Fossil Fuels

The lukewarm response to the report of the commission set up to advise on plans for the elimination of coal use in Germany is understandable. The commission’s conclusions push the end of coal use out to 2038. The plan is cautious enough to have secured the support even of those members of the commission representing the coal industry and the main coal producing regions. Criticism of the report has predictably come from groups such as Climate Alliance Germany and Friends of the Earth, which have said that the plan will not meet the Paris climate agreement targets, and that the phasing of the reduction through the 2020s needs to be defined in detail. There is good reason, however, to take a different view. The report, which will now be confirmed by all the mainstream parties in the Bundestag, represents a death sentence for the coal industry and will send a powerful negative message to investors, producers, consumers and employees. The demise of coal as a major source of power in Germany could come much more quickly than the authors of the report expect. What the critics have missed is the power of expectations in shaping behaviour. With an end date set, it is hard to imagine serious investors putting money into new coal production capacity in Germany or into plants that run on coal, including the country’s 84 coal-fired power stations. On the contrary, it is logical for at least some producers and coal users, particularly in the power sector, to start picking up the generous compensation payments the report proposes and closing plants ahead of schedule. Under the commission’s proposals, power stations running on brown coal will be taken out of service by 2022, and no brown coal will be used at all by 2030. Those targets could easily be exceeded.

FT 11th Feb 2019 read more »

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Published: 11 February 2019