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EU slump underlies shift back to coal-fired generation
- 12 years ago (2012-05-11)
- Junior Isles
Europe's economic slump has depressed overall emissions and the price of carbon in the EU ETS, allowing utilities to turn back to cheap, highly polluting coal-fired generation while still meeting their emissions targets, recent figures show.
Preliminary EU data suggests emissions in the capped market fell just over 2 per cent in 2011. Currently the low costs of emissions permits mean that utilities have extra leeway to burn coal. Polluters currently pay around €7 ($9.13) per ton of CO2 emitted, 60 per cent lower than the same time last year.
"If you have anything that's coal-fired in your generation park at the moment - be it lignite or hard coal - you will take advantage of the high margins and burn the stuff," a trader with a major German utility has said.
Profits based on benchmark German prices for coal-fired generation have risen by around 30 per cent since the beginning of the year, and are at their highest levels since 2008. This could lead to a 13.5 per cent year-on-year jump in German hard-coal power production, Reuters has estimated.
For the months January to May, German midday hard-coal and lignite power generation rose from 53 per cent to 68 per cent of the nuclear and fossil power generation share, data from Leipzig-based European Energy Exchange (EEX) shows.
Britain has over 12 million tons of coal in inventories and is running coal-fired plants at capacity while carbon permits are cheap and gas is expensive; though how long this lasts will depend on the weather, Nigel Yaxley of the UK Coal Importers Association claims.
"[Depressed economic statistics] allow us to burn as much coal as we want to without actually raising UK emissions, but in the longer-term it sends out the wrong signal and will mean rising emissions once the economy bounces back," a power trader in London said.
European officials and lawmakers are reviewing how to deal with the oversupply problem and intend to introduce a price floor along with gradual removal of permits over the 2013-2020 Phase III period of the EU ETS.
Some estimate that carbon prices would have to rise to over €30 per ton in order to push utilities into switching from coal to gas.
The European Union committed to cut overall emissions by 20 per cent from 1990 levels by 2020. Emissions last year were already down 17 per cent, and increasing energy efficiency makes a 25 per cent reduction by 2020 viable, the European Commission has said.
