02 May 2019, 14:00

Implementing Germany’s coal exit proposal – the road ahead

Germany's coal exit commission has agreed on a proposal on how the country can manage to phase out its single largest source of greenhouse gas emissions by 2038, but the ensuing political decision-making process has only just started. Chancellor Angela Merkel's government coalition has to decide how to implement the non-binding proposal and draft necessary legislation. Many details have yet to be worked out and ultimately decided by parliamentarians in a process that could last well into 2020. In this factsheet, Clean Energy Wire lays out the basics of the ongoing political process to put the German coal exit into action. [UPDATE adds proposals for timetable for shutting down coal-fired power plants by Green Party and Greenpeace/ClientEarth]

Also read our full package on Germany's coal exit in the dossier Europe's largest economy aims to exit coal to reach climate goals. To stay abreast of most recent developments, search for the hashtag #coal, and also follow us on twitter @cleanenergywire.

 

Government must put proposal into action

In late January 2019, Germany's coal exit commission agreed on its highly anticipated phase-out proposal and recommended to end coal-fired power generation by 2038 at the latest. On almost 300 pages, the commission provided detailed suggestions on a wide range of aspects, but at the same time also omitted crucial questions – such as which power plant has to be switched off at what time. Policymakers now have to find an answer to these moot points if the commission's carefully balanced phase-out plan is to be observed.

From the onset, the commission’s final report was meant to serve rather as a general blueprint for political decision-making than a detailed manual on how to proceed. However, according to the commission's leadership, the proposal takes the interests of all main stakeholders into account, which is why it urges the government to follow its recommendations as closely as possible.

The structure of Germany's federal political system brings with it that both the federal parliament (Bundestag) and the council of state governments (Bundesrat) have to give their consent to many aspects in the legislative process of a coal phase-out. [This factsheet gives a brief overview of German law-making on energy and climate issues.]

In the end, state governments will have to implement the coal exit at a regional level, for example through licensing future lignite mining projects or deciding which infrastructure investments are most pressing to give the regions an economic perspective that goes beyond coal.

Photo of Germany's Bundesrat building in the capital Berlin. Source: Bundesrat.
State government representatives in the Bundesrat have to agree to many aspects of a German coal phase-out in the legislative process. Photo: Bundesrat.

Before parliamentarians get involved, however, the federal government first has to decide which details of the process it will adopt and draft relevant legislation for. Chancellor Angela Merkel's government has started to “closely and constructively review” the final report.  This process that was still ongoing as of April 2018 and would "still take some time" but eventually result in a set of energy laws before the end of the year, the government said. However, Merkel also signalled her readiness to move ahead with the deal. “The fact that a commission made up from such different societal groups has found an agreement and created a framework is an important message for us. We will handle this very carefully,” she said. The deal showed “responsibility for society as a whole and we want to live up to it.”

Also the government coalition partner of Merkel's conservative CDU/CSU alliance, the Social Democrats (SPD), said they are ready to implement the deal. SPD party leader Andrea Nahles in late March called for initiating the legislative process soon. “My expectation is that the (…) commission’s results will be implemented exactly as proposed,” Nahles said, adding that this meant laws for the structural economic development of affected coal regions would be introduced before summer.

The coal exit is likely to also play an important role in the upcoming deliberations of Germany's so-called climate cabinet, an intra-government panel announced in March that is supposed to bring all ministries relevant for climate action as well as the chancellor and government party leaders together in order to achieve progress on emissions reduction. It is also meant to serve as a platform to prepare the introduction of Germany's highly anticipated Climate Action Law, which according to Merkel will be adopted before the end of 2019.

Elections in mining states let policymakers tread carefully

German politicians have called the coal exit's implementation “a very complex and unstable process” and warned that it “will surely not be a cakewalk”. Within the government coalition, conservatives from CDU/CSU have to agree with the SPD on the details of a phase-out. But state governments across the country are made up of much more varied coalitions, including many with Green Party participation.

In addition, several eastern German states head to the polls this autumn, including lignite mining states Saxony and Brandenburg. Both Merkel’s conservative CDU/CSU alliance and the SPD have slumped in polls and in last year’s regional elections. Concerns that voters may perceive the deal proposed by the coal commission as a burden had made both parties nervous as the right-wing populist and anti-energy transition AfD party is polling strongly in eastern Germany. News of individual power plant closures in the economically weak eastern mining regions ahead of the autumn elections are feared to strengthen this trend.

Moreover, the state premiers of the three eastern German coal mining states, Saxony, Saxony-Anhalt and Brandenburg announced that they are not going to pay for any structural economic adjustment measures associated with the coal exit from their own state budget. “By all means want to avoid the impression that the coal mining areas end up bearing the brunt” of a coal phase-out, the state premiers from the CDU and the SPD told chancellor Merkel in an open letter in early April.

Twofold implementation process

A few aspects have become clearer since the coal commission presented its deal in late January, one being that the future process of implementing phase-out will be split up into two fields of action:

A. Structural economic change – support for lignite mining regions

B. Energy and climate policy legislation

Economy and energy minister Peter Altmaier said Germany will need two major laws to implement the phase-out plan. One on support for mining regions, the other on the timetable for coal-fired power plant shutdowns. However, several additional laws, amendments to existing legislation or regulatory changes, will likely be necessary.

A. Support for mining regions

From the beginning, the economic future of lignite mining regions was handled as key task of the coal exit commission, as reflected in its official title “Commission on Growth, Structural Change and Employment.”

Accordingly, the implementation of the coal exit deal will “on the one hand happen via a law concerning the necessary measures for structural economic change,” the economy ministry told CLEW. The measures and financial means for affected coal regions will be put into law before the summer break, the government said in an answer to a parliamentary inquiry by the Green Party. Chancellor Merkel prolonged the deliberations over how support payments could be strucutred and plans to table a first proposal for a cabinet meeting in May, news agency dpa reported.

Against the backdrop of the autumn elections in eastern Germany, coal state premiers want to act quickly to present tangible negotiation achievements to their mining regions. They have announced to agree with the federal government on key infrastructure projects in a programme of measures by the end of April.

Newspaper Frankfurter Allgemeine Zeitung says that the government wants the coal states to finance part of the structural economic support measures for mining regions, as the states want to use 14 billion euros out of a total support package of 40 billion euros free of their own choice. Germany’s coal exit commission agreed that coal regions should receive a total of 40 billions euros, 26 billion of which will be used to finance measures to be laid out in an upcoming law.

Merkel says she plans to then get the requisite law off the ground by May. Then it will have to be debated and decided in parliament. Lignite mining state premiers call for an accompanying contract between the national government and the states to implement the law, which would give regions security beyond the current legislative period.

In addition, the coal exit commission has proposed to draft an immediate action programme to use the 1.5 billion euros earmarked for structural economic support in the current federal budget until 2021. Economy minister Peter Altmaier said the federal government is “ready for a very quick start regarding financing.” In a parliamentary debate on 14 February, state secretary in the economy ministry Oliver Wittke said this programme would be initiated in March 2019.

B. Energy and climate legislation

The government has not yet decided the legislative footing on which to place the coal exit. It is unclear whether there will be one ‘coal exit law’ or a package of legislative changes.

Graph shows installed coal power generation capacity before and after the potential coal exit according to Germany's coal exit commission. Graph: CLEW/Appunn 2019.

The implementation of the coal exit commission’s proposals for the energy sector will likely require the amendment of several existing laws, such as the Renewable Energy Act (EEG) or the Combined Heat and Power Law (KWKG).

Besides the law on measures to support mining regions, "additional action on legislative and regulatory levels" is going to be necessary, especially regarding the phase-out of coal capacity from Germany's energy system, the energy ministry told CLEW.

The timetable for shutting down coal-fired power plants will be among the more contentious pieces of legislation, as individual regions, companies and jobs are immediately affected. While the government has not yet published any plan, the opposition Green Party has published a ten-point-plan on how to proceed, including a timetable for closing the first coal-fired power plants.

In the beginning of May 2019, environmental NGOs Greenpeace and ClientEarth published their own proposal for a coal exit law, detailing a shut-down schedule. They criticised the government for failing to propose ways of implementing the official coal exit commission’s February 2019 recommendations.

A concrete plan for switching off individual power stations could also be decisive for whether or not the embattled Hambach Forest can remain intact or will be cut down by utility RWE to expand a nearby lignite mine.

On 20 February, North Rhine-Westphalia's (NRW) state premier Armin Laschet said his government had agreed with energy company and western German lignite mine operator RWE on a moratorium for clearing the embattled Hambach Forest until autumn 2020. Laschet said preserving the Hambach Forest would be “desirable”, adding that the forest needed to be part of the negotiations between lignite companies and the federal government over which power plants to shut down when and how to compensate the operators. RWE has put the price tag for preserving the forest that has become a symbol for climate activists in the country at more than one billion euros.

The coal exit commission recommends settling questions related to compensation for operators of lignite plants as well as for employees in “mutual agreements.” First talks could be conducted over the coming months, as the question is closely interlinked with the decision on a timetable for taking power plants off the grid. State premier Laschet made clear that these negotiations fall under the responsibility of the federal economy ministry, and his government would then implement the outcome. RWE has said it estimates costs of 1.2 to 1.5 billion euros for each gigawatt (GW) of power plant capacity switched off. 

However, the federal parliament’s research service in late February concluded that the German state is not necessarily liable to compensate coal plant operators. While compensation might be paid in certain cases of “otherwise unreasonable economic burden”, the proposal as it stands did not put any such burden on individual plants. In April, the government stated that "possible" compensation payments were still subject to the review procedure.

Should mutual agreements not be found by the 30 June 2020 deadline, the commission recommends settling the dispute “by regulatory law,” which would mean that the government decides which plant has to shut down when to provide planning security and ensure uninterrupted power supply.

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