German government sets aside $50 billion for phase out of coal-fired power stations

Key Points
  • Authorities in Germany want to move the country towards using more renewable sources of energy.
  • At the moment, however, fossil fuels still have an important role in the country's energy mix. 
INA FASSBENDER | AFP | Getty Images

Germany's federal government and the four German states where lignite – or brown coal – is mined have agreed to "a way forward" for the phase out of coal-fired power stations in the country.

In an announcement Thursday, the federal government said it would provide 40 billion euros ($44.52 billion) to the federal states affected by the transition.

In addition, operators of power plants will be provided with 4.35 billion euros across the next 15 years to compensate for the shutting down of their facilities.

Energy firm RWE, which operates lignite-fired power stations in Germany, said it would get 2.6 billion euros in compensation, adding that over 3,000 jobs would have to be cut in the short term, with total job losses rising to around 6,000 by 2030. Shares in the firm were up by more than 2% on Thursday afternoon.

The agreement between federal and state authorities was approved by the state premiers of Saxony-Anhalt, Saxony, North Rhine-Westphalia and Brandenburg. It could potentially result in the phase out of using coal to produce power by 2035, authorities said, three years ahead of the government's original aim of 2038.

At a press conference, Peter Altmaier, Germany's federal minister for economic affairs and energy, said the agreement provided "legal certainty and allows actors to plan, ensuring that we meet our climate targets while guaranteeing reliable energy supplies."

While authorities in Germany want to move the country towards using more renewable sources of energy, fossil fuels still play a significant role in its mix. Lignite, for example, accounted for 22.5% of electricity production in 2018 while hard coal, or anthracite, was responsible for 12.9%, according to the Federal Ministry for Economic Affairs and Energy.