EU approves $2 billion subsidy for German coal exit

BERLIN (Reuters) -The European Commission said on Tuesday that it has approved a 1.75 billion euros ($2.03 billion) compensation payment from Germany to power company LEAG for exiting coal by 2038.

As part of its efforts to become climate neutral by 2045, Germany's government in 2020 agreed to shut coal-fired power plants by 2038. It agreed with LEAG on the compensation amount, pending EU approval.

In 2024, LEAG supplied 7 gigawatts of lignite-fired power, about 10% of Germany's total.

The shift, which involved a planned repurposing of opencast mines, caused concern about social upheaval in the eastern mining region of Lusatia.

The Commission had concerns about approving the state payment and in 2021 opened an investigation to determine whether it distorted free competition in the EU's internal market.

"The European Commission has reviewed and approved a German subsidy worth up to 1.75 billion euros in favour of Lausitz Energie Kraftwerke AG (LEAG) according to EU state aid rules," the Commission Representation in Germany said in a statement.

It said the support would provide compensation for additional fixed costs arising from the early closure of the power plants, including social costs to support employees in changing jobs, as well as for lost profits.

The European Commission had signalled that it would give its clearance in June of last year.

($1 = 0.8620 euros)

(Reporting by Andreas RinkeWriting by Madeline ChambersEditing by Miranda Murray)