Coal phase-out compensation for LEAG Non-compliance with State aid law and the EU’s 2019 Electricity Market Regulation

The document analyzes two primary compensation mechanisms for LEAG's lignite-fired units in Lusatia: Direct Closure Payments and a New Security Reserve. It argues that the EUR 1.75 billion in Direct Closure Payments lack a meaningful incentive effect because the plants would close on a similar or earlier schedule under business-as-usual scenarios, resulting in minimal CO2 reductions. Furthermore, it contends that the New Security Reserve is unlawful as it fails to meet the design and transparency requirements of the EU's 2019 Electricity Market Regulation and creates a perverse incentive for operators to increase generation prior to mothballing to maximize remuneration.

• The proposed Direct Closure Payments of EUR 1.75 billion for four of LEAG's lignite units are unlikely to be compatible with EU State aid law because they provide no real incentive for early closure. Analysis shows these units would actually close later than under LEAG's own 'Business Planning Scenario 1A' (BPS 1A), and the overall coal phase-out results in only a 1.5% decrease in lignite burned compared to business as usual.
• The Direct Closure Payments are considered grossly disproportionate to the actual impact on LEAG's operating costs. Because the operating lifetimes and fuel consumptions under the Draft Coal Law are nearly identical to the counterfactual business-as-usual scenario, the EUR 1.75 billion payment far exceeds the net extra costs required to achieve the objective of CO2 reduction.

APA

ClientEarth (2020). Coal phase-out compensation for LEAG Non-compliance with State aid law and the EU’s 2019 Electricity Market Regulation. https://www.clientearth.org/media/e5ld11jt/legality-of-compensation-for-leag-under-the-german-coal-phase-out-ce-en.pdf

Chicago

ClientEarth. Coal phase-out compensation for LEAG Non-compliance with State aid law and the EU’s 2019 Electricity Market Regulation. 2020. https://www.clientearth.org/media/e5ld11jt/legality-of-compensation-for-leag-under-the-german-coal-phase-out-ce-en.pdf.

Wikipedia

{{cite report |author=ClientEarth |title=Coal phase-out compensation for LEAG Non-compliance with State aid law and the EU’s 2019 Electricity Market Regulation |date=May 2020 |url=https://www.clientearth.org/media/e5ld11jt/legality-of-compensation-for-leag-under-the-german-coal-phase-out-ce-en.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{clientearth2020coal, author = {{ClientEarth}}, title = {{Coal phase-out compensation for LEAG Non-compliance with State aid law and the EU’s 2019 Electricity Market Regulation}}, institution = {ClientEarth}, year = {2020}, month = may, url = {https://www.clientearth.org/media/e5ld11jt/legality-of-compensation-for-leag-under-the-german-coal-phase-out-ce-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }