Avoiding stranded assets and costly compensations by enshrining zero emissions target in law

Germany should legally anchor its 2045 net-zero greenhouse gas emissions target in a way that prevents operators of fossil fuel-burning power plants from later seeking taxpayer-funded compensation for forced shutdowns, Berlin-based NGO Climate Neutrality Foundation proposes. “Climate neutrality by 2045 means nothing other than that the use of coal, petroleum and natural gas in Germany must be ended by then,” Climate Neutrality Foundation managing director Rainer Baake said in a press release. “This end date must be enshrined in law, and immediately, because many plants have depreciation periods that extend well beyond 2045,” the foundation points out.“If time is wasted here, there is a risk that climate-damaging bad investments will be made today and claims for compensation will be asserted against the state budget tomorrow. The billions in payments that are being demanded by the energy companies as part of the coal phase-out show where this can lead,” Baake added.

The proposal applies above all to the use of fossil fuels in power generation, industrial plants, transport and heating and outlines how it can be limited to the period up to 1 January 2045. The foundation commissioned the law firm Becker Büttner Held (BBH) to examine how such a legally sound time limit could be designed to achieve the goal of climate neutrality by 2045 without generating bad investments and whether such a limit was even possible under European and German constitutional law. The foundation's proposal is based on the law firm’s legal opinion. In letters to environment minister Svenja Schulze and economic affairs and energy minister Peter Altmaier, the foundation expresses the need for urgent action and notes that, at the moment, there is still just about enough time for the state not to have to make any compensation payments in view of depreciation periods. It also urges lawmakers to define the legal and regulatory framework to achieve climate protection goals as early as possible in order to “act in accordance with the investment logic of companies” rather than against it, “and thus avoid bad investments in areas with particularly long investment cycles”.