On 14 July 2021, the European Commission adopted a package of proposals to deliver on the targets agreed in the European Climate Law and so revolutionise the economy and society for a fairer, greener and more prosperous future. Known as the “Fit-for-55” package, it aims to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared with 1990 levels. Europe would then be on the way to becoming the world’s first climate-neutral continent by 2050 – making the European Green Deal a reality.
Today, EURACOAL responds to this important package of legislative proposals which will have a dramatic impact on coal production and use across the EU:
The EU Methane Strategy, published by the European Commission in October 2020, covers several areas of human activity.
For the energy sector, the focus is on fugitive emissions from oil and gas production, supply infrastructure and end use, rather than from coal mining. In light of the international nature of emissions from EU energy-supply chains, this is the right approach and the strategy should be used as a tool in climate diplomacy. In the case of methane from coal mines, EURACOAL highlights in a new position paper several actions at the EU level that would further encourage the mitigation of this methane, turning an environmental issue into a clean energy resource.
EURACOAL submitted its position paper with a letter to the European Commission in which we warn against measures that risk slowing new investment in clean technologies. Current proposals to revise the “Aarhus Regulation” would delay transformation of the EU energy sector as interest groups seek to challenge new developments of all types. Why? Because every project could be argued to have a climate impact, and any NGO could claim to represent the environment.
EURACOAL supports equal access to justice. However, access should only be granted to those directly affected. Extending justice to all under climate law risks opening a Pandora’s box whereby literally anyone can claim harm caused by others.
Secure planning procedures
To transform the EU energy sector and economy, we need faster investment procedures, not slower ones. EURACOAL has urged the European Commission to begin a process to renegotiate the UNECE Aarhus Convention at the international level, so that a better balance can be found between access to justice and a secure planning framework for clean-tech investments.
The European Commission’s Coal Regions in Transition Platform initiative includes a number of activities of relevance to the research community. EURACOAL has been a partner in the EU-supported CoalTech2051 project which has developed a future coal-related research strategy with input from many stakeholders.
This report details the strategy and gives examples of research projects that are already pushing the boundaries to deliver new solutions that can better position coal and the coal regions for the future.
Imagine an energy system where the electricity that powers our cars came from the solar panels on our roofs, while our buildings are kept warm with heat from a nearby factory, and the factory is fuelled by clean hydrogen produced from offshore wind turbines. With the European Commission’s new hydrogen strategy (COM(2020) 301), this vision of an hydrogen ecosystem can be reality. Continue reading EURACOAL joins Clean Hydrogen Alliance→
Like every other country, Ukraine is facing a Covid-19 crisis, but with the added complication that its electricity market is failing to deliver.
In March 2020, Ukrainian electricity demand fell by 7%, because of the Covid-19 lockdown. At the same time, power exports to Hungary, Slovakia and Romania surged by over 50% in the first quarter of 2020 from the synchronised Burshtyn region of Ukraine. This was because wholesale electricity prices outside Ukraine are far more attractive. To protect the country’s heavily indebted energy sector, the government imposed a 65% tariff on coal and electricity imports from Russia on 1 April 2020. Meanwhile, household, commercial and even industrial prices remain regulated with caps, despite an opening-up of the electricity market last year.
In its letter to President Zelenskyy, EURACOAL looks to the future and asks the Ukrainian government to stick with market-based solutions and electricity market liberalisation, rather than return to a failed system of central planning. As agreed in its Association Agreement with the EU, Ukraine should implement the EU Third Energy Package and did introduce the necessary legislation with a start date of 1 July 2019.
Protectionist measures are not working and Ukraine’s largest energy company, DTEK, has had to idle the big Pavlohradcoal mine. Energy companies, including SOEs, are not receiving enough income to operate. The State Company “Guaranteed Buyer” (responsible for subsidising household tariffs and renewables) has massive debts to the nuclear and renewable power companies (estimated at UAH 8.7 billion or EUR 300 million).
Part of the problem is that cross subsidies and over-generous feed-in tariffs for renewable energy sources have pushed up electricity prices such that huge debts have built up in the energy system. The government has responded by retrospectively reducing feed-in tariffs. A fairer solution would be to introduce an auction system for renewables. Electricity prices caps should be replaced with social support for those on low incomes. The caps mean heavy industry benefits from unfair subsidies. Unfortunately, the government has reduced social support intended to help with utility bills – this will lead to more debt.
A Just Transition Fund is very much needed if the EU, with the agreement of member states and the European Parliament, is to complete the huge transformation to a climate-neutral continent. Under the European Green Deal, many member states need to make great changes to their economies as they are no longer viable under current EU rules for energy systems and the even greater efforts envisaged in light of more ambitious climate targets for 2030. Investments will be required and so the European Association for Coal and Lignite (EURACOAL) welcomes, in principle, the proposals contained in the European Commission’s communication of 14 January 2020 for a Just Transition Fund (COM(2020) 22 final). The promise of linking the new fund to existing Structural Funds as part of a Just Transition Mechanism to lever €30 billion or even €50 billion of investment is especially welcome. In this respect, public consultation on the proposed amendments to the Common Provisions Regulation is perhaps even more important than this consultation on the Just Transition Fund.
1. Focus on the regions that are really affected
As supporters of the Coal Regions in Transition initiative of the European Commission, members of EURACOAL likewise insist that the energy transition is fair and based on solidarity, leaving no one behind and not impoverishing those regions where many livelihoods depend on coal. Here, it is important to note that the list of 108 coal regions eligible for support includes regions with little or no connection to coal and omits regions with coal mines, power plants or heating/CHP plants where unemployment can be significantly above average, such as the Ruhr and Saar regions of Germany, the Lubelski region of Poland and Varna province in Bulgaria (European Semester 2020 Country Report Annex D, Overview of Investment Guidance on the Just Transition Fund 2021-2027 per Member State). However, we note that the eligibility analysis by the Commission services is stated to be “preliminary”, so these omissions can be corrected to ensure that no regions are left behind which is the Commission’s aim.
2. A fund with enough firepower
The Just Transition Fund is a necessary support measure for a journey which is going to be both costly and difficult in the time available. Therefore, EURACOAL believes that the fund must be backed with a larger budget. The proposed €7.5 billion is really only a fraction of what will be needed. For example, in Germany, the government has agreed to support the transition away from coal with a €40 billion allocation to federal states with coal regions. This will allow regions to prepare for deep, structural change, creating new jobs where old ones are lost. In Poland, the cost of transforming just one company – the largest hard coal producer – is estimated at €44 billion. The European Commission should reflect on the true size of the challenge that lies ahead and ensure that the necessary investment requirements match its policies. Greater financial firepower will be required, dedicated to transforming the coal sector rather than merely an extension of the Structural Funds and Cohesion Fund. This particularly applies in view of the stark contrast between increased ambitions and investment resources: on the one hand, according to the European Commission’s assessment, achieving the current 2030 climate and energy targets will require a “yearly additional investment of around EUR 260 billion” (COM(2019) 285); on the other hand, the European Green Deal Investment Plan (EGDIP) or Sustainable Europe Investment Plan (SEIP) will generate, in a best-case scenario, only €100 billion per annum for the even more ambitious 2030 targets that may be proposed later in 2020.
3. Capitalise on existing value chains
EURACOAL strongly recommends, having in mind the dilution of funds proposed across all 27 member states and across many industrial sectors, to prioritise the coal regions with coal mines, power plants or heating/CHP plants as these will be the ones most affected by the transition. Here, the full extent of the coal industry value chain should be appreciated. Assets, infrastructure and especially human capital linked to the coal industry cannot simply disappear without replacement. New economic activities must be created, building on the assets, skills and knowledge that the coal regions have at their disposal. The de-industrialisation of these regions is not an option. Large coal mining and energy utility companies have always supported the development of local communities and those represented by EURACOAL want to continue in this role by gradually diversifying their activities to establish new jobs in new industrial activities. For example, former miners and power plant technicians are highly skilled in the operation and maintenance of any equipment. At the same time, these companies have land holdings that allow them to invest in renewable energy sources such as solar photovoltaic parks or wind farms, not to mention the geothermal potential of former mine workings. These companies should be included in the transition, not as a remote stakeholder, but as a strong partner in Territorial Just Transition Plans that deliver results in co-operation with the regional authorities. These plans cannot ignore post-mining tasks related to the rehabilitation of former coal mine and power station sites and other inherited liabilities, some of which will continue in perpetuity. Here, it is justifiable that the companies and regional authorities who bear the cost of these tasks receive specific support for this aspect of the transition.
4. Allow the fund to be fully levered
The question of state aid intensity should not be ignored. The Just Transition Fund is not a regular structural fund based on regional policy rules. It exists in response to issues arising from the energy transition, so the need for a strong energy component cannot be overlooked. Thus, EURACOAL supports the suggestion, already raised by many stakeholders, to follow the lead of the European Investment Bank which allows lending up to 75% of an energy project’s value in its recently revised lending policy. Higher intensities of state aid should now be considered by the EU. This would allow the European Commission to lever a much greater impact in the coal regions and so help deliver a popular transition.
5. Solve state-aid issues
Finally, member states that choose to provide state aid for the closure of coal mines or coal power, heating or CHP plants, for example to compensate operators for foregone profits where they cannot continue to extract coal or sell electricity on the market, should not be prevented by state aid rules designed for fair market competition. The energy transition is not market driven, so these rules are no longer appropriate. However, EURACOAL agrees that member states should demonstrate any compensation is proportionate and does not go beyond the loss of profit and additional costs faced by power plant or mine owners due to any premature closures. Any state aid which is not related to an economic activity, in particular aid for early retirements or reskilling, or aid to finance public infrastructure, should also continue to be permitted.
MEP Grzegorz Tobiszowski hosted an evening event dedicated to the coal industry in transition, bringing together eight fellow MEPs with members of the European Association for Coal and Lignite, prior to the launch of EURACOAL’s latest publication.
Invited guest, Mr. Lou Hrkman who is the Deputy Assistant Secretary at the US Department of Energy, spoke about his government’s approach to coal, after remarking that, “the US has no greater friends than Poland and the EU”. The current US administration supports innovations that will reduce GHG emissions from coal to zero, he said, while improving the efficiency and reducing the costs of power plants. He offered the new Allam cycle as an example of a power plant with zero emissions – it supplies pure CO2 to the oil industry and even produces water, he added. Work on smaller, modular power plants will lead to cheaper units that many coal-using countries can rely on to supply heat and power while meeting their Paris Agreement commitments. He wished the EU well with its “just transition”, but said that this was diametrically opposite to the US approach, with its focus on preserving jobs and using fossil fuels in a positive way to enhance economic growth and security. He cited the US oil and shale gas boom which had allowed the US to become energy self-sufficient. For coal, he predicted the 21st century would bring new opportunities, with products made from coal, such as new construction materials and hydrogen for transport. He concluded that, “technology and innovation by the private sector is much better than heavy regulation and taxes”.
Referring to the European Commission’s proposal for a European Green Deal, MEP Grzegorz Tobiszowski (ECR, PL), a former Secretary of State in the Polish Ministry of Energy, highlighted the importance of the proposed Just Transition Mechanism for the coal regions. He went on to explained how Poland’s Energy Policy to 2040 responds to current EU climate and energy policy with several new, state-of-the-art coal power plants being commissioned in Poland, as well as plans for a new coal gasification power plant (IGCC). This will be built near Lublin in partnership with Mitsubishi Hitachi Power Systems of Japan. Thanks to biomass co-firing, Mr. Tobiszowski said it would meet the recent EU emission performance standard of 550 gCO2/kWh.
The First Vice President of EURACOAL, Mr. Vladimír Budinský, presented MEPs with a preview of the association’s latest report: “Coal industry across Europe”. As EURACOAL’s flagship publication, it provides a snap shot of the coal and lignite mining industry and the influence of EU policy on the coal sector as a whole, including power generation. With many facts and figures, it covers not only the EU, but also Energy Community countries. According to Mr. Budinský, future editions – this being the seventh – should cover the US and Russia as both are major coal exporters and of growing importance to meeting EU coal demand.
Participants agreed that coal will be used for several decades to come: here in Europe and in the US. While the volumes used in EU member states will surely decline to meet political targets, the rest of the world will continue to rely on the “black stuff”. Technology will allow the use of coal in new and better ways, which is what the Coal FIRST initiative (Flexible, Innovative, Resilient, Small, and Transformative) aims to show under the leadership of Deputy Assistant Secretary Hrkman. He offered to partner with the EU on clean coal technology development by informing MEPs and working towards a Coal FIRST project in say Poland.
Energy Summit 2019 on “the conditions for a sustainable energy transition” took place in Warsaw on 1-2 October 2019, organised by the Polish Ministry of Energy, EURACOAL and the Polish Mining Group (PGG). Coal industry leaders from across Europe participated to discuss topics of importance. The summit was opened by Mr. Tomasz Rogala, President of EURACOAL and Chairman of the Board at PGG – the biggest hard-coal producer in Europe.
The Polish government was well represented by Mr. Krzysztof Tchórzewski, Minister for Energy, Mr. Adam Gawęda, Secretary of State and Government Plenipotentiary for the Restructuring of Coal Mining as well as Mr. Gawęda’s predecessor, MEP Grzegorz Tobiszowski, who now sits in the European Parliament where he is a member of the influential industry committee (ITRE). For family reasons, the Polish Prime Minister, Mr. Mateusz Morawiecki, had suspended his pubic duties at the time of the summit, but sent a letter of support.
The discussions were divided into four thematic panels:
natural environment and climate change,
security of raw materials supplies,
society and human capital, and
industry expectations for the energy transition.
These allowed those present to give their views of the measures needed for a safe and secure energy transition. Two views were repeated often.
Firstly, a call for some kind of protectionist measures to guard against carbon leakage, perhaps in the form of a carbon-border tax to create a level playing field for those European industries which must complete on the global market. If EU companies continue to pay ever-increasing fees related to environmental and climate policies, then their competitiveness will be lost. To survive, companies will be forced to move their production out of the EU which will then become more dependent on imported products, often made with little concern for the environment or climate. Such an outcome would not only undermine EU standards and policies at home, but also hamper their contribution to global objectives.
The second important view expressed by participants was that the energy transition needs to be a just transition. This means that it must take into account:
the different starting points of each EU member state, based on their particular histories and legacy infrastructure;
the magnitude of the efforts needed to transform the energy sector;
the time that the sometimes massive social changes will take; and
the financial support needed for investments in diversified energy sources, smart grids and energy efficiency.
This social dimension of the energy transition was highlighted by both industry representatives and trade unionists. All agreed that change should be achieved without pushing up electricity prices as this would damage industrial competitiveness and add to the existing problem of energy poverty. This point resonated with colleagues from Germany who face a coal phase-out by 2038 and its replacement with renewable energy sources. The latter have proven costly in countries such as Denmark where electricity prices are more than double those in Poland, according to Mr. Piotr Woźniak, President of the Polish gas company PGNiG.
In the closing session, the EURACOAL President, Mr. Tomasz Rogala, presented the meeting’s declaration which sets out the conditions for a sustainable energy transition. It is available here in Polish and English.
The climate challenge requires global solutions with similar ambitions everywhere.
A carbon-neutral EU economy by 2050 is highly ambitious: the necessary technologies need to be developed and deployed, and carbon-leakage risks need to be clearly addressed.
Without large-scale energy storage, conventional thermal power generation will still be needed.
To gain public support and to maintain EU competitiveness, solutions have to be affordable.
EU member states should remain free to choose their own (different) energy mixes.
Coal’s contribution today:
The EU coal sector has reduced its CO2 emissions by over 47% since 1990, thus helping to meet targets in the UNFCCC Paris agreement. No other sector has done as much.
The extraction and use of coal is linked to over 200 000 high-quality, well-paid direct jobs, as well as indirect jobs at suppliers.
Coal contributes to affordable and competitive electricity prices and thereby to EU prosperity, reinforcing the EU as a place to do business.
Coal’s contribution tomorrow:
Coal is a partner for electricity generation from renewables: existing coal power plants respond flexibly to the ups and downs of wind and solar power.
Under the EU ETS, the coal sector will continue to reduce its emissions, cost-effectively. Accordingly, the EU emissions trading system should remain the only instrument used to drive down CO2 emissions in the power sector.
Coal’s contribution the day after tomorrow:
EURACOAL supports a climate and energy policy based on accelerated technological progress through near-term research, innovation and entrepreneurship within a non-discriminatory, technology-neutral, competitive market place that delivers a wide portfolio of sustainable, low-carbon solutions which consumers are willing to pay for.
Coal’s contribution to progress will be reliable and affordable electricity from power plants that are now cleaner than ever before. The coal sector is already pushing forward new energy storage options; new processes that supply clean hydrogen; and a circular-carbon economy that allows any carbon-based material, including plastic wastes and woody biomass, to be recycled into new products, without carbon emissions.
This week in Poland, Katowice hosts the XI European Economic Congress, the largest such event in Central Europe.
The first day included an interesting debate on “Power and power generation – revolution, regulations and market”. Panellists, including the EURACOAL President and Chairman of the Board of the Polish Mining Group (PGG), Mr. Tomasz Rogala, expressed their views on rising energy prices, the roll out of renewable energy sources (RES) and power-sector investments, as well as on the overall security of Europe’s energy system. Other speakers included Mr. Žygimantas Vaičiūnas, the Lithuanian Minister of Energy, Mr. Krzysztof Tchórzewski, the Minister of Energy in Poland, and not forgetting Mr. Dominique Ristori, the Director-General for Energy at the European Commission.
Mr. Vaičiūnas spoke on Lithuania’s similarities with Poland as the country diversifies energy supply with new interconnectors between Lithuania and Poland, a LNG regasification terminal and innovative projects on the use of LNG in industry and transport. Mr. Tchórzewski emphasised that Poland was in a difficult situation due to the its dependence on coal, linked as it is to past decisions on the development of the Polish energy sector. He explained that Poland, unlike Hungary, Lithuania and Czechoslovakia, never developed nuclear power. In 1990, when Poland regained its independence, 99.5% of the country’s electricity came from coal. Since then, Poland has led Europe to reduce CO2 emissions, but remains in a transition that will take time – by 2040 coal’s share might still be 30%, according to the government’s strategy. Mr. Ristori responded that the Commission recognises Poland’s different situation, noting the importance of helping Poland with renewables and a “just transformation”, especially in Silesia as mines close. He underscored the importance of a long-term, decarbonisation strategy in order to push forward competitive European technologies.
EURACOAL President Rogala raised several issues:
Changes in Europe that reminded him more of political revolution then evolution. He noted that coal production in the EU had fallen by 65% since 1990 (on an energy basis). He stressed that the ongoing political revolution meant far-reaching pressures on the indigenous coal industry, resulting in coal imports growing to 166 million tonnes in 2018 and coal mining jobs leaking out of Europe. “This builds up some kind of distrust towards state authorities and EU bodies that manage the policy”, he lamented.
Referring to the huge use of coal globally, the EU’s negative trade balance with China and generally weak climate and environmental laws outside the EU, he was concerned about European industrial competitiveness. As a country at the EU’s border, he remarked that Poland was acutely aware of these issues. He called for some kind of border tax on products from countries with less strict climate mitigation measures.
On clean coal technologies, the efficiency and performance of modern coal power plants was impressive, he continued. Yet, an energy transformation was in progress, so he confirmed that PGG was on track with two exciting, new projects already submitted to the European Commission for support under the Coal Regions in Transition Platform initiative.
Mr. Rogala concluded with an appeal for a balanced, cautious approach to the transformation: a transfer of value into the EU and not the transfer of companies and jobs out of the EU.