Support for Germany’s lignite regions must be better focused in order to succeed – ifo Institute
Clean Energy Wire
Germany’s Institute for Economic Research (ifo Institute) has warned that the planned economic transformation of lignite mining regions could fail if subsidies are not better targeted. The federal government has pledged up to 40 billion euros to support structural change in the three remaining areas affected by the closure of lignite mining from 2020 to 2038. Some 14 billion euros alone are slated for significant investments by the states and their municipalities. In its evaluation of proposed projects in the eastern German states of Brandenburg, Saxony and Saxony-Anhalt, the ifo Institute said that “a considerable proportion of these funds will be used to finance measures that may improve local living conditions, but have only a minor effect for successful structural development.” It argued that “the selection of projects should be more strongly oriented toward the goals of the Structural Strengthening Act, since otherwise a failure of the transformation process in these regions cannot be ruled out.”
Specifically, the institute said funding so far showed that the intention behind most of the projects was more to improve the general living conditions for the local population than to attract companies. “Judging by the projects that the Länder [states] have so far earmarked for funding, their actions do not seem to be particularly focused,” noted Joachim Ragnitz, managing director of the ifo Institute in Dresden. A change of course is urgent if the goals set out in the guiding principles drafted for the coal mining areas are to be taken seriously, he added. “Otherwise, there’s a risk that economic transformation in the affected areas will fail.”
Germany officially plans to phase out coal power by 2038 at the latest, but the new government has said it will seek an earlier exit, ideally by 2030. “That means new economic structures must be successfully established in the three lignite regions before that date,” Ragnitz stressed.