As Germany takes the helm of the EU, its problematic coal law risks sending out the wrong signals, writes Riccardo Nigro.
The German presidency of the EU could not have started at more crucial times. While Europe gears up to recover from the corona crisis, the climate emergency has become increasingly pressing – May 2020 was the hottest month on record – and according to the IEA the world has six months left to change its course.
Leading the EU towards the post-COVID world will require the German presidency to be pragmatic and imaginative; bold policies to protect people’s health, relaunch the economy and boost employment must be coupled with a green transition that will make our ecosystems and societies more resilient.
However, when it comes to coal, premises are not encouraging. At the very same time as Germany takes the helm of the EU, the Bundestag could approve the law shaping the German coal phase-out by 2039.
This law is outdated and unambitious and risks setting a bad example for other member states which are delaying a necessary and overdue coal exit.
First, the 2039 deadline is too late. Coal is a major contributor to climate breakdown and must be phased out by 2030 at the latest for the world to have a chance to keep the rise in global temperatures below 1,5°C.
Last spring, Members of the European Parliament overwhelmingly called on governments to stop burning coal by 2030. The same date was set as a benchmark by the OECD.
The German model is already inspiring other countries to postpone their coal exit; Polish operator PGE is considering to withdraw its “entire hard fleet in 20-25 years” – that is, 10 to 15 years too late.
Moreover, the recent opening of a new plant by German operator Uniper in Datteln has further spread the message that coal has still a role to play in Europe’s future.
At the same time, the law provides that Berlin pays €4,35 billion to compensate coal utilities for lost revenues. However, German utilities already benefit from massive direct and indirect subsidies, quantified in €5,6 billion per year in terms of health and other air pollution-related costs.
This would also trigger anticipated shutdowns of the most polluting utilities as soon as 2021, with additional benefits for the climate. On the contrary, the German Ministry for the Environment has been defending the interests of the coal industry by applying the absolute minimum level of protection allowed by EU rules.
Indirect subsidies also include the exemptions from repairing the damages caused by coal mining and burning to water bodies. This is the case of the Frankfurt-Oder region, where LEAG’s mining operations in the Lausitz area are forcing the local public water provider to invest €10 million to desulphurise drinking water, which LEAG does not intend to pay back.
According to ClientEarth, not only could the law be rejected by the European Commission for providing state aids to coal giants, it will also recklessly allow LEAG’s coal plants to extend their life-span, as well as to continue its operations thanks to taxpayers’ money.
This would not be the first time the German coal sector is bailed out by public money: national coal has been used in German power plants for decades only because its price was kept artificially low by the state.
Now Germany is about to grant billions euro to coal operators for sticking to business as usual scenarios, and even delaying the already planned closure of certain facilities. We could call this a ‘polluter gets paid’ twist: instead of holding polluters accountable for the burden they inflict on citizens, Germany is using state aid to keep their outdated business alive.
Coal economics were already bad before the COVID-19 crisis: according to Sandbag, the gross profit of the German lignite fleet collapsed by 54% in the first half of 2019, with a loss of €664 million, and no lignite unit being able to cover their full fixed costs.
The profitability of German lignite plants would shrink even more if the government implemented stricter emission limits for dangerous pollutants such as NOx and mercury, in line with the best available techniques.
As the gap between power price and carbon price keeps narrowing and new EU pollution limits hit on lignite plants, Sandbag estimates that lignite will remain loss-making and could lose €1.8 billion over 2020-2022.
COVID-19 has simply accelerated an already existing trend: according to the IEA, “power sector revenues are set to fall by about 7% worldwide in 2020, though coal-fired power is likely to be hit harder.”
In such a scenario, Germany has the responsibility to champion the Green Deal and guide the EU towards a climate-neutral and zero-pollution future.
The corona crisis has caused an unprecedented drop in greenhouse gas emissions, but economic shocks are often followed by an emission rebound.
We cannot afford this: our governments have a unique chance to put global emissions into structural decline while investing in low-carbon solutions to relaunch the economy and create millions of new jobs.
Renewables are mature enough to guarantee energy security in the long term, other promising technologies like renewable hydrogen will dramatically reduce emissions in hard-to-abate sectors.
Boosting energy efficiency in buildings, industry and appliances will keep energy consumption under control while contributing to the economic recovery and sustaining employment.
Policymakers have little time to make important decisions which will shape economic and energy infrastructures for decades to come, and determine our chances to meet energy and climate goals. In the next six months, Germany must lead the EU by example.