By PATRICK MCGROARTY And VANESSA FUHRMANS

AFP/Getty ImagesGerman Chancellor Angela Merkel, center, received Monday a report on safe energy supply from the newly formed so-called Ethics Commission in Berlin.

BERLIN—Germany on Monday said it would close all of its 17 nuclear reactors by 2022, a sharp policy reversal that will make it the first major economy to quit atomic power in the wake of the nuclear crisis in Japan.

WSJ's Patrick McGroarty reports German Chancellor Angela Merkel's decision to close all nuclear power plants by 2022 in response to the nuclear disaster in Japan following March's tsunami. Photo: THOMAS KIENZLE/AFP/Getty Images

German Chancellor Angela Merkel announced that she plans to follow a government-appointed commission's recommendation to shut eight of the country's reactors immediately and close most of the others by 2021. Three plants may be kept online into 2022 as a source of reserve power, she added.

"This path sets out a great challenge for Germany," she added, but "we can be the first industrial country to make the transition into an age of highly efficient and renewable energy."

Germany's move—marking a contrast with the U.S. and other countries that have largely stuck to plans to continue pursuing nuclear power—is a U-turn from a contentious plan that Ms. Merkel engineered just last fall that would have extended the lifetimes of some of Germany's reactors into the 2030s, more than a decade longer than previously scheduled. Ms. Merkel's latest move is effectively a return to an agreement to phase out nuclear power approved in 2002 by a center-left Social Democrat-Green coalition.

It's unclear whether a formal ban on nuclear-energy imports will be a part of the final law, but Ms. Merkel has said that it would be senseless to scuttle Germany's nuclear industry only to import electricity produced by reactors in neighboring countries.

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FMK / DemotixProtesters holding antinuclear banners marched through the streets of Hamburg on Saturday.

Just days after the first explosion at Japan's tsunami-stricken Fukushima Daiichi plant in March, Ms. Merkel shut down seven of Germany's oldest reactors and ordered a review of its nuclear strategy. Germany's youngest nuclear-power plant, the Neckarweistheim II reactor north of Stuttgart, went online in 1989. The government's decision Monday, based on the outcome of that review, marks the most dramatic shift yet in a nation's nuclear-energy policy in reaction to the Japanese crisis. Switzerland's government also has approved a plan to decommission its nuclear plants. Under the Swiss plan, however, the nuclear phase-out may not be completed until well after 2030.

But apart from Japan, which has quit plans to build more reactors, few countries have altered long-term nuclear energy policies. Many, instead, are still examining how or whether to proceed with plans for new reactors. More than 150 are planned world-wide, in addition to the 64 under construction, according to the International Atomic Energy Agency. China, Taiwan and Italy have suspended plans for new reactors, pending safety reviews, while the U.S. and the U.K. have also conducted reviews.

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On Monday, the Obama Administration repeated that the U.S. intends to push ahead with efforts to revive the U.S. nuclear-power industry while learning lessons from the accident in Japan. "The administration is committed to increasing our nation's clean energy share through a broad range of energy sources," White House spokesman Clark Stevens said. President Barack Obama, whose home state of Illinois relies on nuclear power for nearly half its electricity, has long supported expanding nuclear energy as part of an effort to increase power sources that emit little or no carbon dioxide.

Since the Japan accident, the Nuclear Regulatory Commission, which oversees civilian uses of nuclear power in the U.S., has been conducting special investigations of nuclear reactors. The chairman of the U.S. Nuclear Regulatory Commission, Gregory Jaczko, has expressed confidence in the safety of U.S. nuclear reactors, but recently threw the industry a curve by saying there are "technical issues" with a new type of reactor some U.S. operators are using for their next-generation nuclear plants.

German officials decided late Sunday night to close all nuclear power plants by 2022. Video courtesy of Reuters and photo courtesy of AP.

Germany's largest neighbor, France—where nuclear energy makes up three-quarters of the electricity mix—said Ms. Merkel's move wouldn't sway its nuclear policy. "I respect the choice that Germany made," French Prime Minister François Fillon said in Strasbourg on Monday, but "it's not the choice that we are making—we think that nuclear energy is a solution for the future."

Ms. Merkel's change in course, though, hasn't produced the desired political effect. Conservative allies have been frustrated by her turn away from a cherished policy victory, and nuclear opponents have seen the move as opportunistic. Those perceptions contributed to several stinging regional election losses for the Christian Democratic Union this spring, and have led to a surge in clout for the opposition Green Party.

The center-left Social Democrats said Monday they would approve the government's new plan in parliament only if a stronger commitment is made to build up wind and solar capacity, and if the legislation leaves open the possibility of closing all nuclear plants sooner than 2022.

German industry leaders, while not surprised by the announcement, lashed out at what some called a politically driven decision that would increase energy prices and threaten German competitiveness.

"The clearly political intent to fix a final and irreversible end-date for German nuclear energy with such unprecedented haste gives me increasing worry," Hans-Peter Keitel, head of Germany's BDI business lobby, wrote in an open letter to German business leaders Monday.

Dieter Zetsche, chief executive of Germany luxury car maker Daimler AG, aired qualms about Germany's shift in nuclear policy. "People expect orientation, and with that in mind, too many changes in direction are to be viewed critically," Mr. Zetsche said in an interview in the German tabloid Bild-Zeitung. Mr. Zetsche added that the huge power requirements of Germany's heavy manufacturing companies—a pillar of its economy—need to be considered alongside the concerns raised by the Fukushima disaster.

Germany's electricity prices, which have more than doubled in the past decade, are a sensitive issue for industry, whose domestic sites consume nearly 50% of the country's electricity.

Currently, Germany derives 42.4% of its energy supply from coal-fired plants, but phasing out nuclear power, which now makes up nearly 23% of the country's energy supply, could force it to rely more on coal. The big variable is the cost of natural gas, the preferred, cleaner alterative. But procuring cheaper gas from other countries is complicated, in part because long-term contracts that many German utilities have signed with Russia lock them into a price tied to the price of oil.

On Monday, Ms. Merkel said the new nuclear policy wouldn't affect Germany's renewable energy targets, which call for generating 80% of Germany's energy supply from sources such as wind and solar, by 2050. Renewable energy capacity currently makes up about 16.9% of Germany's electricity consumption.

The move boosted stocks of German renewable energy companies. SolarWorld AG and solar-cell maker Q-Cells SE jumped more than 8%, while wind turbine maker Nordex SE rose 13%.

Shares in German utilities E.ON and RWE AG, which operate most of Germany's 17 nuclear reactors, fell sharply Monday on news of the plan. Though the utilities will no longer reap the potential profits of operating their nuclear plants longer, the government said they will still be subject to a new tax on nuclear-fuel rods introduced this year to offset those potential gains.

—Max Colchester, Jan Hromadko, Rebecca Smith, Stephen Power and Gary Fields contributed to this article.Write to Patrick McGroarty at patrick.mcgroarty@dowjones.com and Jan Hromadko at jan.hromadko@dowjones.com