Coal power stalks the earth, killing hundreds of thousands each year, and surpassing all other energy sources for its contribution to climate change. You’d be forgiven for expecting that the EU’s aggressive investment in renewable energy, and a planned 40% cut in emissions by 2030, would put an end to the spectre of coal in Europe. New research from carbon emissions think tank Sandbag (PDF) shows you’d (probably) be wrong; none of the current EU policies will significantly impact coal.
Sandbag looked at four key climate policies; the EU Directives on Renewables, Energy Efficiency, Air Quality, and the Emissions Trading Scheme (ETS). This expands on our July 2014 report called “Europe’s Failure to Tackle Coal” which looked specifically at how the Air Quality Directive and the ETS are having a limited impact on coal generation. We present a scenario where, without major policy reform, coal remains substantially untouched by the current policy package.
Different assumptions on changes to electricity consumption
A key assumption to note is our use of the European Commission’s projections which don’t expect the Energy Efficiency Directive to reduce total electricity consumption. The Commission forecast, in common with other analysts, a steadily increasing electricity consumption; 0.2% a year to 2020, and then 0.7% a year to 2030. But electricity consumption has been falling recently and Sandbag believes it could continue falling to 2030, if efforts to increase energy efficiency continue. The implications of this change in scenario will be explored in a future Sandbag report.
The briefing released today shows that renewables growth so far has been at the expense of gas, whilst cheaper and higher-carbon coal is left on the grid. Looking forward, renewables will continue to displace gas to a greater extent than coal, leading to smaller emission cuts that would be possible if gas stayed in the energy mix.
Air quality regulations also aren’t expected to result in the closure of many coal power stations. Continued EU industry lobbying has seen regulations watered down and delayed, and cheaper than expected power plant filters allow coal stations to continue operating, capturing some of their sulphur and nitrogen oxide emissions but increasing their carbon emissions. More of the same is expected in the future; although the EU air quality regulations are to be reviewed, it doesn’t currently appear likely that these will be enough to shut down coal to a significant degree.
The carbon price and coal
The continued massive surplus in the ETS of more than two billion carbon allowances, now and out to 2030, is failing to constrain coal generation. With the surplus, it’s impossible to envision a situation where the ETS represented any kind of cap on coal generation. The faltering ETS has left us with a price of just €6 for a tonne of CO2, when the EU planned for €30 and above, meaning high-carbon energy like coal is continuing to persist in the energy sector at the expense of cleaner alternatives. Sandbag believes that without substantial reform the carbon price will not rise above €10 out to 2030. Legislation to begin to partially fix the market has now been proposed, but even this faces a rough ride through parliament.
All this means that coal, currently responsible for 20% of EU power sector emissions, will likely reduce by little more than 1% a year out until 2030. With China and the USA potentially taking aggressive action against coal, the EU risks looking like a laggard. China has banned coal around Beijing and plans a cap on total consumption, leading some analysts to predict coal use in China will peak as early as 2015. In the USA, new emissions limits primarily impact coal, already reeling from the effects of cheap gas. Europe needs to look at improvements in all current policies, and even consider new ones. Emissions Performance Standards for power are one option, whilst more needs to be done to boost Carbon Capture and Storage to ensure the EU follows the cheapest pathway to a low-carbon economy, and is able to sequester remaining fossil fuel emissions.
This analysis is a further wake-up call for the EU. The current plan can’t stop coal. Brave action is needed to reform the carbon market and introduce further supporting policies. European policymakers must not dodge this chance to protect the health of their citizens now and in the future.