Minister set to ease climate levy burden on old coal plants - draft proposal

After weeks of protests from trade unions, the coal industry and politicians, the Minister for Economic Affairs and Energy, Sigmar Gabriel, looks set to adjust his proposal for a climate levy on old coal fired power stations and Chancellor Angela Merkel will make the issue her own priority. A ministry draft paper, seen by the Clean Energy Wire, suggests reducing the annual amount of carbon emissions that the power sector has to save to 16 million tonnes. The ministry’s previously suggested mechanism had envisaged a reduction of 22 million tonnes CO2.

On Tuesday, German media reported that Merkel now weighs into the dispute about the climate levy, having arranged for a meeting at the chancellery with Gabriel, his state secretary Rainer Baake and the head of the chancellery, Peter Altmaier, on Wednesday to discuss the so called climate contribution.

The climate contribution is part of the implementation of the Climate Action Programme designed to ensure that Germany will meet its own emission targets by 2020. The power sector is responsible for 40 percent of the country’s greenhouse gas emissions and projections showed in 2014 that Germany would miss its climate target without further steps. Because emissions from old lignite (brown coal) fired power stations had remained too high, the planned climate levy specifically targets these plants, giving them a certain emission allowance depending on their age. If emitting more, plant operators would be obliged to buy additional emission permits from the European Emissions Trading System (EU ETS). Power plants younger than 20 years don’t face restrictions. Overall 90 percent of the power generation from fossil fuels would not face any additional costs, the original paper said in March 2015.

A ministry spokesperson said that the talks were ongoing, declining to comment on any "interim results".

While researchers had rebuffed industry claims that the climate levy would cause many old power stations to close down, trade unions and energy utilities including RWE and Vattenfall had warned Gabriel that many jobs in the sector could vanish, and unions staged protests in Berlin at the end of April.

Now the adjusted ministry proposal increases the amount of CO2 that olderplants may emit without penalties. All fossil power stations older than 37 years are allowed to produce 3.8 million tonnes CO2 per gigawatt capacity before the climate levy  kicks in, up from a maximum of 3 million tonnes for all power stations older than 41 years. This will “improve the economic viability of old power stations,” the new draft proposal says. 

Minister Sigmar Gabriel and his state secretary Rainer Baake had repeatedly said that they would be open to suggestions and ready to make sensible adjustments to the climate levy but that Germany’s greenhouse gas reduction targets were non-negotiable.

In case of hardship: special rules for old lignite stations

After talks with electricity producers the ministry now also proposes to adapt the calculation of the levy, payable for excess emissions. Instead of a fixed value of 18-20 euros payable per tonne of CO2 emitted over the limit, the climate contribution should rise and fall with the wholesale price for power and the price for ETS allowances. This would make sure that power stations will be able to always earn enough to cover their costs and stay alive. And it would make the climate levy more compatible with the European Emissions Trading System as the climate levy is reduced when the price for allowances goes up.

For cases of special hardship among lignite-fired power stations (e.g. high transport costs from mine to plant), the new proposal promises special rules. Instead of mainly reducing emissions from the brown coal sector, the new mechanism would target hard coal fired stations more to achieve a fuel-switch from hard coal to natural gas, the new paper says.

Oliver Krischer of the Green Party opposition in parliament called the document an "evidence of incapacity”. Gabriel should be aware that by giving support to 50-year-old, inefficienct and polluting brown coal-fired power stations, jobs would not be saved but instead endangered, at modern gas power plants, in the sectors of energy efficiency and renewables, Krischer said.

As the new climate contribution scheme would only lead to a reduction of 16 rather than the needed 22 million tonnes CO2 by 2020, increased support for combined heat and power stations (CHP) could be used to achieve the missing emissions savings, Reuters and German daily Handelsblatt write, citing government sources. Instead of 1 billion euro CHP support per year 1.5 billion could be spent.