Session 6, International Forum for Coal Regions in Transition

1. Place-based Policies in Lignite-Coal Phasing-out
Regions: The case of Germany
Berlin, 27.10.2023
International Forum for Coal Regions in Transition
Session 6 – Economic Diversification

2. Overview about the Evaluation Project
Background: Legal mandate to evaluate the InvKG - Contracting
authority: Federal Ministry of Economic Affairs and Climate Action
Main objective: Impact evaluation of the interventions of the InvKG
program on economic policy targets => providing evidence to policy
makers
Method: Evidence-based Evaluation (within the framework of a Mixed-
Methods-Approach)
Download: https://www.iwh-halle.de/fileadmin/user_upload/publications/iwh_studies/iwh-
studies_2023-06_de_InvKG_STARK.pdf (in German, an English version will be provided soon)
Involved institutes: Halle Institute for Economic Reserach (IWH) – Member
of the Leibniz-Association and the Leibniz Institute for Economic Research
Essen (RWI)
2

3. Social Context
Decision to phase out coal: Result of a negotiation process involving
(civil) society
Political recognition: Coal phase-out brings socio-economic
challenges in the affected regions => negative shock
Compensation of the actors of the energy industry (KVBG) and the
regions (StStG): plethora of very different individual regulations
Fundamental component of the StStG: InvKG, provision of 41.09 billion
€ for the assisted area => positive shock
InvKG: Complex legal framework for the allocation of funds to
recipients
– Widely distributed responsibilities : States (1st pillar), federal government
(2nd pillar), various actors in the 2nd pillar
– Broadly based funding purposes (infrastructures: transport, R&D, local
amenities, education and training etc.) and objectives
– Variety of individual programs
3

4. Map of eligible regions
4
GFS assisted areas until 01.01.2022
Source: IWH/RWI 2023, p. 18.
Administrative
boundaries
States
Regional Policy
Eligible within GRW
InvKG aid map
Helmstedt mining area
County Altenburger Land
Lusatian mining area
Central German mining area
Rhenish mining area
Locations of hard coal-
fired power stations
details
forward
• Most of the InvKG regions
are already
characterized by
structural weaknesses
• Almost complete overlap
between InvKG and GFS
funding areas
• InvKG funding additional
to the existing (regional)
funding framework

5. Allocation of the budget to the states
5
Source: IWH/RWI 2023, p. 70.
Table 5-1: Distribution of the InvKG funds among the federal states (in billion euros unless otherwise
stated) (as of Dec. 31, 2022)
State
ID for the
distribution of
fundings in
chapters 1, 3
and 4
(in percent)
Responsibility of the federal
states
Responsability
of the
federation
Total
(Chapter 1 to
4)
JTF funds
credited to the
InvKG a
Total JTF funds
Chapter 1 Chapter 2
Chapter 3 and
4
Brandenburg 25,8 3,612 - 6,708 10,320 0,668 0,786
North Rhine-
Westphalia
37,0 5,180 0,662 9,620 15,462 0,580 0,683
Saxony 25,2 3,528 - 6,552 10,080b
0,548 0,645
Saxony Anhalt 12,0 1,680 - 3,120 4,800b
0,309 0,364
Lower Saxony - - 0,247 - 0,247 - -
Mecklenburg-
Vorpommern
- - 0,053 - 0,053 - -
Saarland - - 0,129 - 0,129 - -
Total 100,0 14,000 1,090 26,000 41,090 2,106 2,478
Notes: a The funds from the JTF are credited to the budget of the federal states at 85 percent. In the case of
Brandenburg, the funds are allocated to the budget in chapter 1. In the case of the states of Saxony, Saxony-
Anhalt and North Rhine-Westphalia, the funds are allocated to the budgets in chapters 3 and 4. – b The scope
of the InvKG also includes the Altenburger Land district in the Free State of Thuringia. Under Chapter 2 of
the InvKG, this district receives financial assistance amounting to €90 million, which is charged in equal
shares to the budgets of the states of Saxony and Saxony-Anhalt for the Central German Mining District.
Source: Illustration of the IWH.
• Total budget 41.09bn €
• 40 billion € to Chapter
1 regions
• Allocation of the JTF to
the states´ budgets
• KVBG includes further
compensation
mechanisms

6. Allocation of the federal budget by topics and federal
states
6
Table 5-8: Budgeted fundsto date (in percent) by coal region and clusters (as of 12/22/2022).
Cluster Brandenburg
Saxony
(Lusatia)
Saxony
(Central
german
region))
Saxony
Anhalt
North Rhine-
Westphalia
1 – Accessibility 29,1 35,5 26,0 34,8 34,2
2 – Education 15,6 0,1 0,1 4,8 0,1
3 – Culture 2,7 2,4 1,3 5,0 1,8
4 – Health 0,0 0,0 0,0 0,0 0,0
5 - Business locations 3,5 0,1 0,1 0,1 0,1
6 – Research and development 26,1 38,6 54,5 29,4 29,8
7 – Climate and sustainability 1,6 0,4 0,4 1,1 1,2
8 – Social capital 0,0 0,0 0,0 0,0 0,0
further measures by the federal government
9 – Process costs 1,2 1,3 1,1 1,4 1,2
10 - Immediate action program and STARK 13,8 8,0 8,1 11,6 23,2
11 – Placement of public authorities 6,4 4,7 0,0 0,0 0,0
12 – JTF 0,0 9,0 8,4 11,8 8,3
Overall 100 100 100 100 100
Source: Illustration of the IWH.
Source: IWH/RWI 2023, p. 80.
• Regional variation in
priorities
• Focus on R&D and
accessibility in all
federal states
• Differences in focus on
non-investment
measures (STARK) and
the placement of
public authorities

7. Time frame for expected effects
7
Source: IWH/RWI 2023, p. 59.
• InvKG funding categories
very heterogeneous
• Different impact horizons
for different types of
funding categories
• Regional incidence of
certain types of funding
categories determines
the impact horizon at the
regional level
• Expectation
management: It will take
time before the first
effects can be found
2020
Begin of StStG End of StStG
Funding period 1 Funding period 3
Funding period 2
Treatment
1
Delay in the
effect of the
treatment
Delay in
data
provisio
ning
Treatment 2
Delay in the effect of
the treatment
Delay in
data
provisio
ning
Treatment
3
Delay in the
effect of the
treatment
Delay in
data
provisio
ning
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
details
forward

8. Spatial incidence of the InvKG
program
8
InvKG aid map
Chapter 1-regions
Planned expenditures
as of Dec 31, 2022
(million euros)
0 – 500
500 – 1,000
1,000 – 1,500
1,500 – 2,000
2,000 – 2,431
Chapter 2-regions
non-eligible regions
• InvKG: demand driven
program
• Uneven spatial absorptive
capacities
• Granted actors in non-
eligible regions, too (in line
with the policy rules):
transport infrastructure;
collaboration projects

9. Baseline projection of the development of coal regions
9
Figure 6-2: Baseline projection - GDPdevelopment and contribution of the components, 2020-2040
Notes: BB - Brandenburg, SN - Saxony, ST - Saxony-Anhalt. M.-Revier - Central German mining area. Non-FG -
aggregated counties in Germany not included in the assisted areas. SK-Reviere - counties mentioned as eligible
in InvKG, chapter 2, § 12.
Sources: VGRdL, own calculation.
• TFP as key growth driver
(0.5 percentage points)
• Same holds for capital -
contribution particularly
prominent in the Saxon
part of the Central
German mining region
• Labor shortage limits
growth in all regions -
declining working-age
population
• Particularly pronounced
in the Brandenburg part
of Lusatia
Source: IWH/RWI 2023, p. 100.

10. Before and after comparison of the InvKG outcomes
10
Source: IWH/RWI 2023, p. 109.
Table 7-1: Development of the number of employees subject to social insurance contributions (1/3)
Mining area
Changes in the number of employees subject to the social insurance system
(measured at the place of work)
12/2013 - 12/2019
(annual average growth rate
in percent)
12/2016 - 12/2019
(annual average growth rate
in percent)
12/2019 - 09/2022
(annual average growth rate
in percent)
All employees
Lusatian mining area (BB) 1,1 1,0 0,9
Lusatian mining area (SN) 1,2 1,2 0,4
Central Germany mining area
(SN) 2,2 1,8 1,6
Central Germany mining area (ST) 0,9 0,8 0,8
Rhineland mining area (NRW) 2,2 2,1 1,4
Regions according to §§ 11-12 1,5 1,7 0,8
Other counties Western Germany
(excluding Berlin) 2,1 2,0 1,3
Other counties Eastern Germany
(excluding Berlin) 1,1 0,9 0,6
Source: Raw data: Federal Employment Agency. Own calculation.
• Comparison of mining
areas: employment
growth strongest in the
Saxon part of the Central
Germany mining area in
the period 12/2019-
09/2022, followed by the
Rhenish mining area
• Lowest employment
growth in the Saxon part
of the Lusatian mining
area
• No reduction in
employment in the
assisted areas

11. Considerations for a suitable control group
11
Source: IWH/RWI 2023, p. 21.
Administrative
boundaries
States
Regional Policy
Eligible within GRW
InvKG aid map
Helmstedt mining area
county Altenburger Land
Lusatian mining area
Central German mining area
Rhenish mining area
locations of hard coal-
fired power stations
Counties
Quasi-experimental
setting
Controls
Treated

12. Event-Study-Design
12
Source: IWH/RWI 2023, p. 132.
Figure 7-2: Employment development in the coal areas compared with the control group.
3) Consideration of regional control variables and corona infection counts: Specification 2) + number of infections
Notes: The horizontal axis represents quarters relative to the start of the InvKG in August 2020 - operationalized over the
third quarter of 2020 (time 0). The vertical axis shows the growth of employment in the InvKG counties relative to
the start of the law, compared to the counties in the control group (red horizontal line). The black vertical line
represents time t-1, i.e., one quarter before the start of the InvKG (second quarter of 2020).
Source: Raw data: Labor market data: Federal Employment Agency, funding area delimitation´s: BMWK, Corona infection
figures: www.healthcare-datenplattform.de; calculations: IWH; charts: Stata Tool eventdd.
• So far, there is no evidence of further backsliding (due to the
negative effect of the coal phase-out), nor of a positive effect
on the development of assisted areas

13. Summary and political implications
So far, sum of actual payments low: 658.4 million euros (47.2 [1st pillar] +
611.2 [2nd pillar])
Large variety in measures to strengthen the diversification of the coal
regions
– Accessibility (railroads, interstate, federal roads)
– Diversification (R&D infrastructure, R&D projects, educational institutions,
placement of government agencies)
Variation in absorptive capacities across eligible regions
Rather long time span between interventions and measurable effects of
the program
Focusing InvKG targets on strengthening the endowment with qualified
labor: (pre)school education, vocational education and training,
accessibility (by rail) to “thick” labor markets, attracting skilled workers
from abroad
13