German election primer – 2038 end date for coal under fire as climate forecasts worsen

• The first installations were taken offline at the end of 2020 and more are to follow by the end of 2021. By the end of 2022, the total capacity is supposed to drop to 15 gigawatt (GW) hard coal and 15 GW lignite, from 22.8 GW hard coal and 21.1 GW lignite in 2019. For 2030, the current targets are 8 GW hard coal and about 9 GW lignite.

• Hard coal phase-out auctions have so far largely been deemed a success, with bids per megawatt taken off the grid being far below what grid authorities had planned. Operators concluded that taking even the most modern plants offline is more economical for them, as the example of Hamburg's Moorburg plant, opened in 2015, demonstrated.

• Many climate activists took issue with the fact that the law did not rule out the start of operation of a new coal plant, Datteln 4 by operator Uniper, at a time when the country was trying to find a compromise on phasing out coal. The plant started operation in mid-2020, after years of delay, and was given an operating license until 2038, meaning it would be among the last installations in the country to go offline. However, Uniper since has signalled it would consent to an earlier closure if a future government demands it. A German court recently found that construction plans for country’s newest coal plant did not meet legal requirements, possibly the first of two steps that could lead to the plant's immediate shutdown. The ruling is seen as a blow to conservative candidate Laschet, who strongly backed the plant in his home state.

• While coal power generation markedly increased in the first half of 2021 compared to the year before, when the coronavirus pandemic massively reduced economic activity and energy demand, it still remained lower than in 2019, meaning a downward trend generally was sustained. Altogether, coal provided just over a quarter of Germany's total power production in the first six months of 2021 (see graph).

• However, forecasts by think tank Agora Energiewende found that a strong rebound in economic activity in 2021 will likely mean that Germany is going to see its strongest year-on-year rise in emissions since 1990 and exceed the CO2 limit it managed to meet in 2020.

• According to the think tank, this means further immediate steps to reduce emissions, including an earlier end of coal-fired power production, cannot be avoided. However, Agora said it estimates that coal would drop out of the market anyway by 2030 under a reformed ETS, with prices rising above 80 euros per tonne and making coal unprofitable in most of Europe.

Why is the agreed phase-out model being contested?

• While many negotiation partners in the coal commission criticised what the government had made of the compromise right after the law was introduced, worsening climate forecasts, tighter climate targets, and events such as the deadly floods sweeping parts of Germany in the summer only fuelled calls to reconsider the agreement. But the government coalition was criticised in media comments for shying away from resolving the big contradiction of increased climate action and sticking to the late end-date for coal to avoid alienating trade unions or break their promise to coal workers.

• Environmental NGO Greenpeace calculated that coal power operation as provided by the current law could use up almost half of Germany's remaining carbon emissions budget of roughly 4.4 billion tonnes under a trajectory that aims to limit global warming to 1.5 degrees Celsius. Sticking to the phase-out schedule thus would drastically reduce all other sector's budgets. Depending on the speed of the roll-out of renewable power sources, coal's share in the remaining budget could even be as high as 74 percent, it added.

• Climate analysts at think tank E3G pointed out that Germany’s new climate target of becoming greenhouse-gas neutral by 2045 cannot be achieved if emissions from the energy sector aren’t cut quicker than foreseen in the coal exit legislation. A draft government report from August backed this assessment, finding a large gap between estimated greenhouse gas emission reductions and targets over the coming 20 years. Without further action, 2030 emissions will have decreased by only 49 percent, and not by 65 percent as planned, the report found.

• Energy market analysts at Energy Brainpool found that "the reduction in coal-fired power generation remains by far the greatest leverage in terms of emissions”, but also stressed that a quicker phase-out must come with faster renewables expansion. If the end of lignite alone was brought forward to 2029, the necessary share of renewable energy sources in gross electricity consumption would have to climb from 65 to 75 percent in 2030, they calculated.

• Environmental NGOs also criticised the bill presented to the taxpayer, arguing that the over 4 billion euros agreed in compensation payments to lignite plant operators are far too much. Given the changing market environment, roughly 343 million euros would already have covered the companies' losses, they argued. Operators would have had to shut down earlier anyway due to market forces making coal power unprofitable. The guaranteed funding now would give them financial leverage to keep installations running, they argued. The plans are currently being scrutinised by the European Commission to see whether they are in line with EU State aid rules.

• Researchers at the Wuppertal Institute warned that the next government faces "the task of the century" to prepare the country for a rapid decline in greenhouse gas emissions and must enforce an earlier coal exit in 2030 to achieve them. "The next legislative period is the crucial time to turn the 2020s into a decade of implementation and to enter the climate protection path irreversibly," the institute's scientific director Manfred Fischedick said.