Europe must stop investing in coal mining

Energy transition

The coal mining industry did not have a good start into the New Year. Europe’s largest coal producer, the Polish company Kompania Weglowa, has been pushed to the brink of bankruptcy. It is now a showcase of the end of hard coal mining on the continent. New scientific evidence confirms that also the mining of lignite, low-grade coal, must become a thing of the past, as most of our coal reserves have to stay underground to limit dangerous climate change.

Still, against all odds, Germany and Poland, Europe’s largest coal producers, are planning to open new lignite mines. The global climate summit in Paris at the end of the year must accelerate our transition towards renewable energy, away from fossil fuels.

The article was originally published in Revolve.

Almost half of global carbon emissions come from burning coal. Thus, this form of energy production is considered to be the most harmful one for the climate. Moreover, it not only releases carbon, but is also the primary source for a number of hazardous air pollutants. They cause chronic diseases such as bronchitis, lung cancer, heart attack and stroke. There is no such thing as obtaining energy from coal in a clean, sustainable and safe way.

Yet coal companies and some EU governments keep repeating that coal provides citizens with secure and cheap energy. In light of the recent events facing Poland’s biggest mining company Kompania Weglowa, these claims are obsolete.

Poland mines more hard coal than any other country in Europe, while it generates more than 80% of its electricity by burning coal. For many decades Poland was also a major coal exporter, however for the last six years it has been a net importer. This is due to the fact that imports are cheaper than coal extracted by Kompania Weglowa and other Polish hard coal companies. Imported coal comes mostly from Russia, hampering Polish energy security.

Polish hard coal companies are now forced to sell coal cheaper than it’s quarried. Due to that fact, at the end of 2014 debts of Kompania Weglowa amounted to EUR 1bn. According to the Polish Ministry of Economy, the continuation of current extraction levels without any reforms would mean that by 2020 the whole hard coal industry would have yielded losses of EUR 5,8 bn. This is equal to the money required to provide all school children in Poland with healthy meals for two and a half years.

The government has just proposed a restructuring programme that will cost Polish tax-payers ca. EUR 500 mln. The problem is that out of numerous mining reform packages enacted by the government since 1989, none were successful. From 1990 to 2012, the coal mining sector received a considerable EUR 32 bn of government support. An example of its lack of effectiveness could be the fact that between 2003 and 2011, state aid for Kompania Weglowa exceeded its profits eight times. Taking into account all the subsidies, and also costs of damages to environment and health, it is clear that cheap energy from coal is an expensive myth.

With hard coal becoming less and less profitable, governments and companies turn their attention to lignite. Lignite – also called “brown coal” – is a low-grade coal that results in the highest carbon emissions per unit of generated energy. Mining lignite leaves behind destroyed landscapes and lowers the water table in surrounding areas, thus damaging local ecosystems and agricultural land.

Germany is the world’s largest lignite miner, Poland is ranked fifth. In both countries there are companies who are considering the further expansion of existing lignite mines and opening new ones. They are supported by national and regional authorities, including Sigmar Gabriel, Germany’s economy minister. Opening new mines means additional large-scale investments, which will lock-in the future use of even more coal to make the investments pay off. This contradicts Germany’s efforts to stay on track to reach its climate targets. The German government beginning of December 2014 agreed to a set of actions in order to meet its 2020 climate target, which will include having to put in place measures to limit burning of coal.

Prospects of the pay-off of these mining investments are questionable, when we take into account the urgency to act on climate change. To tackle the climate crisis adequately, we have to stop burning fossil fuels and power our societies exclusively from renewable sources of energy by 2050. New reseach published last week in Nature confirms that if we are to avoid the worst impacts of climate change, significant shares of Europe’s fossil fuel reserves, including 89% of its coal reserve, has to remain buried forever. This is the only way that will allow us to keep global warming well below two degrees – the threshold that was accepted by all the world’s governments.

This raises the likelihood that coal companies will become worthless and future fossil fuel investments, also into new lignite mines, could become stranded assets. The problems of Kompania Weglowa in Poland would then be shared by lignite mining companies, who did not manage to align their business models to the energy transition.

The new global climate deal to be signed at the UN summit in Paris this December has to adhere to the goal to keep global warming well below two degrees. Around 100 countries already expressed support for the fact that the agreement should include phasing out carbon emissions by mid-century. The summit in Paris can accelerate the ongoing transition from the fossil-fuel era to the renewable, climate-friendly future.


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