Analysis of German lignite compensation

Ember analyzes the German Ministry of Economics (BMWi) formula for lignite compensation, arguing that three key assumptions lead to a systematic overvaluation of payments. By adjusting power and CO2 prices to more recent data, accounting for avoidable fixed costs, and reducing the compensation period to three years, Ember suggests the total payment could be reduced from €4.4 billion to as low as €343 million.

• The German government's use of average forward power and CO2 prices from January 2017 to December 2019 overvalues compensation because power prices have since declined and CO2 prices have risen. Using forward prices from January to December 2020 would reduce payments to €2.6 billion, while using prices from May 5, 2021, would reduce them to €143 million.
• The BMWi formula assumes that no fixed costs are saved through early closure, which Ember argues overstates the payment. Following Oeko Institut's assumption that all plant fixed costs and 20% of mine fixed costs are avoidable (reflecting personnel costs), the compensation would be halved to €2.14 billion.
• The government's assumption of providing compensation for four to five years lacks provided justification. Reducing this period to three years, as proposed by Oeko Institut, would decrease compensation payments by 35% to €2.83 billion.
• If the three problematic assumptions regarding pricing, fixed costs, and duration are combined, the total compensation would drop from €4.4 billion to €343 million.
• The BMWi formula uses specific inputs for its calculations, including a power price of €41.01/MWh, a CO2 price of €16.62, and an 'optimisation uplift' of 7.5%, all based on data from 2017-2019.

APA

Jones, D., & Brown, S. (2021). Analysis of German lignite compensation. Ember. https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf

Chicago

Jones, Dave, and Sarah Brown. Analysis of German lignite compensation. Ember, 2021. https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf.

Wikipedia

{{cite report |last1=Jones |first1=Dave |last2=Brown |first2=Sarah |title=Analysis of German lignite compensation |publisher=Ember |date=May 2021 |url=https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jones2021analysis, author = {Jones, Dave and Brown, Sarah}, title = {{Analysis of German lignite compensation}}, institution = {Ember}, year = {2021}, month = may, url = {https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }