The German coal exit law: grounds of incompatibility of the compensations for hard coal plants with State aid law

ClientEarth submits that the German Coal Exit Law (KAG) provides incompatible State aid through the Steinkohlezuschlag (hard coal closure compensations) and CHP conversion bonuses. The document argues that older hard coal plants (over 25 years) lack residual value, meaning compensations would result in overcompensation and lack an incentive effect. Furthermore, it claims that CHP funding—specifically the Coal Substitute and South Bonuses—may discourage rapid coal phase-out by offering more attractive financial terms than closure auctions and by promoting unsustainable fuels like natural gas and biomass. ClientEarth calls for a formal Commission investigation into these measures, citing potential violations of Articles 7, 9, and 11 TFEU regarding environmental protection and sustainable development.

• The Steinkohlezuschlag (compensations for hard coal plant closure) is qualified as State aid because it uses federal budget resources, is selective to hard coal operators, and distorts competition and trade between EU Member States.
• Economic analysis indicates that hard coal plants older than 25 years have no residual value and are unprofitable, meaning any auction compensation would constitute overcompensation.
• The auction mechanism may perversely incentivize operators of older plants to artificially prolong their operations just to remain eligible to bid for closure compensations.
• Funding for conversion to combined heat and power (CHP) plants, including the Coal Substitute Bonus and South Bonus, may delay the coal phase-out because these subsidies are more financially attractive than the closure auction bid limits.
• The Coal Substitute Bonus and South Bonus are described as retroactive, as they apply to plants that started construction or conversion before the law entered into force on 14 August 2020, raising doubts about their incentive effect.
• The document argues that the German government's claim that competitive bidding was the most cost-efficient alternative is undermined by significant increases in price caps between the January and July 2020 drafts, with some caps increasing by over 81%.
• ClientEarth asserts that the European Commission must explicitly integrate Articles 7, 9, and 11 TFEU into its assessment to ensure environmental protection and human health are prioritized in State aid control.

APA

ClientEarth (2020). The German coal exit law: grounds of incompatibility of the compensations for hard coal plants with State aid law. https://www.clientearth.org/media/4hjds3sm/2020-09-01-state-aid-submission-to-dg-competition-grounds-of-incompatibility-of-the-compensations-for-hard-coal-plants-in-the-german-coal-exit-law-with-state-aid-law-c-1.pdf

Chicago

ClientEarth. The German coal exit law: grounds of incompatibility of the compensations for hard coal plants with State aid law. 2020. https://www.clientearth.org/media/4hjds3sm/2020-09-01-state-aid-submission-to-dg-competition-grounds-of-incompatibility-of-the-compensations-for-hard-coal-plants-in-the-german-coal-exit-law-with-state-aid-law-c-1.pdf.

Wikipedia

{{cite press release |author=ClientEarth |title=The German coal exit law: grounds of incompatibility of the compensations for hard coal plants with State aid law |date=September 2020 |url=https://www.clientearth.org/media/4hjds3sm/2020-09-01-state-aid-submission-to-dg-competition-grounds-of-incompatibility-of-the-compensations-for-hard-coal-plants-in-the-german-coal-exit-law-with-state-aid-law-c-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{clientearth2020german, author = {{ClientEarth}}, title = {{The German coal exit law: grounds of incompatibility of the compensations for hard coal plants with State aid law}}, publisher = {ClientEarth}, year = {2020}, month = sep, url = {https://www.clientearth.org/media/4hjds3sm/2020-09-01-state-aid-submission-to-dg-competition-grounds-of-incompatibility-of-the-compensations-for-hard-coal-plants-in-the-german-coal-exit-law-with-state-aid-law-c-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }