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Today, the European Commission launched a public consultation for the new electricity market design which it hopes will enable an efficient transition to a low-carbon electricity system.
 
We believe these objectives are laudable but, as written, the consultation fails from the outset because it ignores a key issue: the need for new electricity markets to help drive rapid decarbonisation and phase out reliance on aging, unabated coal fired power stations.  The EU electricity transition is not just a “transition into low-carbon generation”; it is also a “transition out of high-carbon generation”.  
 
Coal power stations are causing huge problems:
– Coal is the most carbon-intensive of all fuel types.  For one unit of electricity, hard coal produces double the CO2 emissions of gas, and lignite triple the CO2 emissions of gas.  Indeed, coal power stations produced 18% of all European CO2 emissions in 2013.[1]
– Excess coal capacity is causing new efficient more flexible gas power stations to close.  This is not just increasing emissions today, but stops the ability to reduce emissions tomorrow. 
– Impact on health.  Coal pollution causes a huge impact on its citizens, mainly through sulphur dioxide, nitrous dioxides and mercury emissions. 
 
New electricity market arrangements could be used to underpin the phasing out of unabated coal that a carbon price alone is unlikely to achieve.  The current EUETS price of €7.70/tonne is doing little to limit coal generation and for some plant political unrealistic prices would be needed to drive them off the system. The arrangements should also rule out distorting subsidies for fossil power stations such as capacity payments to high-CO2 emitters, and any state aid for retrofitting to comply with air quality standards. 
 
Tighter air quality limits are also needed. 71,000 deaths could be avoided between 2020 and 2030 through tighter air quality limits on large coal power stations.[2]
 
New market arrangements should accommodate national policies on coal such as setting phase-out dates, mandating closure based on age or efficiency or emissions performance.
 
Finally, the Commission should build on the pre-existing electricity market regulations that require generators to disclose fuel mix[3] by introducing an obligation to steadily reduce the carbon intensity of retail electricity.  This obligation would act as an important policy tool for securing investment in to decarbonisation in the absence of legally binding targets for renewables after 2020.[4]
 
We believe the Market Design Initiative is currently too narrowly conceived and fails to address the crucial issue of phasing out high-carbon infrastructure including unabated coal. We hope that through the course of this consultation a broader discussion will be stimulated and solutions will emerge. 
 
 
References