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  Geotimes - October 2007 - Goodbye German coal

Energy and Resources
Goodbye German coal

Once a major player in the world’s coal market, Germany is bidding farewell to its last few remaining hard coal mines over the next decade. Starting in 2009, pending final parliamentary approval, Germany will begin to phase out the coal subsidies that have kept the country’s unprofitable hard coal mining industry afloat over the last half a century. The government anticipates spending 21.6 billion euros ($29 billion) on the phase-out with money earmarked to help compensate Germany’s 34,000 hard coal mine employees. “A great, long era is coming to an end in a socially responsible way,” said Germany’s Economy Minister Michael Glos, according to The Associated Press on Aug. 8.

At the turn of the 20th century, Germany’s prosperous hard coal mining industry helped make the country an industrial power. By mid-century, however, the industry began to decline. As hard coal extracted from other parts of the world — as well as other forms of energy, such as oil — became cheaper and more widely available, the cost of German hard coal became uncompetitive. Most of the world’s hard coal is extracted from relatively shallow mines, says Karl Storchmann, an energy economist affiliated with New York University and Whitman College in Walla Walla, Wash. But Germany’s hard coal deposits are much deeper, making extraction much more expensive. (Germany also mines another type of coal, called brown coal, or lignite, which has a much lower carbon content than hard coal. That industry is going strong, Storchmann says.)

By 1958, the hard coal mining industry’s problems came to a head, and the government instituted the first hard coal subsidy. Since then, Germany has spent nearly 200 billion euros ($270 billion) to support its failing hard coal mining industry. “My first reaction to the end of coal subsidies was, ‘This was overdue. They should have done this 30 years ago,’” Storchmann says.

In fact, the subsidies were never meant to be permanent, but politics played a large role in keeping them around, Storchmann says. Until recently, the Social Democratic Party (SPD) had controlled the state government in Germany’s largest state, North-Rhine Westphalia, which is home to seven of the country’s eight hard coal mines. The SPD has always had strong ties with the mining unions, owing much of its early success during the 19th century to coal miners, and has therefore always used the state’s clout to safeguard coal mining subsidies. When the Christian Democratic Union won control of the state in 2005, however, these expensive subsidies — that both the federal government and the North-Rhine Westphalia state government fund — were no longer secure.

Ending subsidies entirely by 2018, Storchamann says, seals the fate of Germany’s hard coal mining industry. “As far as I know,” he says, “not a single German [hard coal] pit can survive on the free market without any subsidies.” The government, however, may not be shutting the door on hard coal mining completely. In 2012, it will review the subsidy phase-out plan.

Erin Wayman

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