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German government plans to exit coal industry by 2038

03 February 2020

Germany’s Chancellor Angela Merkel announced on January 29 that the government is backing plans to stop using coal as an energy source by 2038. The move is part of the ruling coalition’s efforts to protect the climate and move towards renewable energy sources.

Uniper's Staudinger power plant - Image: Wikimedia
Uniper's Staudinger power plant - Image: Wikimedia

The move would see Germany opt for renewable sources such as wind and solar power while exiting nuclear power by 2022 and coal-fuelled power sources by 2038, according to Reuters

Following the announcement, Environment Minister Svenja Schulze said: “This is not just an exit from coal, it’s an entry into renewable energy. We will cut a quarter of all CO2 emissions in Germany – that is a very important sign, internationally too, that Germany is taking its responsibility here.”

The German government introduced a significant climate change package in 2019 and aims to cut greenhouse gas emissions to 55% of its 1990 level by 2030. The exit from coal is expected to mean large investments in renewable energy.

The government has already agreed compensation schemes for workers, companies and regional governments that are set to be impacted by the closure of coal plants. This includes a €40 billion (£33.9 billion) deal with coal-mining regions to ensure “structural change succeeds”, according to Finance Minister Olaf Scholz. 

A draft law approved by the cabinet to phase out coal-fired power stations would see maximum compensation of €165,000 per megawatt in 2020, falling to €155,000 in 2021 and 2022. The maximum sum would then drop annually 25%, reaching €49,000 in 2026, before compensation is stopped.

Reuters reports that in response to the government’s announcement, Uniper said that it intends to shut down most of its hard coal-fuelled power plants by 2025. The German utility, formed in 2016 following the separation of E.ON's fossil fuel assets into a separate company, announced its plans on January 30.

The energy company plans to shut down around 1.5 gigawatts of capacity by 2022 and a further 1.4 gigawatts by 2025, which will account for around half of its European coal capacity. 

“We’re setting Uniper on a decisive course for the future: our actions will provide planning security to our employees at the facilities affected and give our company the financial and structural flexibility to focus on important, sustainable projects,” CEO Andreas Schierenbeck said.

Uniper said that its planned closures would see its carbon emissions cut by around 18 million metric tonnes per year. The company could qualify for government compensation of around €365 million if it is able to succeed in planned auctions that will allocate closure permits to the least expensive bidders, Reuters says.

Uniper’s decision does not affect its Datteln 4 plant, a new €1.5 billion coal-fired power plant set to go online in 2020. The government has said that former coal sites should be used for new facilities such as gas-fired combined heat and power plants. Uniper intends to develop its own sites to preserve jobs.

Germany’s exit from coal is likely to come with political repercussions for Chancellor Merkel’s ruling coalition. Recent record-breaking hot summers combined with an increased focus on climate change and the prominence of climate activists such as Greta Thunberg, has seen public opinion go against the use of coal as an energy source. Meanwhile, the far-right Alternative for Germany (AfD) has looked to increase its popularity in the coal mining regions of east Germany with its simple message that jobs are more important than the environment.

The closure of coal plants will begin with the country’s oldest plants, some of which date back to the 1950s. The government’s plan will also see the country exit brown coal, or lignite, of which Germany is the world’s largest producer. Brown coal generates around 19% of the country’s electricity but is considered the most polluting type of coal.

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