Dispute Erupts Over Coal Phase-Out in Lusatia

Negotiations surrounding compensation for the coal phase-out in the Lusatia region have hit a snag, raising concerns about the future of the agreement.

In the summer of 2024, the German federal government, the EU Commission, and the energy company LEAG reached a significant agreement regarding compensation for the shutdown of lignite operations in Lusatia, pledging up to EUR1.75 billion. This agreement was heralded as a crucial development for local communities, with officials expressing optimism about the potential for regional transformation.

However, over eight months later, progress has stalled as the discussions have yet to materialize into a formal contract. The stalled negotiations have led to speculation about the intentions of LEAG's parent company, EPH, owned by Czech billionaire Daniel Kretínský. Concerns are growing that EPH may be introducing new demands that are preventing a swift conclusion to the agreement.

Initially, the deal stipulated that the German government would provide a maximum compensation of EUR1.75 billion to cover the costs associated with the permanent closure of coal-fired power plants in the region. A structured payment system was established, with an immediate allocation of EUR1.2 billion set to address fixed costs related to social agreements and necessary adjustments in regional planning.

The remaining amount, potentially up to EUR550 million, is contingent upon lost profits, meaning it will only be released if the operation of the power plants remains economically viable beyond the mandated closure date. This structured payment approach was designed by the EU Commission to avoid overcompensation while taking into account the extended timeline for the phase-out.

Although LEAG's leadership previously described the agreement as a vital step towards transitioning to greener energy practices, the recent absence of a signed contract has raised alarms among government officials. Some believe that the current management of LEAG is not primarily to blame for the delays, instead pointing to EPH's representatives for complicating negotiations with new demands.

Michael Kellner, a parliamentary secretary within the federal Ministry of Economics, has expressed growing skepticism regarding EPH's commitment to finalizing the contract. He mentioned that the ongoing delays could jeopardize essential funding for both employees and the Lusatia region itself, underscoring the critical need for the compensation funds to be released promptly.

Kellner further noted that if EPH continues to prolong negotiations, it could potentially result in a less favorable deal given the current market dynamics, including increased carbon pricing and the rapid growth of renewable energy sources, which diminish the profitability of coal-generated electricity.

Kretínský's extensive investment portfolio in Germany, particularly in coal companies, has sparked apprehension among political figures, especially within the Green party. Critics fear that his strategy may involve extracting maximum profits from coal operations before abandoning these entities, leaving the state to bear the costs associated with mining and environmental remediation.

In light of these concerns, Kellner emphasized the importance of EPH's responsibility in ensuring a sustainable future for Lusatia, urging the company to facilitate the timely conclusion of negotiations.

As the situation develops, both LEAG and EPH have refrained from commenting on the ongoing negotiations, leaving many questions unanswered regarding the future of coal mining and energy production in the region.