Europe’s economic slump is allowing utilities in some countries to burn increasing amounts of cheap, highly polluting coal for electricity generation and still meet legally binding targets to cut carbon dioxide emissions, Reuters research shows.
The EU’s carbon scheme, its main tool to fight global warming, caps CO2 emissions on around 12,000 industrial and power plants in 30 countries and requires them to purchase permits to exceed those caps.
The supply of permits has increased, however, to the equivalent of several hundred million tons of emissions due largely to slowing industrial output. Preliminary EU data suggests emissions in the capped market fell just over 2 percent last year.
Prices have slumped accordingly. Polluters currently pay around 7 euros ($9.13) per ton of CO2 emitted, down 60 percent from the same time last year.
The low costs of being allowed to pump carbon into the atmosphere mean that utilities have leeway to burn more coal.
At the same time, profits based on benchmark German prices for electricity generated by coal-fired plants have risen by around 30 percent since the beginning of the year to their highest levels since 2008 and could lead to a 13.5 percent year-on-year jump in German hard-coal power production, Reuters research shows.
“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 said.
Utilities in Germany, Europe’s biggest power market and economy, have constantly increased their use of coal-fired plants since the beginning of the year.