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EU approves subsidy of $2 billion for German coal

The European Commission announced on Tuesday that they had approved a compensation payment of 1.75 billion euro ($2.03 billion), from Germany, to the power company LEAG in exchange for it ceasing coal use by 2038.

In 2020, the German government agreed that coal-fired plants would be shut down by 2038 as part of its effort to achieve climate neutrality by 2045. The compensation amount was agreed upon with LEAG, subject to EU approval.

LEAG will supply 7 gigawatts (about 10%) of Germany's total lignite-fired electricity in 2024.

This shift, which included a planned repurposing opencast mines in eastern Lusatia, caused social unrest.

In 2021, the Commission opened an investigation into whether the payment distorted the free competition on the EU's inner market.

The Commission Representation in Germany released a press release that said: "The European Commission reviewed and approved an German subsidy up to 1,75 billion Euros in favour of Lausitz Energie Kraftwerke AG" (LEAG). This was in accordance with EU State Aid rules.

The support will compensate for the additional fixed costs that arise from the early closing of the power plants. This includes social costs for employees to change jobs as well as lost profits.

The European Commission signaled that it would grant its approval in June last year.

(source: Reuters)