You are here: Coal industry update | Energy policy

The irreconcilability of EU climate targets and energy objectives

In taking a U-turn from the draft decision on aid that was designed to strengthen security of supply, the European Commission has now presented the Council with a "Sustainability Strategy" calling for aid to the coal and energy industries to be terminated by 2010.

Even the IEA - no advocate of the subsidy policy - has confirmed in its latest analysis report that the removal of aid will inevitably result in imported coal taking the place of indigenous fuel. This development would not alter the environmental balance in any way, either within the EU zone or outside it. The EU Summit in Göteborg failed to take up the Commission’s proposal. Other European initiatives, especially those of an environmental nature, also contain proposals that seem to threaten the future of the coal industry in the form of a "decarbonisation" offensive. Such measures would make it increasingly difficult for Member States to operate an independent coal and energy policy.

One particular example of this is the first draft Directive on CO₂ emission rights trading, which was proposed by the Commission in mid-2001. This called for the setting up of an instrument that would effectively allow a free-market and more flexible approach to the problem and to this extent would be preferable to the introduction of administrative rules governing emission limits. However, the draft Directive that was finally submitted only tightened the existing regulatory laws and sought

• to use compulsion, while success can better be achieved by voluntary settlement, as has been clearly demonstrated by the climate protection agreements concluded in Germany;

• to focus on a number of selected industrial plants and power stations inside the EU, whereas the Kyoto Protocol intends to apply this instrument on a worldwide basis;

• to penalize coal above all other fuels, whereas – to varying degrees - all forms of energy present risks as well as advantages; this measure was supported by various studies based on a somewhat biased survey, which by "allocation of social costs" claims to have "demonstrated" the supposed need for corrective action on electricity prices, especially in the area of coal-fired generation;

• and consequently to concentrate on the coal producing nation Germany, which for a number of years has succeeded in cutting CO₂ emissions by 15% a year compared with 1990 levels, while average emissions from other EU Member States – rather than falling – are in fact increasing at the rate of 4% per annum.

The Commission intends presenting a revised version of the Directive by the autumn of 2001. The new draft is aimed at creating a better framework for satisfying the economic as well as the ecological requirements, i.e. the system for emission rights trading is to be organized on free-market principles and regulated in an unbureaucratic way. It must also be aligned with climate-policy measures currently existing at national level and form a link with the other flexible Kyoto instruments, such as Joint Implementation and Clean Development Mechanisms. The important energy objective of security of supply, strengthened by a sustainable contribution from indigenous fossil-based energies, must also be taken into account in an appropriate way. The Clean Development Mechanisms provide a means whereby modern coal and energy technologies, when transferred to the developing countries, can be offset against the CO₂ audit of the industrialized nations. The European Commission initially wanted to restrict the use of this instrument to energy-saving and renewable-energy processes and at the same time to exclude modern coal-burning technologies from the scheme. Such an approach would constitute another form of discrimination against coal and would in fact jeopardize climate targets, for without the diffusion of efficient coal-utilisation technologies from the industrial nations to the developing countries there is little or no chance of a global CO₂ reduction – in fact the cost of meeting these targets would be even greater.

The EU was eventually forced to make concessions at the conference of Kyoto signatories that was held in Bonn in July 2001. EU States would henceforth be able to extend the global instrument for CO₂ reduction to include modern coal-burning systems. However, when one looks at the overall context of the different quantitative targets from an EU perspective, especially in terms of economic growth, energy savings, renewable energies and the cogeneration of heat and power, as well as the climate targets themselves, there is no mistaking the fact that they contain more than a grain of contradiction. As independent analyses have shown, it is simply not possible to achieve all the targets at the same time. As a result, some elements within the Commission now seem to be looking for a way out of the dilemma by abandoning coal-related activities. The global and national viewpoint is somewhat different.

Source: GVST (German Coal Producers’ Association) Annual Report 2001