Chancellor Friedrich Merz warned in March that Germany’s ambitious plan to abandon coal by 2038 may become unrealistic. “We must supply this country with electricity,” he said. “I am not prepared to jeopardise the core of our industry simply because we have adopted phase-out plans that have become unrealistic.”
The comments came as a sharp rise in global natural gas prices, triggered by the US-Israel conflict with Iran, has prompted a rethink of coal’s role in power generation. Germany currently relies on coal for 20% of its electricity, making it the biggest user of coal for power in Europe and the fourth largest in the world. It had pledged to phase out the fuel entirely by 2038, with even stricter targets for lignite – the most polluting low-quality soft coal – by 2030.
“Germany may reconsider its coal phase-out as rising gas prices make the cheaper, abundant lignite more attractive”
But the economics of energy are shifting. Germany imports 95% of its natural gas, leaving it exposed to volatile global markets. In contrast, the country sits on Europe’s largest lignite reserves and the third biggest globally, enabling it to be entirely self-sufficient in the fuel. As gas prices surge, the cheaper local coal becomes vastly more appealing. Nuclear, which could have provided an alternative, is off the table after Germany closed its last reactor in 2023.
The dilemma is twofold: supply security and price. While renewables now account for 59% of German electricity, intermittent wind and solar require reliable backup, especially in winter. Berlin had planned to replace coal with gas-fired plants, which emit half the CO₂ of coal, but the cost advantage has evaporated.
Other nations are already backtracking. Japan has loosened rules to allow more coal use, Italy is delaying the closure of its remaining coal stations until 2038, and India has postponed maintenance shutdowns. In Germany, energy firm LEAG – the country’s second biggest lignite miner – is positioning for a reprieve. “We very much welcome the fact that the German federal government is placing not only medium, but also long-term, security of supply at the heart of its energy policy considerations,” it said in a statement. LEAG noted it had already boosted lignite supplies to compensate for the halt of Russian gas imports after the 2022 invasion of Ukraine.
Whether the phase-out survives the price shock remains uncertain. The answer could shape not only Germany’s climate targets but the energy landscape of Europe.