EU asks Germany to add backstop to €1.8 billion coal exit payout

The Niederaussem lignite coal-fired power plant is Europe’s third-largest emitter of carbon dioxide. Image source: Pixabay

The EU is asking Germany to add a profit-based backstop to a €1.75 billion ($1.9017) payout for the early shutdown of the operations of its second-largest coal miner.

A state payment of as much as €1.2 billion to an entity of Czech billionaire Daniel Kretinsky’s EPH Group AG has been preliminarily passed by the European Commission, Germany’s economy ministry said on Tuesday. The remainder of the payout will depend on how profitable the assets are in future.

The approved sum, reported by Bloomberg on May 31, is to cover costs for mine rehabilitations, closures and the impact on jobs. To prevent paying too much, Lausitz Energie Bergbau AG will be required to provide proof of future costs and will be compensated from the remaining sum of €550 million, according to the letter sent by the EU’s Competition Commissioner Margrethe Vestager.

Germany is trying to speed up the phaseout of coal in its power generation mix after falling short on its emissions reduction targets. The government already agreed in 2020 to pay billions of euros in compensation to LEAG and RWE AG to shut coal-fired power plants by 2038. Now to cut carbon faster, the state is trying to negotiate accelerating the coal exit by eight years.

In 2022, RWE agreed to a 2030 phaseout and will receive €2.6 billion in payments from the state. LEAG is still round the negotiating table because it wants to keep burning coal beyond the end of the decade.

Fossil fuel plants have to pay for carbon permits and ministers are worried that coal profits would be squeezed anyway if these costs rise. The backstop measure is meant to address this – if LEAG decides to shut down plants earlier because the outlook is unprofitable, the subsidy would be cut. Unsurprisingly, LEAG maintains that coal will remain profitable until 2038, the current legal exit date.

“This is a bet on the future,” economy minister Robert Habeck said at a press conference in Berlin, adding that foregone profits for 2038 are difficult to calculate.

The European Commission still needs to give its final decision on the payment.

(By Petra Sorge)


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