The European Union has set itself an ambitious climate protection target: climate neutrality by 2050. As part of the Green Deal, emission reduction targets were recently raised from -40 to -50-55 per cent by 2030 (compared to 1990 levels). We are facing a fundamental transformation of our societies. This applies not only – but especially – to the energy sector.
Germany and Greece are among the European countries most dependent on coal for their energy provision. Until now our prosperity has been unthinkable without coal-fired power generation! The goals of climate neutrality, however, necessitate a swift and complete transformation of our electricity systems. In concrete terms, this means significantly accelerating the expansion of renewable energies and phasing out coal-fired power generation. The EU Commission has recently adopted industrial and hydrogen strategies to support the national decarbonisation processes. These are aimed at ensuring that the decarbonisation of the energy sector does not lead to deindustrialisation. On the contrary: Done right, the transformation towards greenhouse gas neutrality can bring about re-industrialisation and the development of new energy and industrial value chains centred on emerging green technologies.
The german “Coal Commission” as an example of just transformation
In 2019, Germany decided to shut down all its coal-fired power plants by 2038 at the latest. The phase-out of coal-fired power generation was organised as a compromise between politics, science, NGOs, companies and trade unions. Conflicting goals and different points of view were dealt with as part of a broad consultation process in what became known as the “Coal Commission”. Even if there wasn’t always agreement, the broad-based commission format has ensured a high degree of legitimacy for the phase-out plan.
But it wasn’t just the ecological goals that were considered. At the same time, an investment volume totalling 40 billion euros was promised for regions particularly hard hit by the phasing out of coal-fired power generation. This shall be used for expanding modern infrastructure, investing in schools, digitization and day-care centres, as well as for attracting new industrial companies. The intention here is to support regional economies in their industrial renewal.
Once the Commission had reached agreement in principle, the German Bundestag and the parliaments of the federal states passed the corresponding legislation in 2020. This is where the concrete work really began for the employee side. In collective bargaining it was agreed that the major energy companies increased the government’s so-called adjustment benefit (APG) to at least 80 per cent of the last net salary and developed a toolbox to get workers into new employment, both internally and externally. A good 18,000 people working in the coal companies now have security until 2043. This provides a good example of transformation based on solidarity that also accords with the wishes of the trade unions.
Sustainable industrial policy
In addition to the phase-out of coal, the other pillar of the energy sector’s transformation is the simultaneous phasing in of renewable energies. These parallel processes of phasing out fossil-based technologies and infrastructure while phasing in renewable-based technologies and infrastructure will also be necessary in other sectors. Energy-intensive industries, such as chemicals, steel, aluminium, glass or cement, all have a huge demand for energy, both for electricity and for process heating. They urgently need sustainable alternatives to coal, oil and natural gas.
Many new industrial process and product innovations are already on the way. In addition to green hydrogen – which as a key technology can be used in almost all industrial sectors instead of fossil fuels and raw materials – various sector-specific technologies also play important roles. However, many of these technologies are associated with significantly higher power demands. To decarbonise Germany’s chemical industry using green hydrogen would consume as much electricity as is consumed in the whole of Europe today. Decarbonising industry therefore requires not only a radically accelerated expansion of renewable energies and hydrogen infrastructure within Europe. New partnerships with neighbouring countries that can produce and supply green hydrogen cheaply and flexibly, for example in North Africa or the Middle East, are also necessary. The first such partnerships are already being concluded by the EU Commission and the German government.
In particular, much stronger mechanisms for innovation and investment support are needed to enable European industrial actors to switch to sustainable, electricity- and hydrogen-based processes on a large scale. Innovation costs, investment costs and long-term increases in electricity and hydrogen costs must be partially supported by government. In Germany, new funding and financing models are currently being discussed and tested – for example, so-called Carbon Contracts for Difference or a new transformation fund.
From a worker’s perspective, an important prerequisite for a socially sustainable industrial transformation is that research and investment in new plants, technologies and products take place in Europe. In other words, emerging products and technologies should not only be researched and developed but also produced in Europe. When fossil-based industry and jobs disappear, is it paramount that renewables-based industries and jobs emerge to minimize the social costs of transformation. This requires a considerably more active, forward-looking and sustainable industrial policy, encompassing economic, employment, education and technological policy areas. The Member States and the EU Commission must provide support for education and training around green technologies and companies that is much more substantive in this regard. Only in this way can we ensure that the decarbonisation of Europe also leads to its necessary reindustrialisation and not to an exodus of important steps in the value-chain – and thereby jobs – towards Asia or the USA.
Lessons learned
What can be learned from Germany’s coal phase-out and industrial renewal with regard to the transformation processes in other European countries?
- The phase-out of coal-fired power generation and the parallel expansion of renewable energies is the most important basis for the rest of society becoming carbon neutral by 2050. Industry, the heating sector and mobility can only be decarbonised on the basis of fossil fuel-free electricity.
- In order to make the exit from the coal industry socially sustainable, broad political participation processes are needed as well as concrete development prospects for the affected regions and employees. Government must finance and organise both the phasing out of fossil energy and the phasing in of new energies and industries.
- For employees, this means that they must be offered further training as well as the opportunity to join new industrial companies. This employment policy transformation process can only be constructively guaranteed with the engagement of social partners and trade unions. Parallel to the Green Deal, a Social Deal is therefore also needed so that environmental and social sustainability can go hand in hand.
- Politically, stronger innovation and investment support is needed to develop new industrial value chains centred on green technologies – at the national and European level. The EU also needs to provide especially dedicated support for the transformation processes in Europe’s coal regions, for example by increasing the Just Transition Fund or establishing “hydrogen valleys” in former coal regions. This requires a rethink of governments’ self-understanding and new strategies for a social and environmentally sustainable industrial policy.
We are not at the end of the industrial era, but at the beginning of a new industrial chapter. Both the state and other social actors must more intensively develop strategies and concepts to support the transformation constructively. Europe’s socio-ecological transition can only succeed through policies integrating innovation, competitiveness, training and new employment opportunities.
