This is Germany’s $45 billion, 18-year plan to move away from coal

Merkel 2020

Ms Angela MERKEL, German Federal Chancellor. Copyright: European Union

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Johnny Wood, Senior Writer, Formative Content

  • Germany has said it will phase out coal by 2038 as it looks to renewable energy sources for its power generation.
  • A $45 billion compensation fund will assist the closure of lignite mines and power plants and help reskill the sector’s workers.
  • Germany’s booming renewable energy sector aims to produce 65% of the country’s electricity by 2030, creating many new job opportunities.

Germany is the world’s biggest producer of lignite – the dirtiest grade of coal – and some states have invested heavily in a coal-fired future. But a recent agreement is set to make the country a coal-free zone by 2038, paving the way for a transition to cleaner energy sources.

The agreement between the government and regional leaders sets an 18-year timeframe to phase out Germany’s coal-fired power stations, which are a significant driver of global warming.

In a bid to reduce emissions, the government aims to generate at least 65% of the nation’s electricity needs from renewable sources by 2030.

Mix of energy sources used to generate electricity in Germany in 2018
Energy sources used to generate electricity in Germany in 2018
Image: Statista

As the chart shows, in 2018 coal generated around 35% of the country’s electricity. Across the EU as a whole, this figure is about 20%.

Also known as brown coal, lignite is extracted from open mines, which can permanently damage the landscape, destroying animal habitats and local ecosystems, according to the Federal Ministry for Economic Affairs and Energy. The decision to phase out Germany’s coal sector could also prevent whole villages from being demolished to make way for new mines.

Clean energy at work

Coal is an important power source for many countries, and according to the International Energy Agency its use is “likely to be significant in the future in the absence of concerted government policy”.

It says that if coal is to have a place as a cleaner energy source in the coming decades to come, “greater efforts are needed by government and industry to develop and deploy less polluting and more efficient technologies”.

While Germany’s move away from coal and lignite will prove an expensive business in the short term, it may prove to be a small price to pay compared to dealing with climate change in the long term.

A $45 billion compensation package will support closing lignite mines and coal-fired power stations in Saxony-Anhalt, Saxony, North Rhine-Westphalia, Brandenburg, and other areas dependent on the coal industry.

The fund will compensate mines and utilities for lost production revenues, fund new infrastructure projects in coal-dependent areas, and help coal-industry workers retrain for new jobs in their local area.

Germany’s lignite industry employs around 20,000 people, three-quarters of which are pit workers and the rest work in lignite-fuelled power stations. A further 5,000 people work in black coal-fired power plants, despite the country’s last black coal mine closing in 2018.

As climate change impacts the planet and the price of clean energy from solar power and wind farms continue to fall, renewables are a growing influence in Germany and many other countries.

Contribution of renewable energy to the German energy mix from 2010 to 2018
Renewables’ share of German energy mix 2010-2018
Image: Statista

Renewables are a growing part of Germany’s energy mix and their upward trajectory looks set to continue. Wind, solar and other clean energy sources currently account for more than a third of the country’s energy production, having more than doubled over the past eight years.

International Renewable Energy Agency (IRENA) figures for 2018 show around 284,000 people working in Germany’s renewable energy sector, the vast majority in wind energy.

To reach the government target of 65% renewables by 2030, the sector will need to increase its current share of the energy mix by half, creating numerous new jobs for people living in Germany.

What’s the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.

Is your organisation interested in working with the World Economic Forum? Find out more here.

Policy pledges

The decision to phase out coal by 2038 – or sooner if the transition to clean energy goes to plan – is in line with EU leaders’ decision to make the bloc carbon neutral by 2050.

Other European nations are also saying no to coal, with a host of EU member states declaring their intention to phase out the fuel.

Finland approved a ban on the use of coal to produce energy, which comes into effect in May 2029, for example, and the Netherlands announced plans to close all coal-fired power plants by the same year.

Countries like Ireland, Denmark and France have set later deadlines.

At Davos, the World Economic Forum is urging all participants to set a net-zero emissions target.

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