Germany plans to phase out coal-fired power stations by 2038
Last Modified: 08:45 AM, Sun Jan 27, 2019

Tobias Buck and Guy Chazan in Berlin

FT.com. 27 January 2019
Compensating coal-mining regions expected to cost German taxpayer €40bn

The German government has welcomed an official proposal to phase out the country’s coal-fired power stations by 2038, saying it would act quickly to implement the recommendation.

The proposal put forward by the government-appointed commission, which was announced on Saturday, would see Germany join a growing number of countries to have decided to end the use of coal, a key source of greenhouse gas emissions.

But it is likely to place a big burden on the German taxpayer, requiring huge compensation payments to coal miners, coal-producing areas and the operators of power stations that will be closed as a result of the new policy.

German economy minister Peter Altmaier said the commission’s proposals were a “strong signal” that was good for “the economy and the climate”. The deal would mean “less CO2, more new jobs, reliability of supply and affordable [electricity prices]”, he tweeted.

He told the Bild am Sonntag tabloid he was planning to table a bill in the next few weeks to implement the commission’s findings.

Germany was long viewed as a champion in the fight against climate change, but its slowness in exiting coal has dented that reputation. It is more dependent on coal than most other western economies, and still boasts a large domestic lignite mining industry. Lignite, or brown coal, is one of the dirtiest fossil fuels and has long been a target for green campaigners.

Germany’s energy dilemma was further complicated by the government’s decision in 2011 to exit nuclear energy by 2022, a move that takes out another reliable source of power.

Power plants that run on coal and lignite currently account for about 42 gigawatts of generation capacity, and produce 40 per cent of Germany’s electricity. Under the pathway proposed by the commission, coal capacity would be reduced to 30GW by the end of 2022 and to 17GW by the end of 2030.

The lost capacity from nuclear and coal is supposed to be largely replaced by renewable sources such as wind and solar, which are set to account for 65 per cent of power generation in Germany by the end of the next decade.

The proposal envisages massive financial transfers — worth €40bn over the next 20 years — to regions in Germany where coal mining and coal power still play a significant role.

The commission also wants Berlin to shield households and the private sector from the rise in electricity prices that is expected to follow the phase-out, a move that could cost taxpayers a further €2bn a year.

Green groups welcomed the deal, though there was some disappointment that the phase-out would not be completed sooner than 2038. “Better bad climate protection than no climate protection at all,” said Kai Niebert, head of the Deutscher Naturschutzring, an umbrella group of environmental organisations.  

But there was harsh criticism of the deal from some economists. The Ifo Institute, a think tank, said the loss of coal capacity would be compensated by “imports of energy generated from nuclear and coal from Poland and the Czech Republic”. 

“The compensation for power station operators and the planned cushioning of electricity prices will further increase the cost of the coal phase-out,” said the Ifo’s Karen Pittel.

Michael Theurer, a senior figure in the pro-business FDP party, said the deal took Germany down the path towards a “command economy”. “This national go-it-alone policy won’t save the climate but will saddle the German taxpayer with billions in costs,” he said. 

The deal was adopted after nearly 21 hours of negotiations by a commission that brought together business leaders, environmental groups, trade unions, scientists, and representatives of Germany’s big electricity providers.

The final result was a compromise: green groups had wanted a coal phase-out by 2030, while regions of eastern Germany with big coal industries had pushed for an end date of 2050. Energy company RWE has described the 2038 deadline as “clearly too early”. 

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The Financial Times Ltd.
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Publication: FT.com
Organization: FDP LLC, Ifo Institute–Leibniz Institute for Economic Research at the University of Munich., RWE AG, Axel Springer SE
Location: Berlin, Germany, Czech Republic, Ifo, Poland
People: Michael Theurer, Peter Altmaier, Guy Chazan, Tobias Buck
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