Europe’s failure to tackle coal

This report explores the risks facing the EU low-carbon transition.

Dave Jones

Head of Data Insights

28 July 2014 | 3 min read

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This new report covers coal emissions in the European power sector. Coal for power now represents 18% of total EU CO2 emissions, equivalent to all road transport.

The report explores the question of how long high coal use in the EU could continue and concludes that unless there are changes in the EU’s energy and climate policies it could remain stubbornly high into the next decade.

If EU politicians do not act urgently, Sandbag shows that current policy will not guarantee the end of unabated coal, calling in to question the credibility of Europe’s climate change and energy policy. And with no guarantee of continued renewables and energy efficiency growth after 2020, coal’s comeback could become permanent.

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Executive summary

If the EU climate policy can’t stop coal, then it is not credible.

Coal emissions rose 6% from 2010-13, despite massive investment in renewables and electricity demand falling.

EU CO2 emissions from coal in the power sector have increased by 6% since 2010 and now represent 18% of EU’s total CO2 emissions.

Germany, UK and Poland are responsible for 66% of coal based emissions, and also responsible for the
entire 6% EU increase since 2010.
Overall, power sector emissions fell by 7% from 2010 to 2013, but would have fallen by 18% if gas had
been cheaper than coal. Sandbag sees this as a “missed opportunity” to reduce emissions by an
additional 11%.
Carbon intensity for the power sector across the EU has fallen slightly overall as a result of renewables
and energy efficiency improvements but not as steeply as might have been the case if gas had replaced
coal

European air quality legislation might result in many coal closures, but cheaper non-GHG scrubbing technology and new electricity capacity markets could work against this.

The Large Combustion Plant Directive (LCPD) reduced coal emissions by 5% in 2008-13 as some stations have already shut. A further reduction of 3% is expected from 2013 to 16.
The impact of the Industrial Emissions Directive in 2016 is not yet calculable since many flexibilities have been granted to plant owners. However:
- Virtually no coal power stations have announced closure due to IED.
- Cheaper compliance techniques mean it is increasingly likely many can stay open.
- 40GW out of the total 150GW is still undecided; of this 30GW is in UK and Poland.
- Capacity markets (already planned in UK) risk distorting the closure decision in favour of investing in refurbishment.
- There is a real, preventable threat that many coal power stations will invest to stay open, which creates a high-carbon lock-in into the 2030’s

If coal generation remains cheap, coal emissions will fall only 3% from 2013 to 2016.

However, from 2016 to 2020, coal emissions will begin to fall faster. This is because from 2016 gas generation may have reduced to such a level that coal begins to be displaced by renewables for the first time.
Fuel-switching will be an increasingly important feature of the EU power sector because increasing intermittent renewables leads to a lower utilisation factor on fossil capacity. And this means there is more spare capacity to switch from coal to gas, and vice versa.
Therefore, the emissions saved in a “cheap gas” scenario compared to a “cheap coal” increase, as the potential for fuel switching increases. Emissions saved will increase from 11% of power sector emissions now, to 28% by 2020.

The increased fuel-switching potential has two important implications:

The carbon price will become increasingly important in determining emissions.
Getting the correct generation mix now is essential to future emissions – i.e. saying goodbye to old coal capacity now, and making sure large amounts of gas capacity don’t close.

The most important policy lever at an EU level is the ETS the caps of which must be tightened to deliver a more meaningful carbon price. Additional options include:

The introduction of supplementary carbon taxes to boost the carbon price
The introduction of carbon intensity targets for the power sector
Emissions performance standards on existing power stations
Tighter environmental regulations on non-carbon pollution
Reintroduction of mandatory efficiency targets for generating plant
An age based phase-out policy
A new Carbon Capture and Storage (CCS) policy targeted at countries with a higher than average carbon intensity

To be on course for longer term emissions reductions achieved at least cost, policy changes at Member States level and EU level are necessary to drive unabated coal off the system both in the short and longer term. This is a key credibility test for EU climate and energy policy. We hope that Member States and the newly configured European Parliament and Commission will take these findings to heart and agree an effective 2030 policy package.

We recommend:

Urgent reform of the ETS through cancellation of surplus allowances and the early introduction of a market stability reserve coupled with aggressive increases to the Linear Reduction Factor.
The introduction of mandatory power sector carbon intensity reporting and monitoring at an EU level coupled with a new steadily declining emissions performance standard for suppliers of electricity in the EU.
A new round of grant funding for CCS projects specifically targeted at countries with a higher-than average dependence on coal in the power sector.
A clear state aid policy that states that capacity market payments should align with EU climate policy and take efficiency and carbon intensity into account.

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Europe’s failure to tackle coal