has presented its final report. What’s in it? EURACTIV Germany reports.

“In doing so, we are keeping our promise,” Economy Minister Peter Altmaier told journalists.

The objective of the law is to accompany upcoming structural changes from the outset.

Up to €40 billion euros, €26 billion of which is dedicated to infrastructural measures, will flow into the federal states of North Rhine-Westphalia, Brandenburg, Saxony and Saxony-Anhalt up to 2038. By then, Germany’s last coal-fired power plant is expected to be taken off grid.

For it to come into force this year, the bill needs to be adopted by the German Bundestag and the Bundesrat. These financial commitments should send a positive signal to Saxony and Brandenburg, where elections will be held on Sunday.

According to an Infratest-survey, the far-right AfD could reach 24% in Saxony and 22% in Brandenburg.

The law provides for state institutions to be established in the areas affected by structural change and for railway, motorway and federal highway connections to be further developed.

This should also attract private companies, as 5,000 new jobs are to be created in the former coal mining areas. To this end, research facilities are to be promoted and the regions are set to become testing grounds for future energies, such as Power-To-X technologies.

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The federal economic ministry has followed the German coal commission’s recommendation by preparing a draft bill to phase-out coal power generation. However, things are going too slowly, according to the Greens. EURACTIV Germany reports.

The coal phase-out law is still missing

However, the bill is still only a promise, because the accompanying law that will determine the actual coal phase-out is still missing. It is expected to be drafted before the end of this year.

Until it has been determined when each power plant will be converted to “safety readiness” and shut down, no money will flow from the new “Structural Reinforcement Bill”.

So far, €500 million has been earmarked in the federal budget for the coal regions each year up to 2021.

The German government is currently still negotiating with the power plant operators about the conditions for the shutdown.

According to the coal compromise, energy companies are entitled to compensation payments for every gigawatt of coal-fired electricity prematurely phased out.

For example, if about three power plant blocks in the Rhine region were to be taken off the grid by 2022, RWE could receive compensation amounting to €3.6 billion from the federal budget.

But German Greens believe it is a mistake to make financial commitments to the states as long as these phase-outs are not regulated.

“If the money is approved before the phase-out plan is in place, the federal government will lose an important means of pressure,” party leader Annalena Baerbock recently told the daily newspaper Die Tageszeitung.

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Minister-President of North Rhine-Westphalia Laschet intends to close fewer coal-fired power stations than envisaged by the coal commission. Three of its members are exerting pressure on the federal government to push forward closures as quickly as possible. EURACTIV Germany reports.

Priorities can change

Meanwhile, the federal states are extremely pleased with the promised billions.

The new bill is “the first significant milestone on the way to a successful structural change on the part of the federal government”, said North Rhine-Westphalia’s Prime Minister Armin Laschet.

Economy Minister Altmaier also praised the constructive cooperation with the federal states. They had submitted lists of hundreds of regional projects to be funded until 2038 but the financing is not fixed, he added.

“Nobody is able to predict today what we will be capable of financing with the funds available in 2034 or 2035,” Altmaier added, suggesting that priorities could be subject to change.

However, this is worrying for the prime ministers of the different states, who want an agreement that guarantees them a level of investment, rather than having to renegotiate rates before every new federal budget is decided.

The draft adopted today does not provide for such an agreement. According to the economy minister, this will be “further discussed”.

Environmentalists fear a “road construction orgy”

Initial reactions to the draft are mostly positive.

Industry and business associations welcomed the decision, and the nature conservation organisation BUND also considered the law to be “positive”, but warned against what they call a “road construction orgy”.

The Greens, who have been pushing for the fastest possible phase-outs and had already submitted a draft for a coal phase-out law themselves in May, also welcomed the bill.

The party hopes for good results in the Sunday elections and two days ago presented its proposals for structural development in Lusatia, a region in Germany and Poland.

The Free Democratic Party (FDP), on the other hand, has said that the law is too short-sighted. The party demands the establishment of special economic zones in the former coal areas.

The leader of the German Christian Democrats (CDU), Defence Minister Annegret Kramp-Karrenbauer, also expressed this idea four days ago. Her party is enjoying a slight upswing before the election and could capture 30% of the votes in Saxony.

It is hoped that the bill, which has been presented to the Bundestag and Bundesrat for adoption just on time, could secure some votes for the CDU.

Only eight EU countries plan to phase out coal by 2030

The EU said Tuesday (18 June) that eight of its 28 member countries aim to phase out coal-powered electricity by 2030, triggering charges it is missing the mark under the Paris climate deal.

[Edited by Zoran Radosavljevic and Sam Morgan]

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