Germany Approves €1.75 Billion Compensation for LEAG to Exit Coal by 2038

Germany's economy ministry has received European Commission clearance to compensate LEAG up to €1.75 billion for exiting coal by 2038. This move aligns with Berlin’s goal to be climate neutral by 2045. The compensation addresses social costs and mine repurposing, aimed at aiding the eastern mining region of Lusatia.

Germany's economy ministry said it won the European Commission's clearance in principle to compensate power company LEAG with up to 1.75 billion euros ($1.90 billion) for exiting coal by 2038, part of Berlin's efforts to speed up decarbonisation. In 2020, Germany's previous government agreed to shut coal-fired power plants by 2038 as part of Berlin's ambitions to become climate neutral by 2045. It agreed with LEAG on the compensation amount, pending EU approval.

But the transition

, and efforts to accelerate it, have received a mixed welcome in the eastern mining region of Lusatia, where people remain sceptical about the social and ecological impact of such exit and the technical challenges to be overcome. "This is an important step, especially for the people of the region," Economy Minister Robert Habeck said in a statement.

The Commission had concerns about approving the state payment and in 2021 opened an investigation to determine whether it distorted free competition in the EU's internal market. Some 1.2 billion euros of the compensation is meant for social costs of the exit and for repurposing opencast mines in the region, the economy ministry said.

Around 550 million euros are earmarked as compensation for LEAG's forgone earnings due to the 2038 exit, subject to later adjustments based on the market situation, carbon prices and the final phase-out date. "This is an essential building block for our continued successful transformation into a green powerhouse," LEAG CEO Thorsten Kramer said in a statement. ($1 = 0.9204 euros)

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