Press release: 31 July 2019

Lawyers warn compensation for German lignite operators may not be legal

Environmental lawyers have responded to a new report by Sandbag, on the growing unprofitability of German lignite, saying that the findings could have a bearing on whether companies can legally receive compensation as part of the national coal phase-out.

Head of ClientEarth Germany Professor Doctor Hermann Ott said: “Coal companies like RWE are demanding massive state payouts to close their plants in line with current phase-out plans. These subsidies would be unfounded, given that coal companies have long known that their days are numbered – and immoral, given their impact on people, nature and the climate.

“But vitally, payments like this might not actually be legal. German law only requires compensation for companies facing ‘exceptional harm or an unreasonable burden’ – and given that lignite operators would lose money by staying open, as Sandbag’s report shows, they cannot argue that they qualify.”

On top of being incompatible with national law in the current economic climate, there may be an issue at EU level. Subsidies like this must also be approved by the European Commission as State aid, and history suggests the Commission would only approve them if the compensation reflected future lost profits.

Ott added: “Since lignite operators would not be making a profit – in fact, according to Sandbag they would be making a loss – it seems unlikely the European Commission would approve any State aid to them. And without that approval, any compensation payments made by Germany would be unlawful.”


Notes to editors:

Sandbag has shown that the German lignite industry will soon be losing huge sums of money – as much as €1.8bn from 2020-2022, with potential for further, significant losses in future years.

The lignite cash cow – new report by Sandbag.

About ClientEarth

ClientEarth is a charity that uses the power of the law to protect people and the planet. We are international lawyers finding practical solutions for the world’s biggest environmental challenges. We are fighting climate change, protecting oceans and wildlife, making forest governance stronger, greening energy, making business more responsible and pushing for government transparency. We believe the law is a tool for positive change. From our offices in London, Brussels, Warsaw, Berlin and Beijing, we work on laws throughout their lifetime, from the earliest stages to implementation. And when those laws are broken, we go to court to enforce them.