Eastern German coal mining firm seeks ETS exemption amid Iran war

Eastern German lignite plant operator LEAG aims to promote domestic coal production as a readily available alternative to fossil fuel imports amid the energy crisis and the price shock triggered by the Iran war, business weekly WirtschaftsWoche reported. The magazine cites an internal presentation intended as a briefing for company management for talks with the state governments of eastern German coal states Brandenburg and Saxony. The document describes power production with lignite “made in Germany” as a potentially cheap energy source that could bolster the country's energy security. 

According to LEAG, lignite is only made uncompetitive by carbon prices in the EU’s emissions trading system (ETS), WirtschaftsWoche said. The coal company therefore proposes excluding lignite-fired power plants from the ETS. LEAG did not deny the reports, but said it is in “regular talks” with state governments ahead of a planned monitoring report on Germany’s coal phase-out, due in summer. 

The company added that the US- and Israeli-led war on Iran, which has caused damage to fossil energy infrastructure and trade disruptions in the Persian Gulf region, has created “changed framework conditions” for the phase-out that make fresh talks “absolutely necessary.” Chancellor Friedrich Merz said after the outbreak of the Iran war that Germany may have to delay the closure of individual coal plants in the event of a supply shortage.

WirtschaftsWoche reported that the presentation proposed reducing EU carbon prices for a “predetermined period” and placing selected coal plants on “security standby” while mining operations continue. A proposed industry power price could be as cheap as half of the market price if the state absorbs carbon costs, the presentation said, according to the article. LEAG told the magazine that it aims to “make a contribution to a Europe-wide debate about industry power prices.” If none of the proposals is accepted, LEAG would consider closing its least efficient plants earlier than planned, WirtschaftsWoche reported. 

The state governments in Brandenburg and Saxony did not confirm receiving LEAG’s proposals but said that they are in regular talks with the energy provider, which is an important job creator in coal mining regions. LEAG’s owner, Czech investor Daniel Kretinsky, has previously criticised the EU’s carbon pricing scheme. 

Pushing inefficient and polluting plants out of the market is one of the ETS’s primary objectives. LEAG stands to receive up to 1.75 billion euros under Germany’s coal phase-out law to transition its business to climate neutral energy production, while the states are also set to receive billions of euros to bolster structural economic adjustment in the coal regions before the phase-out’s 2038 deadline. However, market forces in the ETS could make coal-fired power production economically unviable well before this date. 

In the western coal state North Rhine-Westphalia, plant operator RWE has agreed to end coal-fired power production by 2030, provided sufficient backup capacity is installed in the interim. The federal economy ministry on Monday said it had contributed more than a third of a total of 240 million euros in investments in transformation projects in the state, for example in battery production and recycling plants.