No new coal in Europe

IEEFA has a report suggesting that no new coal power stations in (Western) Europe will be built.

Western Europe may already have built its last coal power plant as governments everywhere crack down on greenhouse-gas pollution.

That’s the view of Gonzalo Garcia, the global co-head of natural resources at Goldman Sachs Group Inc. While U.S. President Donald Trump is seeking to revive the industry, politicians across Europe are working hard to stop using the dirtiest fossil fuel.

German Chancellor Angela Merkel has named a panel of lawmakers from the main political parties to consider when the nation can close its last coal plant. The U.K. has vowed to do so by 2025. And financiers, notably Standard Chartered Plc earlier this week, are getting cold feet about writing loans for new coal plants.

“I personally believe that we’re not going to see a new coal plant being built in western Europe ever again,” Garcia said at a conference in Oslo on Wednesday. “It will be very challenging in most OECD countries to build new coal plants. It’s going to become increasingly expensive.”

The coal plants that remain open are becoming more expensive to run. Coal for delivery in Rotterdam is approaching $100 a ton, its highest in five years, and the cost of carbon emissions allowances is near the most it’s been in a decade.

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The recent rise in the cost of carbon certificates has been dramatic.   Since the beginning of the EU's carbon market, it has been flawed.  Too many free carbon certificates were given to coal power stations.  But recently the rules were tightened up, and the cost of carbon has quadrupled:

After many years of excess CO2 allowances, the price for emitting carbon has risen significantly in the European Union over the last year.

Owners of European coal-fired power plants are closely following the development of the price for emitting CO2. In less than a year, the price for CO2 allowances in the European Union’s Emissions Trading System (known as the EU ETS) have more than quadrupled. The price for emitting a single ton of CO2 reached EUR 20 in August this year, which is a ten year high. These developments are tipping the balance in favour of wind and solar power on European electricity markets.

For many years, the EU ETS has been characterised by an excess of CO2 allowances, which has made it relatively inexpensive to emit CO2 gases. Therefore, a number of EU member states, including Denmark, have repeatedly stressed the need to urgently institute measures that would reverse the ETS’ fortunes when a reform of the ETS for the 2021 – 2030 period was due to be adopted.

Negotiations to reform the ETS were concluded in 2017 and entered into force in February 2018. The subsequent agreement included provisions to significantly strengthen the ETS. Excess CO2 allowances are now quickly taken off the market and transferred to a reserve. A large number of the said allowances will also be permanently cancelled. The cancellation can mean that billions of allowances will never be placed on the market again, thus increasing the cost of pollution.

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EU Carbon price per tonne

To put a carbon price of E20/tonne of CO2 emissions in perspective, it's worth remembering that each ton of (black) coal burned produces roughly 2.9 tons of CO2.  So the carbon tax in effect increases the cost of coal (currently around US$120 dollars) by US$67 (E20*2.9*1.15 Euro/$ exrate).  That's a lot.

So, yes, no new coal for Europe--and the continued shuttering of existing coal power stations as new renewable capacity is installed.