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Speech given by Chancellor Gerhard Schröder at the German Coal Day in Essen on 11 November 2003.

Dear Werner, Minister-Presidents, Ladies and Gentlemen and – to whom it applies – Dear Colleagues: The theme for this year’s Coal Day – ‘Energy and security’ – has been well chosen, for it is not only topical but also of fundamental significance for our society and for our entire economy. Werner Müller was quite right in his earlier reference: the power cuts that hit large parts of America a few months ago provided stark evidence of the dramatic events that can strike a modern society when there is no guaranteed security of energy supply.

Federal Chancellor Gerhard Schröder at the German Coal Day in Essen on 11 November 2003

This has demonstrated to us the importance of a secure and affordable supply of energy. But we can also say with a certain degree of quiet pride that such resources are not available everywhere, and certainly not in every highly-developed country, but they are here in Germany. And energy supply security will remain a central concern for our policies.

When it comes to coal and the risks involved we think back to the Lengede mining disaster of almost exactly forty years ago.

Minister-President Steinbrück has already spoken of how we have made advances in other areas too: in recent years we have thankfully never experienced accidents on the scale of the mining industries in Russia or China. Recent incidents have demonstrated, however, that mining safety is something that cannot be taken for granted everywhere.

The fact that mining here at home, and in those countries in which we have an involvement, is practised under conditions of relative safety can be attributed to the use of leading-edge technology. But these achievements are also the result of professional training, skill and excellent teamwork.

It would be hard to find anywhere else the sense of companionship that exists in the mining community. And that has real socio-political significance in these days of individualism – and of course there is nothing inherently wrong with that – although it can at times lead to isolation. It would therefore be wrong to dismiss such communities as mere traditions, and outmoded ones at that.

For one thing is quite clear: when it comes to safety and security of energy supply the modern coal mining industry does not come cheap. Anyone who thinks that is making a big mistake. And I would like to see people remember this when comparing production costs between Germany and other countries.

RAG Chairman Dr Werner Müller at Coal Day 2003 in Essen

At this year’s Coal Day we will of course be talking about the general energy-policy framework in Germany. But I have come to do more than that – for I am here to answer a few questions, as Werner Müller has already intimated in his own inimitable and elegant way. For we have taken a number of important groundbreaking decisions that will give the German mining industry a clear perspective for many years to come.

This was done not just in collaboration with RAG and with the Minister-President of North Rhine-Westphalia but also, and most importantly, in agreement with the trade unions. Without the help and involvement of Hubertus Schmoldt and Klaus Südhofer we could never have achieved it. And I say this with the greatest respect for the absolutely crucial contribution and, as far as production levels are concerned, the great sacrifices that you have made. I say this with the greatest respect for your readiness not just to appreciate the economic and financial necessities but also to assimilate them into your daily routine.

We have now decided on a binding financial framework for the years following the expiry of the Coal Agreement. And we have deliberately chosen a fairly extended period – 2006 to 2012 – because the people of this region both want and need planning predictability for the medium term. For those who are employed in and dependent on this sector it is vital to have a reliable set of parameters for life planning. This is something we must always bear in mind, even when discussing the need for significant reform measures.

For the period in question we have set aside a financial framework totalling € 17 bn. This sounds like an enormous sum, but it is put into perspective when you realise what it has to cover. I believe that it is money very well invested. The state will contribute nearly € 16 bn, or € 15.87 to be exact, while RAG will itself put in over € 1 bn, or to be specific € 1.13 bn. Work is already under way to regularise the appropriations for the first period up to 2008 and I assume that these preparations will not take too long.

In this connection I wish to express my personal thanks to Wolfgang Clement and also to the Federal Finance Minister Hans Eichel, both of whom were instrumental in achieving the agreement.

After hearing the words of welcome from the Minister-Presidents I am sure that we will soon be able to agree on an acceptable and appropriate input from the coal producing regions. I am convinced that protracted negotiations should be avoided in the interest of the regions and indeed in the general interest.

We expect that this financial framework will enable us to be producing 16 million tonnes of German coal by 2012. By then the domestic coal industry should still have a workforce of at least 20,000 people.

I would like to underline what Minister-President Steinbrück said earlier in referring to the fact that the industry is not a charitable organisation but – in connection with Mr Müller’s remarks on security of supply – has a real contribution to make towards a secure and stable energy supply, and this is a contribution that we in Germany can and must make.

Brussels – and this is an important factor – still has to approve these long-term plans. However, I assume that they will give such an approval. And as in previous years I will be personally involved in this process.

We have a great tradition to build on, to go from the contribution made by the former Federal Economics Minister and from his successor, as well as from that made by Mr Starzacher in earlier days. I am sure that the money spent in this area is being very well invested. The Chairman and his management team will see to this. And I am sure that the RAG Board will play its part too. That is also important as a matter of public record.

Reducing production capacity to 16 million tonnes by 2012 will necessarily mean further downsizing the workforce. There is no way around this.

Anyone who wants to discuss this issue would do well to bear in mind the scale of the production cuts to date as well as the number of jobs already lost, along with what has been achieved as part of a generally smooth and socially-acceptable restructuring process. The figures that the Minister-President has referred to here today still have to be explained outside the coalfield regions, for they show that the money is not being poured into a bottomless pit, as it were. More than this, they show that the money is being used to restructure the industry in a socially-compatible way by a process that has maintained social harmony and at the same time preserved manufacturing at a reasonable level. And we want this to remain so.

The financial framework is designed such that the restructuring measures can continue to be applied in a socially-acceptable way, that is to say without compulsory redundancies in a job market that still remains strained, even in the northern part of the Ruhr.

For this reason too the Federal Government intends to extend the adjustment aid paid out to industry employees. This may sound anodyne and may appear that we are granting privileges to the mining industry. But it is a difficult thing to put into practice. Everyone involved in the process knows this. It means that the company management and employees’ representatives have some difficult thinking to do and some difficult decisions to take and – this has to be emphasised – it requires sacrifices from the workers and their families. It also requires solidarity from those who are giving up their jobs. We intend to continue this process in a socially-acceptable manner and to do so in close collaboration with the regional Governments involved.

German Coal Day, Essen, 11 November 2003

Ladies and Gentlemen: security of energy supply ranks alongside competitiveness and environmental sustainability as key pillars in the Federal Government’s energy policy. Achieving these objectives presents us with quite major challenges.

Competition between energy production centres has become much more intense as a result of the deregulation of the European energy markets. And here we can now really think about competition on a European level and not merely within Germany. This means that we will be competing not just within the present European Union but will soon also have to contend with the ten countries that will be joining the EU next year.

For the energy-intensive industries power costs constitute a decisive factor in the competitive global marketplace.

Renewable energies have to be incorporated into the existing energy supply structure. The ambitious emission reduction targets laid down at Kyoto must be met and we intend to do so. Our citizens expect nothing less.

Moreover, many of our existing power stations are in need of modernisation or replacement. The experts have said that for Germany this could represent as much as 40,000 megawatts of generating output between 2010 and 2020. This means that we are facing a huge capital expenditure requirement. Yet this investment will secure sales and jobs for plant construction companies and countless suppliers.

That is one of the reasons why we have in recent months been holding intensive discussions with the energy supply industry, the trade unions and the electricity consumers. This represents a set of challenges that will last well into the next decade and will affect Germany’s position as an energy production base.

I am in absolute agreement with what the Minister-President says: North Rhine-Westphalia has traditionally been the number-one energy centre because of its coal and mining industries, and it should remain so. Here too, Minister-President, there has to be close collaboration between this sector and the Federal Government.

It is our intention to pursue this constructive dialogue with the energy supply industry, which has not been without its critics. And by the way, this is a dialogue whose positive aspects are sometimes in stark contradiction with the alleged ideologically motivated differences between the parties.

It is wrong, for example, to try to stir up rivalry between coal-fired generation and wind power, for this only makes it harder to identify commonsense solutions. The fact is that a broad-based and therefore intelligent energy mix has in the past delivered security of energy supply. I will strive to ensure that this policy is retained.

Admittedly, the make-up of the energy mix will have to change over the course of the next few years. We want to increase the input from renewables, and we must do so. This is important if we are to meet our emission-reduction targets. The amendment of the Renewable Energies Act will allow us to create the conditions for this. The mainstays of this policy were agreed last week.

And let me add this: special care will be taken to ensure that electricity prices remain affordable for private households and, more critically, for the business community, so that the latter can remain competitive. We need to keep a close watch on this and we intend to do so.

As regards the energy-intensive industries, which we want to keep here because we in Germany have a regionally distinct manufacturing and production structure that we wish to preserve, we will prevent market disadvantages by introducing a hardship clause. This will specifically apply not just to the major companies but to the small and medium-sized sector too.

I retain my belief not only that Germany must remain an energy production centre but also that each and everyone of us must have an interest in maintaining a balanced production structure here. This does not imply a rejection of the knowledge society or the services sector. Rather it is an affirmation of what has made the country strong and will keep it so: a healthy mix of service industries and modern technologies and their integration into what is occasionally – and completely erroneously – referred-to as the “old economy”.

Some here at home and in Europe too believe that in future we will be able to survive merely as service providers – and they are wrong. This is why I joined with the French President and the British Prime Minister in impressing on the European Commission that we need to retain the industrial structure of Europe if we are to remain competitive within the Europe-America-Asia triangle. A strong economy like ours relies on a competitive manufacturing sector.

And the statistics show that we are on the right route in this respect. According to the Federal Bank our world market share has grown since the mid-1990s. We have succeeded in increasing it in real terms from 9% to 10.5%. This shows the strength of the German economy.

Ladies and Gentlemen: the energy mix is changing – not just because of the expansion of the renewables sector but also because we will be gradually phasing-out nuclear power in the next few years. The first nuclear power stations are now set for closure. This has been agreed with the energy utilities concerned and so it will stay.

But we cannot and will not phase out the coal industry; this is an important point to be made. Practically half of Germany’s total electricity production is generated from solid fuel, with coal and lignite sharing the honours. This makes it absolutely clear: environmentally-sustainable coal and lignite-fired power stations will form the backbone of German energy supply for years to come.

The precondition is that we continue to address the issue of emissions reduction. We are one of the global leaders in this field. We have taken on and achieved by far the largest share of the reduction commitments for greenhouse-gas emissions in Europe. Since 1990 we have reduced our emission levels by more than 19%, whereas most of the other industrial nations are well short of their Kyoto commitments. Moreover, many countries are simply not prepared to accept their emission reduction targets.

But climate protection can only be successful if the leading role that we have accepted and played does not become a solo effort. We cannot accept a situation in Europe in which we are being encouraged on the one hand to achieve all our European targets – two-thirds of which are being borne by Germany – while at the same time others are backtracking from theirs. That is not the kind of policy that is going to work in Europe, for it will only serve to reduce the competitiveness of German industry. I cannot and will not accept that. Our task is therefore to continue to see to it that others follow suit.

And, Ladies and Gentlemen, we are proving successful, for the EU has now decided to introduce an emissions trading scheme from 2005 in order to meet the emission reduction targets. There have been heated arguments from all sides as to whether this is a commonsense instrument or not. Personally – and I make no bones about this – I believe we can do without it. Nevertheless, we must accept the majority decisions taken as part of an increasingly integrated Europe. We have therefore fought to ensure that this instrument is made as rational as possible.

When this system is introduced we shall therefore make sure that our energy mix is maintained. There can be and must be no discrimination against lignite and coal in the allocation of the emission trading permits.

It would be downright absurd to undermine the massive investment in the eastern German power stations, for example, or indeed in the state-of-the-art BoA lignite plant at Niederaussem, which went into operation just last year, by permitting such a process. That is something that we cannot and will not accept. In fact quite the reverse, for like you and the Government of North Rhine-Westphalia we also want to see the BoA II power plant soon become a reality.

Our central goal will therefore be to ensure that in the area of emissions trading too we can establish reliable regulatory conditions for investment, growth and employment. This primarily means organising the emissions trading system within the context of the existing voluntary commitments agreed-to by industry. It also means that the emission permits are to be allocated free of charge.

This also has to apply to the new power plant that will have to be built as a result of the phasing-out of nuclear power. And we shall take appropriate account of previous investments in CO₂ reduction measures, what is referred-to as “early actions”.

Finally, in the area of emissions trading we shall also be advocating the use of flexible instruments so that emission reduction actions based on German technology can be pursued in those countries where it is most cost-effective. Given the global nature of the problem it cannot be assumed that national efforts alone will suffice. What is more, it is not just the energy sector that is involved here, for other areas are affected just as much.

Taking these steps will increase flexibility in the implementation of the emission trading scheme here at home and make emissions reduction an efficient process, while at the same time creating opportunities for German power-station technology.

This export trade is founded on the fact that we have been building the most modern power stations in the world. This is something that we should not forget: over the last twenty years Germany has improved the efficiency of coal-based energy generating plant by some 20%. Of course we can and must do better and we have to press ahead with what we call “clean coal technologies”. In the last 12 months a research programme has been developed on the initiative of the Federal Economics Minister that will bring even greater advances in energy efficiency levels.

To all those who oppose coal-fired power generation in Germany I would therefore say: If you are so determined to take such steps, and some are, then you will not only be destroying growth and employment in Germany but you will also be squandering the opportunity to make sustainable improvements in the environment of many other countries. For they are reliant on our technology if they are to make progress towards achieving their emission reduction targets. These countries will continue to use huge quantities of coal in the years to come. If we can make these technologies available to them at a reasonable price we will be helping not just German industry and the export trade but the global environment too.

I have made it quite clear that gas and electricity prices must remain affordable, not just for the business community but for private consumers too.

The maxim “trust is good, controls are better” has, in our experience, also proved to be necessary in the energy sector. We must depart from the system of voluntary agreements between energy supply utilities and the business sector and transfer the work of overseeing competition to a regulatory authority. At this juncture I would add that as part of the energy dialogue we are keen to see to it that these controls are set up using tried and tested principles and that bureaucracy is reduced to the absolute minimum.

Ladies and Gentlemen: the coalfield regions have been going through an active process of structural change for years. This process is something that the local people want, or at any rate are supporting. For they know that this will create prospects for their own future and for that of their children.

Dependence on mining and metallurgy has declined significantly and modern industries and services have moved in. Science and research have given a new dynamic to our business community and labour market. And this is exactly what we need.

This is also why we have initiated the “Agenda 2010” programme. It is important to maintain and preserve our social welfare system and to strengthen, and where necessary develop, Germany’s competitiveness in the international marketplace.

But we are also doing this to free-up resources so that this decade and the one ahead can truly become a period of education, research and development, care and support, so that for example female employees who have the necessary training can really practise their careers and female members of our society can attain a labour-force participation rate that is on par with the European average.

Ladies and Gentlemen: North Rhine-Westphalia is still Germany’s leading energy region and Essen is something akin to an energy capital. And let me say with respect for those who have achieved this that RAG too has changed. Many believe that it has become unrecognisable. Not only does it produce coal and electricity but it has also developed into a major chemical concern.

The “white part” of the company – now largely recognised in Government circles through its contribution to the financing of the coal sector – has now become the core of the business. From what Werner Müller has said I take it that it will remain so and indeed will be further developed.

The integration of the RAG Group has still not been completed. However, I believe that it was right for RAG to make the most of the opportunity offered by the merger of E.ON and Ruhrgas. That was no easy undertaking, but it was the correct one and – as the future will show – a step well worthwhile for Germany and for its people.

I know that that it will impose new demands on Werner Müller and his team. But the previous management, and the workforce too, have taken the plunge and opted for change. And I think that is something about which you can be very proud.

Ladies and Gentlemen: with Agenda 2010 the Federal Government has seized the initiative to reverse the cyclical decline – and all indicators suggest that this can be achieved. We must continue this process and there must be no shirking.

This applies to the reform of the social welfare system. And it applies to the reform of the labour market. But most of all it applies to the completion of the final stage of taxation reform, for this can and will serve to mobilise the purchasing power that we need right now to be able to achieve on the home market what is practically taken for granted in the overseas trade sector.

And this I would say in all seriousness, and also with a view to achieving political unity: I believe that this it is not just the responsibility of that part of society that enjoys a majority in the Bundestag. We must bring this reform process to a successful conclusion this year – and we must be prepared to compromise to do it. Maybe we are not accountable to party political tactics, but we are accountable to the people and to the nation as a whole.

And we also owe it not just to Germany, which has the strongest and largest economy in Europe. We have a responsibility not only for ourselves but for others beyond our borders.

We now have until the end of the month to take the decisions that are needed. Everyone who assists in this process is a credit to Germany.

And it is in this spirit that I would wish good luck and success to the coalfield communities and to the German Coal Day!