Germany moves forward with $55bn plan to phase out coal power by 2038

Coal power plant in Datteln, Germany, at the Dortmund-Ems-Kanal. (Image by Arnold Paul, Wikimedia Commons.).

German Chancellor Angela Merkel’s cabinet has approved legislation setting a detailed schedule for the phase out of more than 100 coal-fired power stations across Europe’s largest economy by 2038.

The decision follows an agreement reached earlier this month between Germany’s government and its coal-producing states to kick off the shutdown of their fossil fuel-fired power plants, as part of the country’s efforts to fight climate crisis.

The legislation must still run through various stages of parliamentary approval in coming weeks, but once passed, it will govern 50.8 billion euros ($55 billion) of compensation for regions and companies that rely on coal.

Once passed, the law will govern 50.8 billion euros ($55 billion) of compensation for regions and companies rely on coal  

The deal, which also implies shutting down the mines that feed those plants, sees the government paying up to 40 billion euros ($44bn) in structural aid to the affected coal states of Brandenburg, North-Rhine Westphalia, Saxony and Saxony-Anhalt in the next 18 years.

Merkel’s administration will take further measures worth up to 4.8 billion euros ($5.3bn) in compensation to employees affected by the coal exit law until 2043, and a further 6 billion euros to utilities.

Germany’s timetable, however, could present challenges to the European Union’s efforts to cut its greenhouse gas emissions sooner — by at least 40% by 2030.

Most of the 28 EU states aim to become carbon-neutral by 2050 — that is, carbon emissions should be balanced by carbon-reduction measures. Poland, however, relies heavily on coal and has a temporary exemption.

Germany is the world’s largest producer of lignite (or brown coal), which fuels about 19% of the country’s electricity capacity. That kind of coal is considered the most polluting type because its low heat content means more must be burned and it contains a large amount of impurities such as toxic chemicals.

Late last year, the German government agreed not to force hard coal power plants — which rely on imported raw material — to close over the next seven years. The government plans to use a mixture of subsidies and tenders to encourage operators to close hard coal plants beginning this year.

With files from Bloomberg.

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