(Bloomberg) -- RWE AG will receive €2.6 billion ($2.8 billion) in compensation from the German government for its accelerated phase-out of coal from its energy systems, with European Union regulators set to approve the state aid support.
The multi billion euro package will be paid out over 15 years and covers costs for RWE’s mine rehabilitations and closures. The EU’s approval of the German support could come as soon as Monday, according to people familiar with the matter, following a formal investigation that began in 2021.
The German government initially brokered the deal in 2020, which was meant to cushion companies’ coal exit in 2038.
Carbon prices in the European Union have more than doubled since the end of 2020, now sitting at €68 per ton. Although profitable now, higher carbon prices mean coal isn’t likely to stay in profit for many more years.
Another reform of the EU’s emissions trading system means allowance prices are set to increase even faster, with Germany’s regulator estimating the permits to be at around €125 a ton by 2030.
Last year, RWE sealed a new contract with the government to move its coal exit forward by eight years to 2030, while extending two lignite units until March 2024 to help ease Europe’s worst energy crisis for decades. It said the deal would mean savings of about 280 million tons of carbon dioxide.
Last month, RWE said it will invest €55 billion overall on green technologies by the end of the decade.
The EU’s competition enforcers still have to decide over a €1.75 billion subsidy for Germany’s second largest miner LEAG — a unit of Czech billionaire Daniel Kretinsky’s EPH. The company, which operates lignite pits and plants in the East of the country, said it must to stick to the 2038 coal phase-out date.
RWE and the European Commission declined to comment.
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