This article is part of our series on coal phase out and the G7 in 2021. You can find a full list of articles, along with the backstory of our analysis of G7 coal trends since 2015, here.
The recent landmark ruling by the German Supreme Court has shaken up climate politics and energy planning. Germany’s much-criticised 2038 coal phase out plan was already under pressure from market forces, but a more rapid exit for coal has now become inevitable.
The court ruled that the German Climate Change Act lacks details about emissions cuts after 2030, placing an unfair burden on future generations. Unexpectedly, the government quickly proposed an updated climate law, with increased goals of 65% emissions cuts by 2030 (up from 55%) and a new target of 88% by 2040. It also surpassed international partners by committing to climate neutrality by 2045 (rather than the previous 2050). The new law was adopted in cabinet on May 12 and is expected to be ratified in the parliament before the summer break.
While the updated climate targets improve the climate record of the current government, specific measures will now need to follow that turn commitments into action. The climate law sets out the governance architecture including legally binding emissions reductions targets for individual sectors, while the measures delivering emissions cuts are defined in separate legislation. Most of these are expected to be agreed by the next government after federal elections in September, and they are set to feature prominently in the election campaign. These measures will need to put Germany on track for additional emissions reductions. Analysis suggests that at least 69% emissions cuts by 2030 are needed to align with the 1.5°C warming goal of the Paris Agreement.
The climate law update makes a coal phase out by 2030 inevitable. As it stands, the proposal expects the largest additional emissions cuts to come from the energy sector in order to reach the 2030 goal. Germany’s current 2038 coal exit date and phase out pathway will both need tightening. It is yet unclear whether the coal exit law will be changed, or whether the impact of an increased CO2 price under the EU’s emissions trading system will be sufficient. But it is clear that Germany can join international peers at June’s G7 summit to support 2030 as the coal exit date for G7 and OECD countries.
As it stands, the proposal expects the largest additional emissions cuts to come from the energy sector in order to reach the 2030 goal.
International partners expect Germany to show more climate leadership. At the Biden summit in April, Chancellor Merkel said that Germany had heard UN Secretary General Guterres’ call for 2030 phase out. At the G7 summit she will be able to confirm that Germany will meet this goal. This long-overdue move will allow the current government to leave on a high note of climate progress before federal elections in September.
There is also strong domestic support for moving the phase out date forward. The EU’s new 2030 climate target leaves almost no room for coal in the EU by 2030. The planned revision of the EU’s emissions trading system is likely to push coal out of the market with a possible price of €130 per ton CO2 in 2030. This has even led members of the current government to declare that the coal exit is likely to come earlier. The Green party is advocating for a 2030 coal exit and currently leading the polls, surpassing the ruling Conservatives. Former members of the Coal Commission, instrumental in reaching a deal on exiting coal, published a statement urging for an earlier coal exit based on the court ruling.
This is the ideal moment for the German government to accelerate the coal exit and secure a better value deal. It already has in place the governance structure and funding tools necessary to support coal regions in their transition away from coal – even if the coal phase out comes earlier.
The negative balance sheets of both Germany’s old lignite plants and hard coal fleet provide the economic argument for winding down the industry. They may also require the government to reduce the €4.35 billion compensation package for lignite operators. The European Commission has launched an in-depth assessment into whether the compensations are proportionate given the grim economic outlook of the plants. This is the ideal moment for the German government to accelerate the coal exit and secure a better value deal. It already has in place the governance structure and funding tools necessary to support coal regions in their transition away from coal – even if the coal phase out comes earlier.
Across the Atlantic, US President Biden is aiming for a “carbon-pollution free” power sector by 2035, which studies suggest will mean phasing out coal by 2030. With the EU’s revamp of climate and energy legislation, ‘Fit for 55’, a clean power sector in the 2030s is becoming the new normal on both sides of the Atlantic. It is therefore in Germany’s own interest to stay on top of the race for clean power by picking up the pace of its coal exit. As the former ‘Energiewende’ pioneer, Germany was the country that championed renewables and made them cheap and accessible for all. Why should it not reap the benefits by taking the brake off its transition to an energy system powered by 100% renewables? A 2030 coal exit date is a critical step towards putting Germany back on track.
Jump to another article in this series:
- Charting the course away from coal: the G7’s leadership opportunity
- Strong currents: G7 coal transition data trends
- Surfing the waves: G7 progress towards coal phaseout
- Picking up the pace: Germany’s coal exit is getting closer to 2030
- Anchors aweigh: USA rejoins the coal transition mainstream
- Time and tide wait for no one: Japan’s coal progress