German Just Transition: A Review of Public Policies to Assist German Coal Communities in Transition

This report examines public initiatives implemented in Germany to support workers and communities impacted by the decline in coal production from the 1960s to the present. The main goal is to present key policy alternatives and lessons from the German case to inform Just Transition (JT) processes in other countries and regions.

With the prospect of phasing out coal and sharply cutting use of other fossil fuels in the United States due to greenhouse gas mitigation efforts, it is worth looking at the successes and failures of past transitions. Germany has intentionally steered its coal reduction process since the 1960s to prevent detrimental economic and social consequences. A central characteristic of the German approach to mitigate the impacts of coal decline for workers and regions is the use of integrative policies based on a combination of policy goals and mechanisms.

The report examines historical policies (implemented between 1968 and 2019) and present policies. Their main goals can be characterized as (a) economic diversification and reorientation; (b) workforce support; (c) social well-being and quality of life, and (d) environmental remediation and protection. Moreover, these policies have commonly employed three mechanisms: (1) financial support for public organizations, businesses, and workers; (2) service and assistance for public organizations, businesses, and workers; and (3) direct investments.

Large public investments in infrastructure and environmental remediation have been central goals of the policies analyzed over time. Providing financial support and assistance for businesses and workers has also been a key component of most policies. These policies especially targeted businesses until the 1980s. In more recent decades, a tendency toward financial support of local governments and nonprofit organizations can be observed.

The report also characterizes the implemented policies according to their governance structures, namely their design, implementation, and forms of public participation. From the 1960s through the 1980s, top-down policies predominated; these were designed, implemented, and administered by subnational governments with limited participation of local stakeholders. Since the end of the 1980s, municipal governments have implemented a more regionalized approach with bottom-up policies, including local participation.

Beyond the policies that explicitly support coal workers and regions, key “baseline policies” played a large role in JT in Germany. They include the German social security system, the labor system, and the system for regional fiscal equalization.

In this report, we highlight the following lessons from the German experience to inform JT policymaking in other contexts:

1. Historical policies implemented in Germany tended to focus on protecting the coal industry and promoting coal production. Since the 2000s, policies began to proactively steer the transition away from coal. This anticipatory and preventive approach had a positive impact on job creation and in the formation of new industries in coal regions (IWH 2020; Bade and Alm 2010; Untiedt et al. 2010). Following a similar approach, the Commission on Growth, Structural Change and Employment (also called the Coal Commission) and subsequent laws have aimed to reduce the risk of economic, social, and environmental problems caused by the decline in coal production. In comparison to the transition in other old industrial regions in Europe, such as the United Kingdom, the reduction of hard coal production in Germany during the 1960s was handled in a more socially compatible way (Brauers et al. 2020), as none of the former coal workers became unemployed directly but instead either entered early retirement or follow-up employment that helped to protect their socioeconomic status.
2. Large-scale government investments and industrial policies have been central aspects of the approach to support coal regions in Germany. In the beginning of the German coal industry crisis, these policies incentivized investments that aimed to restrengthen or conserve the role of traditional industries, which prevented a transition and instead led to high debts and deficits in public budgets. The increasingly proactive role of the public sector in regional economic policy has been important to attract new businesses and promote economic growth. The implemented policies helped to create new economic opportunities and jobs in many of the locations where they have been deployed (IWH 2020; Bade and Alm 2010; Untiedt et al. 2010).
3. Policies to support coal regions have been particularly successful when tailored to the local realities and needs. Including active participation of local stakeholders in the design and implementation of these policies is important not only from a procedural justice perspective but also to create more locally coherent and effective interventions. Incorporating local actors also increases social acceptance and the usage of existing regional knowledge, an important factor in accelerating the transition away from coal. The German experience also shows the importance of providing local governments with enough financial resources to implement these measures themselves. This can reduce the need for coordination between the political levels and hence reduce related transaction costs.
4. Most of the policies implemented in Germany to support coal regions combine multiple policy objectives. Since the 1990s, policies have prioritized the quality of life of local communities through economic, cultural, and environmental interventions. This integrative and holistic approach is important for addressing the transition away from coal as a multidimensional problem and creating synergies between different interventions. This approach contributes to improving the attractiveness of addressed regions and can promote social cohesion.
5. The German social security system, the labor system, and the system of regional fiscal equalization are critical components in Germany’s efforts to assist workers and communities affected by the decline in coal production. Given the relatively strong support that the German social security net provides to coal workers, most of the policies included in this review should be seen as a complement to these baseline policies. Emphasizing that the JT policies exist in addition to these baseline policies is particularly important in order to avoid overestimating their potential replicability in other contexts with weaker social and labor protection systems.
6. These policies may provide valuable examples to inform the design of new JT initiatives in other contexts, although the challenges that lie ahead may require even more holistic and forward-looking initiatives to accelerate the transition away from fossil fuels while investing in the future prosperity of workers and communities.

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