Germany Will Pay $45 Billion To Rid Itself Of The Scourge Of Coal

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Germany has long depended on coal to generate electricity. Unlike the United States, which has turned its back on the commitments it made to the world community in Paris in 2015, Germany takes its promise to reduce carbon emissions seriously. This week, it hammered out an agreement that will see most coal generating stations within the country closed no later than 2038. The agreement calls for Germany to pay nearly $45 billion in compensation to various stakeholders over the next 18 years.

Uniper coal plant Germany
Image credit: Uniper

According to the BBC, the states of Saxony-Anhalt, Saxony, North Rhine-Westphalia, and Brandenburg will receive the bulk of the money, which will be used to pay for new infrastructure and to retrain workers affected by the transition away from coal. Those four states are where most German coal mines are found and the majority of coal generating stations are located. The country already has 250,000 workers in its renewable energy sector, the BBC says, far more than are employed in the coal industry.

Just over 10% of the money will go directly to mines and utility companies to compensate them for lost production — $3 billion to mines and power stations in the western part of the country and $2 billion for those in the eastern part. $19 billion is earmarked for the states, with another $30 billion dedicated to “further measures” to support the states in the future.

Germany has shut down its hard coal mining operations but remains the world’s largest producer of lignite, a soft brown coal that has higher carbon emissions than hard coal. It currently gets about 22.5% of its electricity from lignite facilities.

Praise From Government Authorities

The new agreement came after a marathon negotiating session that went into the early morning hours on Thursday, January 16. Government officials were quick to praise the plan, which contains some elements that are not very palatable to some interest groups. According to Deutsche Welle, Environment Minister Svenja Schulze said, “We are the first country that is exiting nuclear and coal power on a binding basis, and this is an important international signal that we are sending,” at a press conference. Germany had previously agreed to phase out nuclear power by the end of 2021.

Finance Minister Olaf Scholz said the payouts to energy firms were “affordable and in my view a good result. Germany is taking big steps on its way out of the fossil fuel age.” Armin Laschet, the premier of North Rhine-Westphalia, called the deal “an important breakthrough for climate protection. We will only succeed in achieving an ambitious coal phase-out if we take the citizens in the affected areas with us.”

Environmental Groups Are Less Impressed

The compromise hammered out by the government was dismissed by many environmental groups as too little too late, according to Clean Energy Wire. “The government has driven the coal compromise into the ground. There is no steady emissions reduction between 2023 and 2030,” Felix Matthes, research coordinator for energy and climate policy at the Institute for Applied Ecology, told the press after the deal was announced.

Herman Ott of Client Earth said the phase-out law on the table “comes from a different universe to the one where Australia is burning and leaders thrash out the climate question at Davos.” He pointed out that pursuant to the agreement, Germany would still use almost 6 gigawatts (GW) of coal power in 2038. “To avoid the worst effects of climate change, and to comply with the Paris Agreement, a 2030 deadline is the only acceptable option.” A tweet by someone calling himself CoalFreeDave summed up the feelings of those who oppose the deal.

CoalFreeDave is concerned that after 8 lignite facilities are closed by 2022, little further progress will be made until eleven lignite units are decommissioned between 2034 and 2038. There was 21 GW of lignite power in Germany in 2019. That will be reduced to 15 GW by the end of 2022. According to the agreement, lignite capacity will be cut to 8.8 GW between 2025 and 2029. Then no further cuts are planned until the last 11 lignite facilities are shuttered between 2034 and 2038.

There is a review process built into the agreement that could move the end date forward by 3 years to 2035. The only hope for coal opponents is that the cost of renewables will continue to fall and drive lignite operators out of business before the new government mandates kick in.

The Datteln 4 Dilemma

Under the new agreement, energy company Uniper is free to begin operating its Datteln 4 hard coal generating station this summer, much to the consternation of environmental activists. German energy minister Peter Altmaier says closing lignite facilities had a higher priority and will have a greater environmental impact than blocking the Datteln 4 plant.

Martin Kaiser, head of Greenpeace Germany, strongly disagrees. He told Clean Energy Wire a new coal plant this year shows the government is not really addressing the climate crisis. “The first assessment will reveal that Germany can and must exit coal much quicker. This is the only way to stick to the Paris Climate Agreement.”

Michael Schäfer of WFF Germany said the plant’s commissioning would send a “devastating” signal for climate action, arguing that the government’s agreement “annuls the hard-fought coal compromise. The conflict around climate-damaging coal in Germany now will begin anew.” He said his organization would strongly support putting a price on carbon dioxide from the utility industry as a way to accelerate the coal phase-out process.

The Business Of Politics

Politics is like sausage, they say. You don’t want to see how it’s made. The new German coal agreement is far from perfect and has left some people bitterly disappointed. But at least the country is not spending taxpayer dollars to prop up the coal industry and promising coal miners their jobs are coming back.

The new agreement is an important part of Angela Merkel’s legacy as she begins her own transition away from being the leader of her country. A half a loaf is better than none and getting even that much required a lot of hard bargaining and arm twisting. And kudos to Germany for recognizing the importance of supporting workers displaced by technological change.

You can’t always get what you want, the Rolling Stones taught us, but you just might get what you need. And in the meantime, market forces are driving the transition to renewables faster every day. Shame on nations that don’t have enough political will for even half a loaf policies like Germany’s.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new." You can follow him on Substack and LinkedIn but not on Fakebook or any social media platforms controlled by narcissistic yahoos.

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