Germany’s Lignite Exit Strategy

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By Gisa Holzhausen, Lisa Keppler and Dr. Christine Wörlen, Arepo Consult

The climate scientists from the Intergovernmental Panel on Climate Change (IPCC) estimated that after 2011, only 1,000 Gigatons of CO2 should be emitted in total worldwide — no matter by whom or how — in order to limit climate change to 2°C. To achieve this, no less than a revolution of the way we produce and consume energy is needed. But as much as horse carriages were replaced when cars became accessible to the average person, the transition of the energy system will create new business for some, and bring down business for others. What strategies can governments employ to get those on board that belong to the old system — like coal miners — and not leave them behind?

In Germany, 80% of greenhouse gas emissions result from burning fossil fuels — for electricity or transport. Among these, the burning of lignite for electricity production is one of the most impactful. To reach the Paris target, Germany must limit the future emissions of its lignite-based power plants so they do not exceed 2,000 million tons of CO2. Without further action, Germany will miss its climate targets for 2020 by 8%.

Against the background of the missed targets, the government has appointed a ‘commission for growth, structural change and employment’. Its task: to identify strategies on how climate action can be achieved while maintaining growth and employment levels. Many countries are observing what Germany will do, as they will likely face the same challenges sooner rather than later. At the heart of the German debate: social and structural measures to support the lignite regions that will suffer from a proposed coal exit. But while the committee discusses the details and the timeline for Germany’s exit from lignite, the industry and the regions are already on their way to adapting to new realities.

Data tell no tales

Today, lignite is still being mined in nine open cast mines in Germany and used to generate electricity for the general supply in nine large-scale power plants. More than 24% of the German electricity production was based on lignite in 2017.

When debating the shutdown of the remaining open cast mines and lignite-fired power plants, coal proponents put a focus on the resulting loss of jobs and the social implications for the coal regions. But the truth is, not even 1% of employees in each of the affected four German states still work in the coal sector, and many coal companies themselves have already developed other profitable business models and strategies.

Structural change in this sector has already been happening since the 1990s. In 2017, about 20,900 people were directly working in the industry in Germany. If we include the indirect jobs, meaning those that are created when mine and power plant operations demand goods or services from other sectors, the figure reaches 43,000 to 74,000 people still depending on the industry for their income. On the other hand, the renewables sector creates around 330,000 direct and indirect jobs. The contrast demonstrates how the importance of lignite as a whole tends to be overestimated.

As workers do, arguments are growing old

Even if the actual numbers of employees affected today are low, generations of workers have worked in the industry, and the identification with the industry is still high in some regions. But many of the current employees are already close to their retirement age. Leaving family traditions aside, new generations do not depend on getting a job in the coal sector. Due to the demographic problem of over-aging, especially in Lusatia, young, skilled workers are needed urgently in all kinds of jobs — e.g. as doctors or teachers.

Companies are diversifying

Part of today’s jobs in lignite can also be preserved without open cast mining: workers are needed for recultivation activities, as well as geological and hydrological management of the post-mining landscapes. MIBRAG, the mining corporation in the central region, and LEAG, the Lusatia energy company, are active outside the mining sector and also increasingly internationally and in export. MIBRAG, for example, is reducing its mining activities, but is systematically establishing its subsidiaries as specialized service providers — from gardening and landscaping to waste disposal, drilling and engineering services. Like these two, many companies in the sector are preparing for and reacting to a changing market.

Regions develop economic strategies in other sectors

Not only companies but also the regions have been strategically developing other sectors and competencies and can now harvest the fruits of their work. In fact, in Brandenburg, more than five times as many, and in Saxony-Anhalt more than ten times as many employees work in the food industry than in the lignite sector. In the district of Rhein-Kreis Neuss near Cologne, where the city of Grevenbroich is located — self-declared ‘capital of energy’ and home to the big power plants of Neurath and a high concentration of lignite related jobs — the chemical sector is more important than lignite. And other sectors are more significant in terms of employment. The logistics industry alone (in a dedicated lignite district) employs more people than the lignite sector in Germany as a whole.

Since profitability of current mining operations is low, the business tax revenues paid by the mining companies to the lignite municipalities have also declined in recent years. The municipalities know that the resulting budgetary problems can only be overcome by attracting new companies independent from the coal sector. Structural change is not a new threat scenario but is and has always been a real and a living strategy for the future. Established and new industries depend on a reliable supply of electricity — but not on lignite.

Let’s face the realities

Germany already has exited from coal: between 2008 and 2018, a systematic and planned phase-out from hard coal mining has ended an era in German industrial history. Compared to hard coal, a socially acceptable exit from lignite is the far smaller challenge. Prolonging the exit from lignite is neither helping politics nor the industry but ignoring what is already taking place. Germany is still leading world lignite production — but is falling behind on reserves. Structural change phasing out coal is already a reality — for businesses, workers and the regions.

In order to win the battle against climate change and provide planning stability for all parties involved, decision makers should refrain from polarizing statements. The German Minister for Economic Affairs and Energy’s proclamation “the exit from coal will not take two or three years but much longer” or the Prime Minister of Brandenburg’s warning that the exit from coal needs to be planned for decades to “avoid dramatic structural breaks” are not encouraging stakeholders to accept realities. Instead they should constructively contribute to clear exit strategies that support the existing trend and offer new and fast perspectives for the affected regions and workers — in the service, energy management, logistics and automation sectors, for recultivation and landscaping. In light of the global challenge of climate change many countries are looking to Germany. A successful transition of the world’s leading lignite producer to the post-lignite age could be their inspiration.

Dr. Christine Wörlen, geographer and economist, is founder and director of the research and consulting company Arepo Consult. Christine is an internationally renowned expert in the area of renewable energy policies and energy systems integration as well as economic impact of renewable energy deployment.

Gisa Holzhausen studied North American Studies, Political Science and Communication Science at the Free University of Berlin and works as advisor for Arepo Consult with a special focus on climate and renewable energy policy in international and development contexts.

Lisa Keppler works as a Junior Consultant at Arepo Consult. She supports projects dealing with evaluation and assessment of energy and climate programmes as well as monitoring of energy policy instruments. She holds a Master’s degree in Economics and a Bachelor’s degree in European Studies.

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