Phasing Out Coal in Germany and Appalachia

Thomas Fröhlich

King's College London

Dr. Thomas Fröhlich is a DAAD/AICGS Research Fellow from September to November, 2021. Dr. Fröhlich currently holds a prestigious ESRC postdoctoral fellowship at the Department of War Studies at King's College London. His research examines the intersection between climate change mitigation, the global deployment of low-carbon energy, geopolitics, and international relations theory. His PhD analyzed Brazil's international ethanol strategy and its attempts to create a global market for biofuels. The related book will be published during his tenure at AICGS.

At AICGS, Dr. Fröhlich will work on a comparative study of the coal phase-out in West Virginia and the Lusatia region in Eastern Germany. The focus of this work is to better understand the local effects of this structural change and how to best support affected communities in overcoming the related hurdles. With the transatlantic knowledge exchange in mind, Dr. Fröhlich will collect a set of best practices and lessons learned to enable policy learning between the US and Germany.

The DAAD/AICGS Research Fellowship is supported by the DAAD with funds from the Federal Foreign Office.

Lessons Learned from Similar Experiences?

The UN Climate Summit in Glasgow, known as COP 26, was held in November 2021, and it again showed that the world continues to face one big problem in climate change mitigation: despite coal being a major polluter, it is still very important to the energy security of many countries. During COP 26, a core group of countries pledged to phase out coal but the biggest consumers of coal, including China, India, Russia, and the United States abstained. This means it is going to be difficult to phase out coal in the timeframe that would be necessary to achieve the Paris COP 25 goals and to limit global warming to 1.5 degrees. While the geopolitical difficulties of phasing out coal are important, here I want to focus on the factors that lead to local resistance to change in coal regions. This is important to understand why the United States abstained from agreeing to phase out coal at COP 26.

To understand this dilemma—within the neoclassical realist approach of international relations—and to make big change happen globally, the domestic dimension cannot be ignored. Impactful economic decisions, like adjusting the energy structure of a country or region, cannot be mandated from the top down, especially in democracies. In this case, the electorate acts as an “intervening variable” and can cause disruption if not consulted, as demonstrated in the case of Brexit or elections of extremist and unpredictable candidates for public office.

During my tenure at AGI, I conducted fieldwork for a comparative study of two regions that are currently undergoing a big structural change away from fossil fuels, and coal in particular: East Germany, in particular, the lignite mining region of Lusatia, and Appalachia, in particular West Virginia. This fieldwork focused on Appalachia and included a research visit to West Virginia and over thirty semi-structured expert interviews.

The two regions lend themselves well for a case study following a most-similar case study design. To illustrate this approach, I first line out the commonalities and differences between the two cases at hand, followed by a discussion of my preliminary findings and several policy recommendations.

Commonalities

Both regions have historically been highly dependent on coal, the production of fossil fuels more generally, and subordinate industries. Both regions are currently transitioning to new economic structures. At the same time, the industry had already been fading for a longer period before phasing out coal as a climate concern became a bigger issue. These similarities stretch beyond the historical to the economic, social, and political spheres.

The comparison of these two regions shows that both have lower development indicators as compared to the average within their respective countries and, possibly connected to that, have recently seen political swings to the extreme political right. This comes after very long and consistent periods of support for liberal policies/the Democratic Party in the United States and center-left parties in Germany.

Organizationally, both regions span across several domestic states (in the case of Lusatia, across a national border with Poland), which therefore involves different governance levels not only vertically but also horizontally. With respect to the outcomes of the management of structural change, the coordination (or lack thereof) between those different levels can reveal practical problems and can be a target for improvement.

Impactful economic decisions, like adjusting the energy structure of a country or region, cannot be mandated from the top down, especially in democracies.

In this area, both regions benefit from organizations aimed at facilitating this coordination, which can serve as regional development organizations and include these multi-level actors from the federal to the state level, down to the local administrations. In Appalachia, this is the Appalachian Regional Commission (ARC). The ARC was founded in 1965 and its mission is to stimulate economic growth and improve the quality of life in its geographic space. The leadership of the ARC consists of the thirteen state governors and one federally appointed chair. Each state has a program manager within the state administrations that liaises with the ARC executive office. Notably, there are seventy-four “Local Development Districts” (LDDs) that coordinate the program efforts on the ground and serve as a participatory institution for municipalities, counties, businesses, and the local community. In West Virginia, eleven such districts (‘councils’ in local parlance) exist, and some of them stretch beyond the state border. The Belomar Regional Council, for example, includes Marshall, Ohio, and Wetzel Counties in West Virginia, as well as Belmont County in Ohio. Overall, cross-state LDDs are the exception. The LDDs are moreover organized in the Development District Association of Appalachia, which offers a forum for exchange and learning. While the institutional set-up appears to include the basic factors for successful multi-level governance (identify base-line, push for action, internal and external coordination, seek assistance, early participation, continuous horizontal and vertical integration), the devil is in the details and the effectiveness of this set-up can be questioned given the development outcomes in Appalachia.

In Germany, the so-called Kohlekommission (coal commission, officially Kommission für Wachstum, Strukturwandel und Beschäftigung—Commission for Growth, Structural Change, and Employment) was charged with setting the framework for phasing out coal and included representatives from the federal, state, and municipal level next to representatives of business and NGOs. Apart from that, the Bund-Länder-Geschäftsstelle für die Braunkohlesanierung (BLGB, Federal and State Office for Lignite Remediation) serves as a political-financial coordination unit between federal and state level, while the Wirtschaftsregion Lausitz GmbH (Economic Region Lusatia Ltd.) allows for municipal actors to exchange with state policymakers and streamline the representation of their interests. In this sense, the German set-up is more technocratic than the very political way the ARC is structured. Understanding the institutional setup of these organizations, in particular how they interact with affected populations and include them in their decision-making, is central for understanding both socio-economic outcomes and political swings.

These commonalities indicate a good setup for most-similar cases, but at the same time, we need to recognize the differences between the two regions.

Differences

Firstly, Appalachia is, as the name suggests, a region defined by a vast mountain range with the highest peak, Mount Mitchell, reaching almost 2000 meters. Lusatia, on the other hand, is characterized by expansive lowlands and low range mountains in its southeastern part peaking at just above 1000 meters. This geography has significant implications for the development of transport, other infrastructure, and overall connectivity.

Secondly, the type of coal that is mined in Appalachia is predominantly anthracite, or hard coal, an energy-dense and exportable commodity. In Lusatia, lignite, or brown coal, is the type of coal that is mined. Lignite is less energy-dense than anthracite and generally used for electricity generation in proximity to the mining site.

Thirdly, deep cast mining was dominant in Appalachia for most of the twentieth century with the switch to surface (mountain top removal) mining only gaining prominence in the 1980s. In Eastern Germany, surface mining has been the default since the end of World War II. Open-cast mining is characterized by large machinery and extensive land use while employing significantly fewer people than deep cast mining. Deep-cast mining is very labor-intensive and appears to create a stronger identity among the miners. The advent of mountain top removal in Appalachia in the 1980s changed the situation noticeably, which is discussed in detail later in this paper.

The Kohlekommission included all levels of government, business, and NGOs. It is fair to say that while this process was not perfect, it included a wide range of stakeholders and can be characterized as bottom-up decision making at a high degree.

Fourthly, the lower population density of Appalachia makes resistance to coal development by affected populations less likely. On the one hand, fewer people are directly affected by any single coal development. On the other hand, the effect on local populations is different in West Virginia than in Lusatia. While populations in West Virginia are generally impacted by run-offs and environmental impacts, in Lusatia, displacement due to the type of surface mining is a direct impact on top of the environmental question. In Lusatia, therefore, local populations are more immediately affected by coal mining and pollution due to their proximity to mines and power generation, which in combination with higher population density leads to more effective resistance.

Fifthly, while both regions display lower socioeconomic indicators compared to their respective national averages, the situation in Appalachia is significantly worse than in Lusatia in absolute terms (e.g., Human Development Index of 0.882 vs. 0.923). This makes attempts to steer the structural change, leveling up, and a just transition more difficult.

And finally, one significant difference is the reason for phasing out coal: In Appalachia, the decline of coal is market-driven, while in Lusatia the current decline is due to political decisions based on climate concerns.

Keeping these commonalities and differences in mind, the two cases at hand will be analyzed in more detail.

The case of Lusatia

Lusatia is a region in the Eastern part of Germany and Western part of Poland that has been the energy heart of Eastern Germany since the 1950s, most notably with the creation of the Kohle- und Energiebezirk Cottbus (coal and energy district Cottbus) in 1952, which led to rapid population growth by the 1970s. By 1989, lignite mining employed about 80,000 people directly in the region and more in dependent industries like steelmaking, optics, precision and electrical engineering, as well as textiles. These industries, however, collapsed with the fall of communism and the reunification of Germany in 1990.

At that time, the German government via the Treuhandanstalt (trust/caretaker administration) assumed responsibility for the previously nationalized industries. Since 1995, the responsibilities for environmental reclamation of lignite activities by the public mining companies of the GDR fell onto the Lausitzer und Mitteldeutsche Bergbau-Verwaltungsgesellschaft (LMBV, Lusatian and middle-German mining administration) after the viable industries had been privatized. In this case, the Lausitzer Braunkohle AG (LAUBAG) was created in 1990, sold to a consortium of West German energy companies and subsequently resold to Vattenfall in 2001 until the Swedish utility closed its coal business, and resold the mining company and related energy production business to Czech investors in 2016 who rebranded as LEAG. During these restructuring processes, the number of direct employees decreased to around 7,400.

Early successes can be identified in the investment that has already flowed into new industrial clusters around former coal sites, such as Schwarze Pumpe, where infrastructure for hydrogen will be installed, or the city of Cottbus that is expanding its position as a regional research and education hub.

Already in the 1990s, the federal government and the Länder took over a large part of the reclamation efforts and economic development via the BLGB. The experience of this managed transition for parts of the former state industries of the GDR forms the basis for the approach Germany is following in its ongoing coal phase-out.

When the idea of voluntarily phasing out coal was first brought forward in the early 2010s, the federal government decided to quit coal in Germany. In the 2013 federal coalition agreement, a phase-out of fossil fuels was set as an ambition and the Energiewende (energy transition) towards renewable energy affirmed.

The second grand coalition under Merkel instated the Kohlekommission from 2018-2019, applying the lessons learned from the disruption of the Western German coal industry in the 1980s as well as the experiences gathered in remediating the dismantlement of unviable coal extraction in Eastern Germany after 1990. The subsequent report resulted in the Kohleausstiegsgesetz (law to phase out coal) which was passed by the Bundestag in summer 2020. This law—among other crucial points—set the end of coal in Germany to the year 2035 and mobilized financial resources of 40 billion euros to compensate coal producers and assist regions affected by this phase-out.

Equally important is the process that led to the law. On the one hand, the Kohlekommission included all levels of government, business, and NGOs. It is fair to say that while this process was not perfect, it included a wide range of stakeholders and can be characterized as bottom-up decision making at a high degree.

On the other hand, all levels of government, including the EU, have invested several billion Euros in research related to the Energiewende that not only covered technical but also social aspects. These research funds were used by research institutions as well as think tanks and NGOs that conducted community consultations. This aspect is very important, since these bottom-up consultations not only offered insights into but also have the potential to increase local acceptance of the mandated structural change.

Beyond this, early successes can be identified in the investment that has already flowed into new industrial clusters around former coal sites, such as Schwarze Pumpe, where infrastructure for hydrogen will be installed, or the city of Cottbus that is expanding its position as a regional research and education hub. And lastly, the tourism industry in the newly expanded Lausitzer Seenland (Lusatian lake region) is also growing. While the research on the overall economic benefits of tourism is not conclusive, it seems clear that this transition has proven to be successful in terms of mitigating the worst environmental and employment-related impacts.

While all these points can be seen as successful mitigation efforts, one should critically keep in mind that the unemployment rate in Eastern Germany remains higher than in other parts of the country. The past election cycles have also displayed a high degree of political disenfranchisement, low voter turnout, and higher electoral support for political extremes than in most parts of Germany.

The case of West Virginia

While the overall research project examines the region of Appalachia, the field work conducted so far only covers the state of West Virginia. This state, however, can serve as a proxy for understanding the dynamics of the wider region.

Fossil fuel extraction and coal mining have a history in West Virginia that dates back to the late nineteenth century. Precise coal production data is available back to the year 1895. U.S. coal production as a whole peaked in 2008 and in 2019 dropped below the levels of 1978, with West Virginia trailing Wyoming as the second-largest producer. West Virginia’s production peaked in the late 1990s. Historically, coal culture has played a significant role in the state, has regularly been studied, still permeates the public consciousness with statues and plaques, and influences the discourse about the state and the wider region. This economic model and cultural identity have been hit by at least two technological shocks that can explain some of today’s situation.

The first shock was the advent of mountain top removal mining in West Virginia. From the 1980s onwards, mountaintop removal mining became increasingly popular after its regulation in 1977 through the Surface Mining Control and Reclamation Act. This type of surface mining keeps the promise of its name. Using explosives and large excavators, mining companies remove the tops of mountains, extract the hydrocarbons, and leave vast areas of debris. While underground mining also comes with economic, social, health, and environmental consequences, mountaintop removal requires labor to produce larger amounts of coal, resulting in lower employment rates with devastating environmental and health consequences for nearby populations.

A second shock hit the West Virginia coal industry in the mid-2000s: the improvement of hydraulic fracturing (“fracking”) technology and the subsequent expansion of this form of extracting natural gas. The fracking boom rendered many of the traditional coal operations economically unviable and negatively affected the employment opportunities of a significant number of miners, in particular due to the un-unionized, short-term nature of fracking employment.

Taking these two shocks together, it is fair to speak of a collapse of the West Virginia coal industry over the past thirty years. Of a total workforce of about one million people in the state, the coal industry employs roughly 12,000, down from a spike of 23,000 in 2011 and the overall peak of around 485,000 in the 1950s. Additionally, in the ARC region, the reliance on coal extraction leads to higher levels of poverty in bust cycles of hydrocarbons. It is a curious observation that these technological changes were not met with a similar resistance than the more recent threat of climate change mitigation, in particular since West Virginia used to be politically dominated by progressive political forces, in particular unions and the Democratic Party.

What happens without a strategic approach can be seen in West Virginia firsthand: the failures of structural change.

On top of these technological shocks comes the so-called opioid epidemic, the widespread availability and related abuse of prescription opioid medication. West Virginia has one of the highest abuse and subsequent overdose rates in the United States. Industrial decline is given as one explanation for the high rate of opioid users as well as the easy access to these drugs due to a strong representation of pharmaceutical interests. During my fieldwork in West Virginia, I came across two surprising populations of users, former mine workers who suffered from injuries as well as veterans with similar health issues. While the Veterans’ Administration (VA) is generally respected for its compliance with its duty of care, in a state with roughly 140,000 veterans, the problem is significant.

Taking this together, the situation presents itself as dire, as hardship is the predominant result of this structural change away from coal. Without a strategic plan to counter the economic decline, the indicators are unlikely to change for the better. It is indicative that none of the successful industrial cluster initiatives to revive de-industrializing regions is in West Virginia or core Appalachia.

What happens without a strategic approach can be seen in West Virginia firsthand: the failures of structural change. Ghost towns are common in West Virginia and even in mid-sized cities, empty buildings are a familiar sight, witnesses of a more prosperous past. With the infrastructure goes human development. West Virginia’s development indicators are especially poor. Life expectancy and literacy rates are among the lowest in the United States. A 2005 research paper by the University of West Virginia applies the Human Development Index methodology to counties in West Virginia and identifies very low levels of development witnessed in many developing counties.

Within this conundrum of decline and poverty, however, there are several success stories to be told as well. The poster child of transformation in Northern Appalachia is the city of Pittsburgh, which is not in West Virginia but has successfully transformed from a coal and steel town to a center of high-tech, healthcare, and the service economy. Similarly, on a smaller scale, Morgantown, West Virginia, took advantage of the chance of developing an educational and research cluster, with West Virginia University now being the largest employer in the area.

But apart from this, a heightened sense of Mountaineer culture and a turn towards tourism is another attempt at diversifying the regional economy. This includes investment in state branding (“almost heaven”) and in the state tourism agency. The recent growth numbers of tourism in West Virginia look promising that this part of the economy can offer both, new jobs in the local economy but also an appreciation for the need to transform the economy and step up environmental reclamation efforts.

Finally, in the fall of 2021, the ARC held its annual conference and presented its roadmap for the coming years: “Appalachia Envisioned: ARC’s 2022-2026 Strategic Plan.” This is significant in two ways. Firstly, the development of this strategic document was conducted in a participatory manner by consulting 2,000 people in the region. This is a good start to gain higher levels of support for centrally planned initiatives. Secondly, this initiative will mobilize $232 million that can in turn leverage the $1 billion in funds available through the Build Back Better Regional Challenge by the U.S. Economic Development Administration.

Summary of preliminary findings

These findings are based on an initial literature review, followed by more than thirty semi-structured expert and elite interviews that were conducted during September and November 2021 virtually as well as in-person in Washington, DC, and West Virginia, and complemented by observations of the work of local initiatives, entrepreneurs, and activists.

One interesting finding is that very few initiatives expand beyond administrative units in Appalachia. That means cross-state collaboration is almost unheard of. And even between counties within one state, it is difficult to foster collaboration. In contrast, in Germany, a higher degree of federal involvement in this region leads to further integration of regional and local actors in the transformation process. In West Virginia and Appalachia, the ARC might seize the moment and foster such collaborations.

A related problem is the difficulty for local actors in accessing federal structural transformation funds. During my interviews, many interlocutors voiced their frustration with the process and challenges of accessing transformation funds. Closer collaboration between county managers could allow for knowledge sharing and increase application and success rates for such applications. The ARC is aware of this issue and has proposed a way forward, explicitly includes capacity building in this area in its strategic roadmap, which can be a good start towards a more actively managed transition.

Until now, the problem with access to transformation funds has been addressed locally and unstructured, mainly through individual initiatives. Since the hurdles to access public funds for the transformation are high, private citizens and philanthropic foundations fill this gap. These organizations on the one hand can invest their own capital but on the other hand, can also support the applications for public funding with their existing administrative capacity that often exceeds that of the local county.

Finally, the “coal culture” that is widely cited for local resistance to change could not be observed during my fieldwork. If anything, an entrepreneurial, individualistic spirit might be identified as a resisting factor towards federal or outside support. And that comes with a high level of distrust towards politics, which in West Virginia could be explained by what political scientists call a high degree of state capture by industrial interests. In the case of West Virginia, the interests of the coal industry have been dominant for a long period of time, which could justify the popular sentiment that people would rather have no government involvement than one that does not act according to their interests. Public consultations can be one step forward in this regard.

The German example shows that reclamation efforts in the 1990s have functioned sufficiently well with the state’s involvement and that public consultations as an instrument of public policy can improve buy-in and outcomes of transformation processes.

However, policy learning needs to be caveated, especially in this case. The situation in West Virginia is more urgent than in Eastern Germany, the level of development (broadly speaking) is significantly lower, which raises the costs of leveling. This does not only include the aforementioned health and education indicators, but also infrastructure. Eastern Germany enjoys higher levels of connectivity, including highways, railroads, and internet access. On top of that, the terrain of West Virginia is different, with more mountainous and sparsely populated lands, thereby increasing the unit cost of infrastructure measures. Combined with the higher need, the cost is significantly higher.

The final crucial difference lies in the fact that while in Eastern Germany the decision to phase out coal due to climate change concerns was political, in West Virginia the coal phase-out is a market-based process. Germany experienced this phenomenon in the 1970s in the Ruhr area and can therefore rely on the experiences that have been gained half a century ago.

Recommendations

What can be learned from these cases? Such transformation processes require a degree of management to avoid very adverse impacts on local populations. To maximize the benefits of active transformation management, one should focus on these areas (from macro to micro):

• Investment in modern infrastructure and connectivity are the basics that need to be done right and can have immediate benefits. Most recently, the wider Lusatia area benefited from city flight during the COVID-19 pandemic, while West Virginia has so far not been able to widely capitalize on this trend due to lack of infrastructure.
• This investment in infrastructure includes environmental reclamation efforts. In a world that is characterized by rising temperatures, loss of biodiversity, and increasing urbanization, nature is already and will increasingly be an asset. To ensure reclamation is done right, the state should expand its role as a rule setter to become a service provider that actively ensures that fossil fuel companies care for the necessary provisions as well as a service provider for high-quality reclamation.
• The stimulation of an entrepreneurial spirit in regions where large employers have left can help local people support themselves economically and lead to spillover effects that benefit the wider community. This can be done through entrepreneurship centers, education, and support from charities or local governments. In areas with existing yet empty spaces, flexible use options can help create hubs for growth and innovation.
• In the United States and Germany, the overall level of financial support available for start-ups and transformation is high. It is important to structure the process to access such funds clearly and easily to maximize the impact of these funds. Additionally, training people in fundraising or offering support can leverage their entrepreneurial potential.
• Transatlantic policy learning can take place in this space. Initiatives that bring together academics, experts, as well as local leaders and practitioners who work on the issues of structural change and just transitions are easy ways to learn from best practices and inspire new forms of managing these issues. While successful initiatives (e.g., Pocacito, Transforming Industrial Regions of North America and Europe by CGA and MEC, the EU’s Just Transition Platform, AGI’ss program on Social Divisions and Identity, Ecologic’s Transatlantic Dialogues) already exist, this space can and should further be expanded.

Supported by the DAAD with funds from the Federal Foreign Office (FF).