Europe Increases Its Use of Dirty Coal

By Christina Andersson Medina

Being European, living in the U.S., I often credit myself for being from a more climate change-savvy continent. The flagship program of Europe’s climate politics is the Emission Trading Scheme for carbon credits (EU ETS). Although somewhat dysfunctional in the first years (2005-2008), it set stringent goals to reduce carbon emissions by 20 percent by year 2020, compared to 1990 levels. Until 2010, the goal seemed to be on its way to being met as reductions reached 17 percent, but after 2010, something happened. Emissions started to rise again.

Politicians in Europe could not foresee the downturn in the economy, which caused a decreased demand for carbon credits and built up a large surplus of emission allowances. However, since the worst recession, carbon prices have not raised in line with the rest of the economy, or with the emissions. Prices still hover around €5-7, half below the market price where they actually need to be.

I don’t feel so proud of Europe anymore. Coal is re-emerging as a dominant fuel source.

This dirty fuel is the most polluting of all energy sources, there is plenty of it, and it’s cheap – at least in Europe. The low carbon price has made coal even more profitable. The root of the new golden age of coal in Europe is the shale gas boom in the U.S. Without getting into any discussions about shale gas, let’s just face the fact that Americans are turning their backs on coal, as the less-polluting natural gas over here has become so cheap. Combined with a slowing Chinese demand, marketers of American, as well as European coalmines now see Europe as its primary market.

Renewable energy such as wind and solar have been able to grab great market shares and will continue to grow. But as it looks now, coal seems to be replacing (in Europe, the more expensive) natural gas, and Germany is phasing out nuclear power, not coal. In Germany, RWE generated 77 percent of its electricity from coal in 2012, compared with 66 percent in 2011. In the UK, coal has surpassed gas. Electricity generated from coal in Q3 2012 was 50 percent greater than in the same period in 2011.

Perhaps the coal boom is just temporary, as new legislation needs to be met for all coal-power plants by 2016, or maybe not, as new plants are being built to replace some of the old ones. Even Sweden, the “environmental haven” is investing in new coal-power plants via state-owned Vattenfall.

There needs to be more certainty around the carbon price for the long term. The EU Commission has proposed to withhold some emission allowance for some time in order to even out the surplus and boost the price (i.e. set-aside), but no one knows for sure if it will be implemented, or how much it will help. I have been following the debates for some time, and know the bureaucracy and lobbying in the EU Commission. What EU needs is not a quick fix, but a longer-term fix to the system in order to restore trust for businesses to invest in renewable energy and abatement technologies and to overcome coal.

Since ETS is a leading symbol of the effort to tackle climate change and reach Europe’s environmental targets, it is critical that the European institutions take decisive action with either price-based or quantity-based instruments, or a mix of both.  2013 emission allowances will be auctioned for power utilities, but as long as the surplus exists, it's doubtful if prices will take the neccessary jump. Restoring the ETS with firm and consistent actions would enable EU to achieve its emission goals and force the energy markets to change, and it would allow Europe be the emission reduction leader it once was.

[Image credit: Public Domain Photo, Flickr]

Christina is a sustainability, climate change and carbon emission trading consultant and advocate. She is Swedish and lives in New York City. For more insights visit nullam at Wordpress.