Balancing Cost and Fairness Concerns in the Energy Transition: Negotiating the Political Feasibility of Coal Exit in Germany and United Kingdom

Two of Europe’s largest economies are making strides towards an exit from coal in power production, requiring politically complicated and economically challenging energy system transitions. Compromises among key societal interests must be struck to make the transition politically feasible. While the German government in the decision-making phase seem to emphasize direct regulatory instruments and building a policy package including compensation measures for communities in coal-producing regions, the UK government stressed the design of market-based policy instruments that aim for cost-effectiveness and economic innovation leading to green growth across the country, including in affected regions. This paper analyzes and compares the respective decision-making processes leading to distinct policy approaches to phase out coal in Germany and UK. More specifically, we explore how efforts to balance cost concerns with demands for compensatory measures influenced the political feasibility of the coal exit decision. We investigate whether fairness concerns ‘interfere’ with perceptions of a cost-effective policy and interactions with the EU ETS, using process tracing methods to identify the compromises made concerning cost vs. fairness between various interests, actors and institutions in the process of finding politically feasible policy approaches within the specific political contexts of the two countries. The analysis is based on primary data sources, including semi-structured elite interviews (N=23), and secondary sources.