Germany’s Lignite Regions: Subsidies Need to Be Better Focused

The ifo Institute has criticized the approach being taken to subsidize Germany’s lignite regions. “Judging by the projects that the Länder have so far earmarked for funding, it doesn’t seem that their actions are particularly focused,” says Joachim Ragnitz of the ifo Institute in Dresden. The traffic light coalition envisions phasing out coal “ideally” by as soon as 2030. “That means new economic structures must be successfully established in the three lignite regions before that date,” Ragnitz says.

An evaluation of the projects in Brandenburg, Saxony, and Saxony-Anhalt earmarked for funding so far shows that the intention behind most of the projects was more to improve the general living conditions for the local population than to attract companies. “Obviously, the prospect of EUR 14 billion in subsidies being showered on regions for investment is tempting people to now revive all those projects that they have wanted to realize for a long time,” Ragnitz says. “If the goals set out in the guiding principles that have been drafted for the coal-mining areas are to be taken seriously, then a change of course is urgent. Otherwise, there’s a risk that economic transformation in the affected areas will fail.”