Why Coal Power Is Merkel's Biggest Climate Challenge

(Bloomberg) -- The German government is deciding how quickly to close all the nation’s remaining coal-fired power plants, part of an effort to fulfill its pledges under the 2015 Paris Agreement on climate change. While environmentalists hope Europe’s biggest economy will put fossil fuels on a short leash, utilities say any quick changes will drive up electricity prices. As an ad-hoc coal commission reconvenes this month to plot the exit, interest groups ranging from Germany’s biggest coal-plant owner, RWE AG, to the World Wildlife Fund are pushing their views on how regulators treat an industry that pumps out a third of all emissions.

1. How much time does German coal power have?

The current plan, according to Economy and Energy Minister Peter Altmaier, is to cut coal capacity in half by 2030 and shutter the industry completely by 2050. Environmentalists say a quicker phaseout is necessary to meet climate targets. Chancellor Angela Merkel has committed to closing coal plants but not yet set a date for when.

2. Will the coal commission make that call?

The panel can’t make policy on its own, but Merkel’s government created it, and she has indicated she will act on its recommendations. The panel is designed to come up with a solution that all parties can live with. The 28-member group includes environmentalists, utility executives, scientists, union representatives, state officials and civil servants. It must map out both when Germany should finish with coal and how exactly to squeeze the remaining plants out of business. Both the date and the mechanisms are crucial to power generators, especially RWE AG, that still operate significant coal capacity.

3. How reliant is Germany on coal?

About 120 coal power plants provided 36 percent of Germany’s electricity last year. In 2000, coal provided half of the nation’s power.

4. Can Germany really kick its coal habit?

Weaning the global economy off fossil fuels was never going to be painless, cheap or quick. Germany has made more progress than most, spending almost two decades lavishing support on wind and solar farms, yet still is likely to fall short of its European Union goals. The German government made that task even more difficult by requiring all nuclear power plants to close, reflecting alarm over the tsunami that caused a meltdown at the Fukushima power plant in Japan in 2011. For all its risks, nuclear energy produces no greenhouse gases.

Why Coal Power Is Merkel's Biggest Climate Challenge

5. How is Germany fighting climate change so far?

Merkel’s Energiewende -- or energy transition -- calls for the economy to build up renewables and scale back coal and eventually natural gas. That also requires a more flexible distribution grid to balance variable flows from wind and solar farms, which only produce electricity when the wind blow and the sun shines. The result: Germany got 36 percent of its electricity from renewables last year, up from 17 percent in 2010. It also has the highest power prices in Europe. And even with that shift, country is on track to miss its target 2020 to slash total emissions by 40 percent from 1990 levels. The coal commission IS supposed to recommend how to make good on those targets while balancing the needs of industry.

6. What do power companies say?

Though united in backing the energy shift, coal plant operators like RWE, Uniper SE and STEAG GmbH say moving too quickly will cause a jump in electricity costs. They also want the coal commission to consider the impact on jobs.

7. How much leverage does the coal lobby have?

Lots. Of the coal commission’s four chairpersons, two are former governors of German states that are among the richest in coal: Saxony and Brandenburg. Those two commissioners are conduits for pressure to keep hard coal and lignite plants running for as long as three decades. And they have a strong argument. Nobody wants soaring power prices or an unreliable grid, which might increase social unrest and boost the populist Alternative for Germany party should tens of thousands of workers lose their jobs in power plants and mines.

8. How are other nations dealing with this?

The 190-plus nations signing up to the Paris climate deal as a whole have pledged to emit 80 percent to 95 percent fewer emissions by 2050 compared with 1990 levels. Some have bigger ambitions. Sweden plans to close its last coal plant by 2022. Britain in 2013 made burning coal more expensive than in Europe with a tax on carbon, and now it’s planning to phase out that fossil fuel completely starting in 2023.

9. What happens next?

Merkel wants to show progress in time for the annual United Nations climate talks, taking place in December in Katowice, Poland. That means taking concrete steps toward the emissions cuts Germany pledged for 2020, so the coal commission must map out some coal shutdowns in the next two years. Merkel will also want a credible end date for coal, to burnish her reputation as a climate-change fighter. The coal commission will present its recommendations in October.

The Reference Shelf

  • Germany’s struggles with its 2020 climate goals are a warning to all countries.
  • When the U.K. went 55 hours without using coal.
  • Bloomberg Opinion’s Liam Denning assessed the U.S.’s renewed fixation on coal under President Donald Trump.
  • Merkel’s allies are pressuring her to keep coal plants running.
  • The German coal commission’s website, in German.

©2018 Bloomberg L.P.