Berlin, Germany – November 18, 2025 – The European Commission has officially approved a 1.75 billion euro ($2.03 billion) compensation payment from Germany to power company LEAG to facilitate the country’s exit from coal-fired energy by 2038. The approval marks a major step in Germany’s ambitious plans to achieve climate neutrality by 2045.

Germany’s government agreed in 2020 to gradually shut down its coal-fired power plants, including lignite operations, as part of a broader energy transition strategy. LEAG, one of the country’s largest energy producers, had previously supplied 7 gigawatts of lignite-fired power, roughly 10% of Germany’s total electricity output in 2024.

Details of the Subsidy and EU Approval

The approved support package will cover additional fixed costs associated with the early closure of LEAG’s coal plants, including:

• Lost profits from early plant retirement
• Social support for employees transitioning to new jobs
• Costs associated with the repurposing of opencast mines in the eastern German region of Lusatia

The European Commission had initially expressed concerns that the state aid might distort competition in the EU internal market and launched an investigation in 2021. After a detailed review, the Commission confirmed that the payment complies with EU state aid rules, allowing the subsidy to proceed.

“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.

The Commission had signaled its intent to approve the subsidy in June 2024, clearing the way for Germany to continue its energy transition plans.

Implications for Germany’s Energy Transition

Germany’s coal phase-out is part of a broader decarbonization and renewable energy strategy, aiming to replace fossil fuels with clean energy sources like wind, solar, and hydrogen. The transition also seeks to address potential social and economic impacts in coal-dependent regions such as Lusatia, ensuring that workers affected by plant closures receive support and retraining opportunities.

The LEAG subsidy demonstrates how EU and national governments are coordinating to support a just energy transition, balancing climate goals with social and economic stability.