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EU clears 1.75 bln euro compensation for eastern German coal exit

Germany's economy ministry stated it won the European Commission's clearance in principle to compensate power business LEAG with up to 1.75 billion euros ($ 1.90 billion) for exiting coal by 2038, part of Berlin's. efforts to accelerate decarbonisation.

In 2020, Germany's previous federal government accepted shut. coal-fired power plants by 2038 as part of Berlin's ambitions to. become climate neutral by 2045. It agreed with LEAG on the. compensation amount, pending EU approval.

LEAG currently provides 7 gigawatts of lignite-fired power,. or around 10% of the total in Germany.

But the transition, and efforts to accelerate it, have. got a combined welcome in the eastern mining region of. Lusatia, where people stay sceptical about the social and. environmental impact of such an exit and its technical difficulties.

This is an essential action, specifically for individuals of the. region, Economy Minister Robert Habeck stated in a declaration.

The Commission had issues about approving the state. payment and in 2021 opened an investigation to figure out whether. it distorted free competitors in the EU's internal market.

Some 1.2 billion euros of the payment is suggested for. social expenses of the exit and for repurposing opencast mines in. the area, the economy ministry stated.

Around 550 million euros are set aside as compensation for. LEAG's forgone incomes due to the 2038 exit, based on later. adjustments based upon the market circumstance, carbon costs and the. last phase-out date.

This is an important foundation for our continued. successful transformation into a green powerhouse, LEAG CEO. Thorsten Kramer said in a statement.

LEAG's lignite coal mines will be amongst the last still. running in Germany, after Berlin struck a 2.6 billion euro. handle energy firm RWE in the western state of. North Rhine-Westphalia in 2022, agreeing to a phase-out by 2030. rather of 2038.

Berlin is not aiming for a comparable deal with LEAG that. would bring the exit date forward. Rather, the government is. hoping that market conditions, including inexpensive renewable energy. growth, and higher carbon prices, would push the company out. of the coal company earlier than planned.

LEAG, owned by Czech investor EPH, has aspirations to. bring 7 GW of solar and wind output facilities online by 2030,. part of a plan to invest 1 billion euros in renewables annually. for the rest of this years.