Capacity for innovative change: Governing competing pressures in energy delivery
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Capacity for innovative
change: Governing
competing pressures in
energy delivery
Caroline Euler
Master of Public Administration, Class of 2021,
London School of Economics and Political Science
Photo by Frédéric Paulussen on Unsplash
Photo cropped and modified to black and whiteABSTRACT
Germany drastically expanded renewable energy
sources and improved energy efficiency; yet, paradoxically,
emission levels remain virtually unchanged (Pahle, 2010;
Pearce & Evans, 2016). The paper extends Murray Horn’s
(1995) transaction cost approach with path dependency
and institutional logic elements (Acemoglu & Robinson,
2012; Pierson, 2000; North, 1996). Applied to Germany,
the framework offers an understanding of Germany’s
lengthy coal phase-out and seemingly contradictory latest
climate policy. Preference and price changes induced by
the European Union’s push for liberalisation and public
opinion changed the coal industry’s characteristic
transaction cost mix. In contrast, strong lobby groups, an
extensive system of coal subsidies and increasing returns
of an early nuclear phase-out exerted a strong pull for
the status quo. Managing these competing pressures,
the government sustained a declining and harmful
industry for decades past its socially- and economically
efficient lifespan. A shifting balance of these pressures
eventually enabled innovative climate policy, albeit non-
transformational and within established strategies. The
framework provides an understanding of the divergences
between the passed 2020 ‘Climate Exit Law’ and the Coal
Commission’s recommendations. The analysis fosters
our understanding of how even climate policy-leading,
prosperous nations struggle to undergo institutional
change in an environment of dynamic, competing and
sustained tensions.[Capacity for innovative change: Governing competing pressures in energy delivery]
TRANSFORMATION THROUGH ENERGY
MARKET LIBERALISATION
Countries are undergoing a “large-scale ‘socio-technical
structural’” transformation by developing, implementing and
enhancing low-emission energy technology (Haley, Gaede,
Winfield & Love, 2020 p.2). Theoretically, adopting renewable
energy technology enables economies to further uncouple
economic growth from increasing emissions – a trend that
has characterised Western economies for decades (Bernauer,
Kalbhenn, Koubi & Spilker, 2010; Stern, 2007). Germany
drastically expanded renewable energy sources and improved
energy efficiency. Yet, paradoxically, emission levels are virtually
unchanged in light of increasing investments and subsidies to
an outdated coal industry (Pahle, 2010; Pearce & Evans, 2016).
Still, coal-generated electricity accounts for 20% of the domestic
and 65% of the European public electricity market (Frauenhofer,
2020; BMWI, 2020). The most recent 2019 Kohleaustiegsgesetz
[coal exit law] specifies 2038 as the coal exit deadline, exceeding
other time horizons by 8 to 16 years (e.g. Sweden, Denmark and
Portugal) (BMWI, 2020).
According to Douglas North’s (1996) institutional logic
approach, sustained economic growth requires allocative
efficiency and adaptive efficiency. The latter implies setting
prices right over time by rewarding innovations while dissolving
obsolete and inefficient industries (Ibid.). For Germany, adaptive
efficiency would entail a reorganisation of the delivery of energy
and electricity by the dominant coal industry. Yet, a complex
corporatist state culture with long-standing ties to coal dampened
reorganisation and prolonged the industry’s decline beginning in
1958 (Peter, Lenz & Lenck, 2019). The associated large public,
environmental and economic costs threaten Germany’s adaptive
efficiency (North, 1996).
115THE PUBLIC SPHERE | 2021 ISSUE
The German government faced agents advocating for the
transformational potential of renewable energy opposed by
well-established structures favouring the coal industry. The
challenge intensified for the ‘grand coalition’ government of
Christian-Conservatives (CDU/CSU) and Social Democrats
(SPD) after the decision to phase out nuclear in 2010. The paper
combines and extends Murray Horn’s (1995) transaction cost
(TC) approach with path dependency and institutional logic
elements to understand how the German government managed
competing pressures for and against complete energy market
liberalisation (Acemoglu & Robinson, 2012; Pierson, 2000;
North, 1996). Hence, the paper sheds some light on paradoxically
high emission levels, subsidies to an outdated industry and a
highly compensated, late coal exit. Section one discusses in
detail the competing pressures and their management by the
German government over time. Section two offers a perspective
on how dynamic shifts lead to the most recent innovative but
unambitious climate legislation.
COMPETING PRESSURES
Pressures for Change
According to Horn (1995), the enacting legislators determine
governance structures to maximise their political support
under electoral competition. Legislators exchange votes against
regulations that positively affect private cost-benefit-calculations
in qualitative, quantitative and persistent ways. German private
coal enterprises started enjoying massive special privileges
after the 1958 coal crisis when international competition made
domestic mining and burning uneconomic – that is nine years
after the industry’s peak (Höök, Zittel, Schindler & Aleklett, 2010;
Storchmann, 2005). These privileges included a complicated set of
direct and indirect subsidies (e.g. for ground sinking); protection
116[Capacity for innovative change: Governing competing pressures in energy delivery]
from competition and high rents from under-pricing natural
resources; social, structural, R&D and decommissioning support;
and sales preferences (Storchmann, 2005; Haley et al., 2020; ZDF,
2018; Peter et al, 2019). More broadly, based on the proximity
to the German government, creditors were implicitly guaranteed
against the industry’s failure (Horn, 1995; Pahle, 2010).
Yet, in the TC framework, legislators’ opportunities to
increase public support are limited by total transaction costs
and involve trade-offs (Horn, 1995). Given available policy
tools and bounded rationality, maximising political gains hence
means minimising total transaction costs (Ibid.). In Germany,
two emerging and strengthened agents shifted the available
instruments and transaction cost mix: The European Union (EU)
and German taxpayers. Hence, politicians needed to readjust for
constituents’ interests demanding organisational reform and
liberalisation (Ibid.).
The European Union
First, the formation of the European Union embodies North’s
(1996) two sources of institutional change: preference and
price changes. Equipped with new supranational institutional
mechanisms, the EU was determined to build a harmonised
European single market with a free, competitive and efficient
market philosophy (Peter et al, 2019). Before 1996, Germany’s
electricity market was organised as vertically-integrated large
utility companies forming natural area monopolies, mixed with
rare municipality-ownership (Ibid.). For instance, in 2000, four
large suppliers owned the utility network grid and half of the
end-user contracts (Ibid.).
The EU guided Germany’s energy market liberalisation
process and pushed climate concerns through three energy
packages in 1996, 2003 and 2009 (Peter et al, 2019). Directly, these
directives broke up monopoly structures, induced competition,
117THE PUBLIC SPHERE | 2021 ISSUE
expanded market access, and protected customer and their right
to choose suppliers (Ibid.). Negotiations to end direct subsidies
worth 3.5 billion Euros started in 2007 (DW, 2007). Indirectly,
price changes through competitive European electricity trading
pushed old and inefficient anthracite coal power plants off the
market after 2002 (Peter et al., 2019). Additionally, the European
Emissions Trading System (EU ETS)’s carbon price started
threatening high-emission lignite coal fuels (Peter et al, 2019;
Blondeel, Graaf & Haesebrouck, 2020). Furthermore, renewables
received special privileges through subsidies and priority in
network feed-in (Peter et al, 2019).
Adjusting the electricity market’s formal and informal rules,
the EU interventions reduced three of Horn’s (1995) transaction
costs previously justifying coal’s special privileges. First,
competition problems from previously large energy companies
and network externalities reduced with unbundling services,
outsourcing utility grid management and encouraging market
access of small-scale renewable energy producers (Horn, 1995;
Peter et al, 2019). Second, the coal industry’s forward and
backward linkages reduced (Horn, 1995). Consumers and energy-
intensive industries rely less on coal (Peter et al., 2019). Price
changes and providing a transparent regulatory environment
enabled renewable energy to replace coal as the primary energy
source (Ibid.). Low-emission energy sources recently surpassed
50% of the net public electricity generation (Frauenhofer, 2020).
Moreover, the coal industry is no longer a key employer or
economic sector such as automobiles (Appunn, 2019; Pieper,
2019; Schulz & Schwartzkopff, 2015). Thus, decreasing pressures
for government intervention based on powerful consumer,
supplier and labour union groups (Horn, 1995). Third, the
importance of former non-commercial objectives reduced
(Horn, 1995). Given ameliorated market failures and improved
energy storage systems, renewables dissolved the ‘energy policy
trilemma’ between affordability, security and efficiency (Peter
118[Capacity for innovative change: Governing competing pressures in energy delivery]
et al., 2019; Evans, 2018; Evans & Pearce, N.a.). Moreover, the
end of the Cold War and increasing connectivity of European
electricity grids ended political energy security concerns which
previously necessitated coal (Evans, 2016; Peter et al, 2019).
German Taxpayers
Next to the EU, German taxpayers forced legislators to
consider further market liberalisation. In contrast to special
interest groups, taxpayers have diffuse and weak interest in the
performance of public enterprises (Horn, 1995). Thus, they
typically are ignorant of the large regulatory expenses they carry
(Ibid.). Yet, citizens increasingly became aware of their individual
costs of the highly privileged coal industry. First, private cost
from climate change impact became more transparent with the
EU’s intervention and indemnification of climate targets (Peter
et al, 2019; IPCC, 2014). Second, subsidies became highly visible
as the previously complex set of 38 distinct measures in 1982
were bundled to six in 2002 (Storchmann, 2005; Schleifer, 1998).
Third, taxes on end-user electricity prices rose from subsidising
both coal and renewables (Peter et al., 2019). Consequently,
taxpayers demand improving financial performance through
privatisation (Horn, 1995).
Upon changed participation cost-benefits ratios, German
taxpayers express their demands through voting (Horn, 1995).
Particularly, voters’ pro-climate preferences showed through
the Green Party’s large electoral successes in local elections
(Weidner & Mez, 2008). Given Germany’s mixed electoral rules,
niche parties have a reasonable chance of governing (Lampe &
Trinius, 2009; Weidner & Mez, 2008). Facing heightened electoral
competition, the CDU-SDP coalition was forced to make
concessions to the general public (Horn, 1995). Consequently,
119THE PUBLIC SPHERE | 2021 ISSUE
past reasons for both taxpayers and political parties to accept
subsidies to the coal industry significantly reduced.
Pressures for the Status Quo
The EU and German taxpayers pressured legislators to
rethink the balance of interests between the public and coal
constituents through preference, price and electoral changes.
Despite alterations to the distinctive transaction cost mix, the
coal industry’s structural form did not fully follow function
(Horn, 1995; North, 1996). While similar pressures lead to
privatisation of the UK’s coal industry in the 1980s, Germany’s
liberalisation process is still ongoing (Horn, 1995; Peter et al.,
2019). Correspondingly, there has been no major decline in the
coal industry after halving production between 1965 and 2000
(Pearce & Evans, 2016). Institutional logic and path dependency
elements contributions to the TC approach’s explanatory gaps is
two-folded. Firstly, explaining the coal enterprises’ ownership
and, secondly, how liberalisation was further slowed down by
transactionally, symbolically and structurally strengthened coal
constituents (Horn, 1995; North, 1996).
Institutional path dependency and logic provides the
necessary stability and continuity to engage in complex and
uncertain industry-politics interactions across space and time
(North, 1996). Otherwise, we could only partially explain why
Germany opted for private, heavily privileged monopolist
structure rather than state-ownership in the first place (Horn,
1995; North, 1996). Archetypically, the former exhibits high
TC from both sides’ inability to trust relational contracts and
fear of opportunism (Horn, 1995). Yet, Germany mitigated
through a corporatist, consensus-based logic with strong legalist
conventions and social-market-economy principles (Schaffrin,
Sewerin & Seubert, 2014; North, 1996).
120[Capacity for innovative change: Governing competing pressures in energy delivery]
Clashing with the EU paradigm, institutional logic explains
industry groups’ heightened ability to hinder and slow down
decisiveness and full liberalisation. Directly, losers of the
‘creative destruction’ process try to maximise profits within
regulatory constraints for as long as possible (Acemoglu et al,
2012; North, 1996). For example, until 2011, operators exploited
the EU’s legislative gaps that allowed for insider trading based
on information asymmetries on coal sites’ operational conditions
(Peter et al., 2019). Indirectly, interest groups influence
procedures and decisions (North, 1996). For instance, Germany
was the only European country choosing a negotiated rather
than regulated grid access in 1996, failing to produce sufficient
competition until further EU intervention in 2013 (Peter et al.,
2019). Moreover, interest groups lobbied for grandfathering of
carbon permits in the EU-ETS (Ibid.). Consequently, leading
to windfall profits and a very low carbon price that failed to
internalise the emission externalities of accessible lignite reserves
(Peter et al., 2019; Blondeel et al., 2020; Grubb, 2014).
The symbiotic evolution of regional economies and political
parties further strengthened coal constituents’ position by
solidifying former transaction cost constellations (North, 1996).
First, the symbolic image of a coal miner associated with post-
war Germany’s Wirtschaftswunder [Economic Miracle] is still
closely intertwined with the SPD’s political identity (Peter et
al., 2019; ZDF, 2018; Commerell, 2013). Second, former coal
regions generally remain structurally disadvantaged, despite
most mining workers’ retirement or re-training between 1990 to
2012 and cities remodelling into innovation centres (Schulz &
Schwartzkopff, 2015; Schuck, 2018). Cultural coal-based identities
are only slowly changing (ZDF, 2018; Schuck, 2018). Although
former monopolist structures might suggest otherwise, coal is
no standard product with local economies having developed and
specialised in close historic relations (Horn, 1995; Peter et al.,
2019; Thorade, 2016). Third, today, these regions largely overlap
121THE PUBLIC SPHERE | 2021 ISSUE
with persisting structural divisions between former East-West
Germany and increasing support of the populist Alternative for
Germany party (Pearce & Evans, 2016; BPB, 2015; Decker, 2018).
Consequently, symbiotic evolution increased the political burden
of non-commercial objectives and electoral threat from the right
(Horn, 1995).
In Horn’s (1995) framework, path dependency is an
exogenous variable determining the available policy instruments
to legislators who optimise total TC in the face of forward-
looking constituents. However, endogenously, constituents and
legislators also take short-term opportunities and react to ideas
and ideologies (North, 19996; Pierson, 2000). These choices
exhibit increasing returns, leading to partially unintended
consequences and creating a new path (Ibid.). Subsidies starting
as temporary support of the coal industry in 1958 became
increasingly irretrievable (Storchmann, 2005). Reacting to the
industry’s proximity to government and an inappropriately
low carbon price, investors’ increased capital flows into coal
plant construction in 2009 (Pahle, 2010). The high sunk cost
associated with a revitalised ‘dash for coal’ either would have
locked Germany into a higher-carbon emissions path for at
least four decades or required larger compensation (Ibid.).
Furthermore, reversal costs increased as politicians reacted to
the short-term opportunity of broad public acceptance of the
anti-nuclear movement (Pierson, 2000). The 2011 Fukuyama
nuclear explosion was a critical junction shifting the CDU policy
stance and thereby uniting all three major political parties behind
the Energiewende [energy transition] paradigm (Evans, 2016).
Constituents are unlikely to have been as forward-looking to
realise that prioritising a nuclear phase-out would sharply reduce
low-emission alternatives to ensure Germany’s energy security.
These procedural rationality-based decisions generated a
different emissions-reduction performance outcome based on
122[Capacity for innovative change: Governing competing pressures in energy delivery]
two unintended consequences in the electricity market (North,
1996; Pierson, 2000). First, lignite became more profitable given
unthinkable nuclear energy, a low carbon price, subsidised
renewable energy and increasing capital flows. So profitable, it
increasingly drove natural gas off the market (Pearce & Evans,
2016; Capion, 2019; Blondeel et al., 2020). Thus, high-emissions
lignite replaced lower-emission energy sources such as anthracite
coal, nuclear and natural gas energy sources. Second, lignite
and renewable energy sources became mutually dependent.
Renewable energy supply is naturally volatile as geographically
proximate plants produce simultaneously (Pearce & Evans,
2016). The result is price cannibalising - energy prices by default
are pushed down exactly when production capacity is optimal
(Ibid.). Until the EU improved storage conditions, renewables
relied on coal-generating capacity as a ‘transition’ or ‘back up’
option (Ibid.). In turn, a large renewables share is needed to avoid
blowing up Germany’s carbon budget (Bundesregierung, N.a.;
Pearce & Evans, 2016). The so-called Energiewende paradox arises
as a consequence of profitability of high-emission lignite and
dependency of renewable energy. Despite an absolute decrease of
unsustainable energy sources, total energy production emissions
remained seemingly unchanged (Pearce & Evans, 2016).
COAL EXIT LAW:
INNOVATION VS TRANSFORMATION
The above shows how the German government carefully
managed competing pressures by only responding to EU
directives only as much as formally needed and within its
institutional logic. It responded to demands by extending
special privileges to both sides, often following seemingly
contradicting goals (Storchmann, 2005; Peter et al., 2019).
For coal, simultaneously supporting closures and production
123THE PUBLIC SPHERE | 2021 ISSUE
(Storchmann, 2005). For renewables, subsidising extensions but
limiting expansion through a cap and regulatory barriers (Pearce
& Evans, 2016). Similarly, taxpayers were encouraged to reduce
their energy use while receiving counterproductive financial
relief (BR, 2019).
Ultimately, specifying a coal exit plan was required to manage
the growing tensions which threatened the delicate balance of
interests. The main enacting legislator, the CDU-SPD governing
coalition party, proposed a new governance structure in the
Kohleaustiegsgesetz [coal exit law], adding to the prior 2019
Strukturstärkungsgesetz [structure strengthening law] (BPB, 2019;
Bundesregierung, N.a.). In line with general climate and energy
policy, there has been no radical shift in the institutional-logic-
driven strategy (Schaffrin et al, 2014). Nonetheless the coal exit
law introduces substantial policy innovations including a larger
use of market-tools (Ibid.). Considering path dependence and
institutional logic, Horn’s (1995) four intertwined transaction
cost bundles help understand the latest climate policy and its lack
of the needed radical transformation.
Decision-making Costs
Horn’s (1995) first transaction cost bundle states that
legislators’ decision-making costs increase with intensifying
interest conflicts. Climate movements gained momentum and
public support, fuelled by years of delayed liberalisation and
increasing visibility of climate impacts such as extensive summer
droughts (Patel, 2020). The Green party criticises compensations
of the coal industry and capping renewable energy expansion
(Pearce & Evans, 2016; Pieper, 2019). They now actively threaten
the grand coalition’s majority in national parliament (Lückoff,
2019; Tagesschau, 2019; Springer, 2019; Ehni, 2019). On the
other side, as it has become apparent that a coal phase-out is
124inevitable, economic losers such as coal plant investors demand
large compensation (Acemoglu et al., 2012).
The government responded by extending formal participation
rights and proposal powers to a range of actors through a
temporal advising body: the Commission on Growth, Structural
Change and Employment (Acemoglu et al., 2012; BMWI, 2020).
This institutional setting allowed civil society and experts such as
environmental scientists to bargain and actively take part in the
political-economic exchange (North, 1995). The coal commission
was tasked with the unspecific and partially contradictory
objective of agreeing on a coal exit both socially acceptable and
meeting Germany’s climate targets (BMWI, 2020). In Horn’s
(1995) framework, high decision-making costs necessitated
vague legislation, hence, further delaying policy action. For
instance, based on interest conflicts in the coal commission, power
plants will not be closed based on specific emission levels but
‘steadily’ -- allowing the government to alter sequencing lower-
emission anthracite coal plants’ closures before higher-emission
lignite ones (BMWI, 2019).
Despite formal equal participation rights, the government
informally was disproportionally responsive to private demands
at the expense of civil society groups (North, 1996; Horn,
1995; BMWI, 2019). Based on the TC approach, the latter’s
leverage relies on the broader public’s volatile interests with
larger collective action problems (Horn, 1995). In contrast,
smaller private interest groups united by the high individual
stake’ outcome can sustain their influence at low participation
costs; thus, allowing them to exploit vague legislation (Horn,
1995). Comparing the coal commission’s proposal to the passed
legislation captures the possibility for further delays, avoidance
of specific emission reduction targets and contentious issue of
new power plants (BMWI, 2019). For example, the coal exit law
provides the legal basis to dissolve emission permits freeing up
125THE PUBLIC SPHERE | 2021 ISSUE
from coal plants’ closures (BMWI, 2019). However, the practical
utilisation of said law remains at the government disposal and
does not have to be exercised (Ibid.). Furthermore, the coal
commission agreed to prohibit the opening of new power plants
constructed during the ‘dash for coal’ (BMWI; 2019). Yet, the
passed legislation has a ‘special permissions’ loophole which the
government is planning to use to open the ‘Datteln IV’ lignite
power plant (BMWI, 2019).
Agency loss
In the TC framework, vaguer legislation shifts the burden of
refining implementation to administrative and private agents
(Horn, 1995). Thus, enabling private and public agents to deviate
from the commission’s intended policy (Ibid.). Private agents,
including power plant operators and mine owners, have to react
to governance incentives as well as administer the coal exit plan.
Private agency loss, for example, could arise from the ambiguous
voluntary auctioning system. Ideally, anthracite coal plants able
to shut down at the lowest demanded compensation should exit
first with payments progressively decreasing until 2027 (Schmidt,
2020). Yet, without prescribing the necessary emission reduction,
the legislation does not prevent anthracite coal plants with an
economic incentive get off the grid anyway to make a profit
without actually lowering emissions (BMWI, 2019).
Public agency loss arises from unspecified final offers and
measures. The coal commission agreed to forcefully close the
coal plant in case a negotiated solution would fail (BMWI, 2019).
While passing such a forced progressive clause for anthracite
coal, the legislator did not for lignite plans (BMWI, 2019).
Thus, shifting the burden to public and private agents as well as
decreasing the formers’ negotiation powers through the absence
of a credible threat. Nonetheless, the broader German political
126[Capacity for innovative change: Governing competing pressures in energy delivery]
structure reduces agency loss. Ministers monitor each other. For
instance, the Green budget minister announced a reassessment of
the finance minister’s decision to compensate coal power plants
with 4.2 Billion Euros (Kista, 2020). Additionally, the Ministry of
Economy and Energy will evaluate Germany’s general progress.
(BMWI, 2019).
Commitment Problem
The third transaction cost bundle, political uncertainty,
requires instruments to reduce costs from mistrusting---
regulatory longevity (Horn, 1995). Generally, legal oversight
increases the governing coalitions’ ability to maximise electoral
support from forward-looking coal constituents (Horn, 1995).
For example, securing the coal exit by a strong agent independent
of the legislator, aka the German courts, limits the scope of
future legislators to undermine the promised compensations
to the coal industry (Horn, 1995). Moreover, placing the
highest exit compensation payments closer to the legislation’s
enactment reduces political uncertainty (Horn, 1995; BMWI,
2019). Additionally, the risk of upward adjustment is minimised
by referring to generous climate targets enshrined into German
law (Appnn, 2019; BMWI, 2019). However, the legal oversight’s
maximising effects are limited. For instance, the vague parts of
the coal exit law have a higher chance of future renegotiations
with the coal constituents’ defending their privileges (Horn,
1995). Particularly, in light of the EU strengthening of
environmental groups’ legal position and legal monitoring of
the industry (Fuder, Elspaß & Wilcock, 2019; Peter et al., 2019).
Plans to sue the opening of the power plant ‘Datteln IV’ are
underway (Gero, 2020).
127THE PUBLIC SPHERE | 2021 ISSUE
Risk and Cost Uncertainty
Next to political uncertainty, constituents adjust their electoral
support on risk distribution and cost uncertainties (Horn, 1995).
The main beneficiaries, coal plant owners and operators, carry
the risk of higher than expected compliance costs (Horn, 1995).
Yet, the risk is considerably minimised by the above listed
favourable conditions as well as increased Länder’s structural
aids and employment adjustment compensations (BMWI,
2019; BMWI, N.a.; Bundesregierung, N.a.; Schmidt, 2020). In
comparison, taxpayers face high compensation costs as well as
cost uncertainties relating to insufficient emission reductions
and unstable electricity markets (Gero, 2020; Peter et al., 2019;
Evans, 2018). Especially, since the coal industry is predicted to
‘naturally’ phase out through the ongoing market liberalisation,
a higher European carbon price, and additional national carbon
prices for fuels (Capion, 2019; Tagesschau, 2019). Yet, partially
responding to concerns, the government plans to limit taxpayers’
and energy-intense industries’ electricity price surges (BR, N.a.).
According to the TC approach, distributing these predominantly
manageable risks are misplaced since taxpayers have no direct
impact on the performance or negotiations with the coal industry
(Horn, 1995).
CONCLUSION
Combining Horn’s (1995) transaction cost approach with
path dependency and institutional logic theories fosters our
understanding of how even climate-leading, rich nations struggle
to undergo institutional change in an environment of competing,
dynamic and sustained pressures (Acemoglu & Robinson,
2012; Pierson, 2000; North, 1996; Amelang, Egenter & Eriksen,
2019). Hence, ultimately sustaining a declining and harmful
128[Capacity for innovative change: Governing competing pressures in energy delivery]
coal industry for decades past its socially- and economically
efficient lifespan. In the last decades, the EU’s and broader
public’s preference and price changes altered the coal industry’s
characteristic transaction cost mix. Consequently, politicians
were increasingly constrained in their ability to maximise net
electoral support from extending massive privileges to the coal
industry. Corporatist-consensus style politics and increasingly
irreversible, self-enforcing choices filled two gaps in the TC
approach: first, Germany’s ability to overcome commitment
problems in the semi-private enterprise setting; and second,
unintentionally exacerbation of the dependency on coal.
Balancing pressures, the legislator pursued contradictory
measures of supporting both coal and renewable energy sources.
With rising tensions and a coal phase-out becoming
inevitable, the governing coalition continued their overall
strategy but adjusted the governance arrangement in the coal exit
law in 2019 (BR, N.a.). Advocates of change, the EU and civil
society organisations, were provided with formal participation
rights and open dialogue (BMWI, N.a.). Taxpayers and Länder on
both sides of the debate receive further structural, employment
adjustment and retrofitting subsidies as well as electricity price
certainty (BMWI, 2019; Bundesregierung, N.a.; BMWI, N.a.;
Schmidt, 2020). The divergence from the coal commission
proposal suggests that Germany’s institutional logic remains
primarily about consensus between governing parties and private
interest groups. The lignite industry in particular was thereby
allowed to maximise flexible direct and indirect special privileges,
including: compensations, negotiation power and a long exit time
horizon with relatively fixed and predictable costs. The energy’s
sector high forward linkages, for example to the transport sector,
makes reducing emissions crucial (Kemmler, 2020). The current
climate action and coal exit legislation risk putting Germany on
an above-2°C-pathways, implying high-probability high-risk
129THE PUBLIC SPHERE | 2021 ISSUE
climate impacts with immense economic damages (IPCC, 2014;
Gero, 2020).
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