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German Hard-Coal Production to Cease by 2018
When Subsidies Expire, So Will an Industry That Sustained Generations in the Ruhr

By Craig Whitlock
Washington Post Foreign Service
Monday, July 30, 2007

VOERDE, Germany -- About a half-mile under the Earth's surface here, dozens of soot-faced miners scrape coal from some of the richest seams in the world, just as their forebears had done for generations. Conveyor belts funnel the shiny black rock through crushing machines and up to the surface, where it helps to power the globe's third-biggest economy.

Germany's 500-year-old tradition of hard-coal mining, however, is dying out. With domestic coal long unprofitable because of cheap imports from Africa and Asia, the German government this year decided to gradually withdraw expensive subsidies that have kept its mines open for nearly a half-century.

Today, only eight hard-coal mines are in operation, down from more than 100 at the industry's peak in the late 1950s. The last of those is set to close by 2018, when the subsidies dry up. And with that, there will be no more German hard-coal miners, who once numbered more than 500,000.

"This region lives for mining. When it closes, there won't be much to keep it going," said Richard Hold, 46, as he surfaced from an elevator shaft at the end of a recent shift in the Walsum mine here, which opened in 1933. Hold followed his father underground as a teenager and hopes to keep going until he can retire. But he'll have to look for coal somewhere else after next year, when the Walsum mine is scheduled to shut down.

All but one of Germany's hard-coal mines are located in the Ruhr, a rust-belt region along the country's western border. Coal production soared in the Ruhr during the 19th century and propelled Germany through the Industrial Revolution. It fueled the nation's steel mills and armaments factories during both world wars. After the defeat of the Nazis, coal rebuilt the tattered country, underpinning the Wirtschaftswunder, the postwar economic boom in the former West Germany.

Since then, German hard coal has lost its competitive edge. Thanks to relatively well-paid miners and supplies that are hard to reach because they are so deep underground, German coal today costs 2 1/2 times as much to produce per ton as imports from Australia or South Africa.

For decades, German lawmakers have propped up the industry, unwilling to risk massive layoffs and reluctant to eliminate a reliable energy source as gas and oil supplies become scarcer.

But after spending more than $200 billion in subsidies since the 1960s, the federal government this year decided that the practice had become unaffordable. The 2018 sunset for the hard-coal industry was set.

Economists and free-market lawmakers have long decried the subsidies as handouts to the politically influential coal industry and powerful trade unions. This year, for instance, Deutsche Steinkohle AG, the owner of the remaining eight mines, will receive more in government subsidies ($3.3 billion) than it will from selling coal ($2.9 billion).

With just 32,000 miners left, that's the equivalent of more than $100,000 in annual subsidies per worker.

"Among economists, it's certainly well agreed that this is impractical," said Christoph Weber, an economics professor who studies the energy industry at the University of Duisburg-Essen. "But politicians in Germany don't always look at the laws of economics."

The long phaseout will enable Deutsche Steinkohle to reduce production without disrupting supplies. The German government has also agreed to review its decision in 2012 in case coal prices skyrocket or a global shortage develops, though economists doubt either will happen.

The end of the subsidies won't affect Germany's mining of lignite, or brown coal. That industry, which is concentrated in the eastern half of the country, remains profitable and relies on surface mining techniques.

The deal to shut down the hard-coal industry is predicated on a pledge by lawmakers and Deutsche Steinkohle to avoid layoffs. Under present rules, miners are eligible to retire with full pension benefits at age 49 if they've logged 25 years underground. Those with less experience are guaranteed placement in jobs in other sectors or extensive retraining.

Deutsche Steinkohle has already reduced its workforce by more than half over the past decade and expects to shed another 20,000 jobs by 2012 but won't resort to layoffs, said Christof Beike, a company spokesman. "We promise that no one will end up unemployed," he said.

Mining executives had lobbied to continue the subsidies indefinitely but agreed to the phaseout. "To be honest, we have to accept this," said Franz-Josef Wodopia, an executive board member of the German Hardcoal Mining Association, a trade group. "It's a socially acceptable way to reduce the capacity of the industry. It is the best exit we could hope for."

Communities in the Ruhr whose economies have long been intertwined with the coal industry are bracing for the end.

In Bottrop, a city of 20,000 people that is home to one of the remaining mines, Mayor Peter Noetzel said the local economy has rebounded recently after years of recession, making it easier to swallow additional job losses than in the past.

"It's not as upsetting for people today," he said, "as it was in the 1960s," referring to job reductions at a time when virtually everyone in Bottrop depended on coal for their livelihood. Then, the city had eight mines with 20,000 workers.

Still, he and others are hoping their last mine, which employs 4,000 people, will somehow stay open. "As far as 2018 is concerned, it doesn't mean the end of hard-coal mining necessarily, but just the end of the subsidies," Noetzel said.

For others, the end of the industry can't come soon enough.

Hard-coal mining has inflicted severe environmental damage on the Ruhr. Centuries of digging have removed so much coal and rock that the ground level across the region has slowly but irreversibly dropped, by as much as 65 feet in some places.

Enormous sinkholes have developed, stretching for miles. Entire cities now lie below the water table and are kept dry by elaborate pumping systems and levees. This technology diverts rivers and creeks uphill, and many of them are filled with wastewater from the mines.

Unlike U.S. coal fields, which are generally located in rural areas, the Ruhr is a sprawling metropolis with about 5.4 million residents, making the environmental costs exponentially higher. Cracked building foundations and buckled asphalt are common.

The German government and Deutsche Steinkohle have agreed to set aside about $7 billion for cleanup costs and to pay for the massive pumps, which must operate in perpetuity.

Klaus Wagner, a spokesman for an environmental protection group based in the town of Dorsten, estimated the environmental damage at closer to $25 billion.

"These are sums you can't even put a figure on, because there are so many problems," he said. "The very best you could do is to stabilize the environmental problems at the level they are now, but you can't solve them."

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