Press release: 11 December 2023

EU says yes to €2.6bn coal deal set to doom Germany’s 1.5C hopes – ClientEarth reaction

After a long investigation, the European Commission has decided that the German government is within its rights to hand €2.6 billion to energy giant RWE to phase out coal by 2030.

ClientEarth lawyers, who have consistently underlined the legal issues with the arrangement, are perplexed that the Commission has greenlit a deal that funds no concrete change to RWE’s climate impact – with the arrangement set to cement a sixfold overshoot of the carbon budget needed to keep Germany on a 1.5C pathway.

The lawyers also highlight the striking imbalance between the gargantuan “consolation” payments and the money being allocated to building the alternatives – particularly in the wake of a fresh climate ruling in Germany that has ruled the country’s current climate fund defunct, wiping €60 billion off the table.

ClientEarth lawyer Francesca Mascha Klein said: “The German government claims this deal was a financial incentive for companies to cut emissions faster. But RWE has managed to swing a deal that sees it chug out just the same amount of carbon as it planned, but in less time – and be handed €2.6 billion for the privilege. We can’t see this as compensation – it’s more consolation.

“With this deal, taxpayers’ money is being handed freely to an industry player that even this year has actively been destroying homes and villages to mine the dirtiest available coal. We are still unclear how the amounts have been calculated, and whether there are means for reversal if the calculated amounts are later proved wrong.

“Germany is bringing an end to coal – as it must. But it is setting an international example here. It is hard to watch astronomical quantities of money being doled out to those who have prolonged the use of fossil fuels, when there is still such doubt about how to finance the transition. Is Germany providing equivalent funds to develop the alternatives? Does Germany have billion-Euro contracts going to demand-side management developers, renewables, sufficiency-centred approaches?

“World leaders are meeting as we speak to thrash out an approach to ending fossil fuels. At the same time, the European Commission has given the thumbs up to a national deal that rewards fossil fuel champions for digging their heels in against progress and making virtually no changes to their existing business plan. Is this the example we want the world to look to?”

The grounds of the decision will be released in the coming weeks. ClientEarth will be reviewing them on publication.

The Commission’s decision is open to legal challenge.


Notes to editors:

State aid for German lignite – a (very) brief history

In 2020, with a view to reduce coal-fired power generation to achieve climate goals, Germany adopted the Closure Law (Kohleausstiegsgesetz) to phase out lignite. This law set the basis for a public law contract negotiated between the German government and, respectively, companies RWE and LEAG. The law and contract establish phase-out dates for individual power plants and compensation agreements.

The initial date for the lignite phase-out was 2038 at the latest. This was brought forward to 2030 for RWE, but on the condition that they could keep two major units online all the way to 2030.

The compensation package is meant to cover alleged foregone profits and additional mine rehabilitation costs for earlier closure. This amoutns to €2.6 billion for RWE (in the Rhineland) - and €1.75 billion for LEAG (in Lusatia).

The LEAG investigation is still ongoing, indicating that the concerns the European Commission voiced in its opening decision remain.

ClientEarth and the lignite deals

ClientEarth lawyer Francesca Mascha Klein appeared in German Parliament last year to present the myriad issues with the deal.

See also:

An overview of ClientEarth’s work to date on the lignite compensation deals can be found in German here.

About ClientEarth

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.