On Tuesday,the European Commission approved a€1.75 billion(about US$2.03 billion)compensation payment from Germany to Lausitz Energie Kraftwerke AG(LEAG)in connection with Germany’s decision to phase out coal by 2038.The aid is part of Germany’s broader commitment to become climate-neutral by 2045,under which it agreed with LEAG in 2020 to shut its coal-fired power plants.
In 2024,LEAG generated about 7 gigawatts of lignite-fired power,representing roughly 10 percent of Germany’s total power output at that time.The planned early closure and repurposing of open-cast mines have raised social concerns,especially in the Lusatia mining region in eastern Germany,where the transitions could disrupt local employment.
Back in 2021,the European Commission opened an investigation to determine whether Germany’s planned subsidy to LEAG would distort competition in the EU internal market.After its review,the Commission’s Representation in Germany issued a statement:“The European Commission has reviewed and approved a German subsidy worth up to 1.75 billion euros in favour of Lausitz Energie Kraftwerke AG(LEAG)according to EU state aid rules.”The approved aid is designed to offset extra fixed costs from the plants’early shutdown,cover social costs of supporting workers through job changes,and compensate for lost profits due to the exit.
This support aims to help LEAG manage the financial burden of winding down coal operations while mitigating the social impact on its workforce.Some employees will need retooling or relocation as part of the transition away from fossil-fuel generation.
Germany’s commitment to close down coal-fired power plants reflects a long-term energy transition.The compensation deal for LEAG underscores how the government is managing the trade-off between decarbonisation goals and economic stability in regions dependent on coal.
By approving the payment,the European Commission has cleared a major hurdle,enabling Germany to move forward without risking state-aid violations.It signals Brussels’willingness to back national efforts to phase out coal when aligned with EU climate and competition policies.
The decision also highlights the challenges of restructuring heavy industry in coal regions,especially where power generation remains a significant employer.With the aid secured,LEAG can plan its exit more responsibly,balancing environmental objectives with social support.This arrangement may serve as a model for other EU states seeking to retire coal plants while managing economic and social risks.
