Media reaction: 21 April 2021
Bad outlook for German coal companies as Commission casts doubt on compensation package
The future of the multi-billion compensation package for German lignite companies RWE and LEAG is looking increasingly uncertain after the European Commission released its initial findings on the scheme today.
The Commission’s State aid experts have raised significant questions over how the compensation was calculated – suggesting that the projected run-time and profitability of the coal plants that would justify such compensation does not square with market realities and climate ambition.
The news comes in the middle of AGM season, and will prompt questions for investors, who have repeatedly been assured that the compensations are likely to be approved.
ClientEarth State aid lawyer Juliette Delarue said: “The Commission has corroborated our doubts – looking into the background of these planned payouts raises more questions than it does answers.
“The idea that an already loss-making sector would lose billions in profits for closing coal plants over the next two decades has left many bemused – and it appears the Commission agrees, casting doubt on the calculations presented by the German government.”
It is also still unclear how much of the proposed compensation is made up of recultivation costs – the expenses of rehabilitating mining sites. This information has not been made available to the Commission and even the consultants the German government commissioned could not reach conclusions due to lack of information from the operators. The law says the operator should always front those costs, but RWE and LEAG are aiming to have some of those expenses covered by the taxpayer.
Delarue continued: “If this giant subsidy is eventually annulled by the Commission, it would present a crucial opportunity to reassess the highly controversial German coal phase-out deal for lignite plants, which is already giving other countries cover to announce unambitious post-2030 coal exit dates.
“It would also, more directly, prevent such a vast amount of taxpayers’ money going to fossil fuel companies, instead of building a promising future.”
The rationale for the current German coal phase-out plan looks increasingly questionable, with German Environment Minister Svenja Schulze predicting this week that the country would be out of coal by 2030.
Stakeholders now have the chance to input into the Commission’s investigation, followed by a response from Germany. A decision would follow within 18 months – although could be much sooner.
Notes to editors:
ClientEarth has published several reports on the legality of the State aid arrangements around the German lignite phase-out.
- Letter to DG Competition – legality of State aid to German lignite operators
- Coal phase-out compensation for LEAG: legality
- ClientEarth reaction: State aid: European Commission pauses over German lignite deals
- ClientEarth reaction: Early agreement of lignite contracts ‘unjustifiable’
ClientEarth previously took legal action to attempt to flush out information on the contested ‘recultivation costs’ for lignite mines and how much of the compensation sums these accounted for.
German energy giant RWE has most recently sued the Netherlands over its climate policies.
ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.