Solving the coal puzzle Lessons from four years of coal phase-out policy in Europe Executive Summary The Nine Elements to Succefully Phase-Out Coal

Solving the coal puzzle Ambitious Lessons from four years of coal phase-out Plans need a phase-out date and policy in Europe pathway consistent with 1.5 degrees℃.

Europe is on a journey to phase out coal. With 15 countries that have announced that it ’s 2038 coal phase- announced to end coal burning since 2015, we can reflect back on a would phase out coal by 2028 out date is much later than the wealth of policy experience gained in the last four years. - going from 33% of electricity 2030 needed to be compliant from coal in 2018, to zero in with 1.5 degrees. We worked with 20 experts across 10 countries. First, we defined nine just ten years. qualities that are needed to make a successful coal phase-out. Then, we interviewed each country expert to see whether there are lessons to share. For each of these nine qualities, we have created a guide of all the “dos and don’ts” of what contributes to a good coal phase-out policy. Legislated On this summary page, we identify the most telling example for each of the nine policy qualities. Plans should be written into law.

We hope you find this interesting and inspiring to how a coal phase-out Finland has imposed a law Italy’s phase-out is described policy could be developed in your country. that makes it illegal to burn only as a goal. There are no coal in energy production actions yet taken to legislate from mid-2029. This ban is the Italian coal phase-out. clear-cut and without loop- holes.

Just No one is left behind.

The Spanish government The only evidence of just transi- achieved a historic €250 tion policy in the UK is either by million agreement to close the companies (e.g. redeployed mines with the coal mining workers), or local government unions. (e.g. retraining schemes). 2 /22

Clean Economic Wind and solar explicitly replaces coal. Coal should pay a carbon price.

The Dutch climate agreement Onshore wind deployment is After the reform of the EU’s Prior to 2018, however, the sets a target to raise renew- coming to a halt in Germa- Emissions Trading Scheme EU-ETS - which was set up in ables generation from 15% ny, because of a proposed (ETS), the price of CO2 rose to 2005 - had a very slow start to 75% in only 12 years and change in planning law. This around €25/t in 2019, signifi- and was largely ineffective envisages an explicit coal to may impact the speed of the cantly worsening coal power for over a decade. clean transition. coal phase-out. plants economics.

Direct Healthy Avoids a bridge into fossil gas Closes dirtiest plants first. or unsustainable biomass. The EU updates air pollution Coal plants received free EU Renewables growth in the In the , four (out limits every seven years. In carbon permits, which fund- Netherlands seems to be of five) coal plants have been 2021, the SO2 and NOx limits ed upgrades to meet stricter strong enough to reduce awarded €4 billion in subsi- will tighten substantially pollution limits. This meant gas generation by 2030, at dies to co-fire biomass with which means utilities must older coal plants stayed open the same time as phasing coal over 8 years. choose: invest or close? longer, rather than close. out coal.

Reliable Smart Keeps the lights on. Avoids pay-off for closure.

The Finnish constitutional Germany’s ‘coal commis- The Netherlands is investing Coal power plants will get pay- law committee, in a signifi- sion’ agreed utilities should heavily in demand-side re- ments until 2022 under the UK cant ruling, slammed hopes be paid to close plants and sponse, new interconnectors, capacity mechanism, which of energy companies to get mines, even though the public hydrogen, and storage. are crowding out investments compensated for having to sees it increasingly as a waste to help replace coal. phase out coal by law. of taxpayer money. Status of coal phase-out plans in Europe Timeline of Coal Phase-Out Four years of coal Announcments 2015 phase-outs in Europe 2029 2 GW UK

In 2015, the UK was the first country in the world to announce an 2016 explicit coal phase-out. Since 2022 Austria then, a further 14 European 0.1 GW countries have announced Finland that they will phase-out coal generation. 2030 2017 These countries are 3 GW on a journey. One Denmark country, Belgium, The Netherlands Portugal has already phased out coal, 2025 1 GW 2025 but for most 2029 10 GW 2035-38 30 GW countries this 5 GW 2018 journey will 47 GW 2016 take a decade, 0 GW Ireland or longer. 9 GW

2023 1 GW 2019 2022 2020 No 1 GW Coal Generation 3 GW 2030 Germany Greece 1 GW Phase-out coal 1 GW 6 GW Hungary Slovakia by 2030 or earlier 2025 3 GW 9 GW Phase-out coal only after 2030 2 GW 4 GW

Phase-out 0.2 under discussion GW 1 GW 5 GW No phase-out 1 GW 2023 discussion 2 GW 10 GW GW Current operating 2028 capacity of 4 GW coal-fired power 21 GW plants in gigawatts (Oct 2019) Country announcements on coal phase-out plans 4 /22

Austria Greece The Austrian coal phase-out is not gov- At the 2019 UN climate summit in New ernment driven. The companies operating York, the Greek prime announced The Powering Past Coal Alliance: the last two coal plants in Austria will close a complete phase-out of lignite by 2028. proud to be going coal-free them by 2019 and 2020, respectively. This has been re-iterated many times At the 2017 UN climate summit, the Canadian since. Belgium climate minister Catherine McKenna and British climate minister Claire Perry (pictured) Belgium is the first, and so far only, - for Hungary merly coal-burning EU country to become launched the Powering Past Coal Alliance At the 2019 UN climate summit in New coal-power-free. The last coal plant closed (PPCA). They wanted to acknowledge York, the Hungarian president announced in March 2016. The phase-out was not a “the need to accelerate the international that Hungary will be coal-free by 2030. policy objective but resulted from the pro- transition from burning coal to using cleaner power sources”. The alliance of gressive closure of aging power plants af- Ireland fected by EU pollution control regulations. governments, businesses and organisations In March 2018, the Irish minister for climate who have pledged to phase out coal by 2030 action announced that Ireland joined the Denmark in OECD countries, has received wide acclaim Powering Past Coal Alliance and will end In November 2017, Denmark was among and is counting 91 members. It is now a “badge coal power use by 2025. It also banned us- the first signatories to the Powering Past of honour” to be part of the global leaders to ing coal for domestic heating from 2019. In Coal Alliance set up by the UK and Can- transition to become coal-free. July 2018, the Irish parliament passed a bill ada, declaring it would work to phase out to sell the country’s shares in coal, peat, oil Ministers Claire Perry (left) and Catherine McKenna (right) coal by 2030. and gas, making Ireland the world’s first © Powering Past Coal Alliance country to divest from all fossil fuels. Finland Finland announced in 2016 that it would Italy ban coal burning in power plants from Sweden The Italian government announced a coal 2029. This was set in law in February 2019. Sweden intends to be among the first The UK was the first country in the world phase-out as part of its 2017 non-binding fossil-free industrialised countries in the to pledge to go coal-free power. The UK’s National Energy Strategy, but very little France world. The last coal plant in Sweden will business and energy minister made the progress has been made since. France’s previous and current presidents, close by 2022. announcement just prior to the 2015 Paris climate summit. Since then, the UK helped Hollande and Macron, both committed Portugal to phasing out coal, announcing it a few The Netherlands set up the “Powering Past Coal Alliance” to Portugal made an initial commitment to times. In the latest energy and climate law In 2017, the Netherlands proposed a com- help countries show-off their coal phase- phase out coal before 2030 back in 2017 from June 2019, there is an emission cap, prehensive climate policy, pledging to out pledges. when it joined the Powering Past Coal which will become effective on 1 January phase out coal alongside a large build- Alliance. The re-elected prime minister 2022. up of renewable generation and a carbon announced in 2019 that the country’s last price floor. The phase-out was legislat- coal plant will close by 2023, confirming a Germany ed in December 2019. Phasing out coal is much earlier phase-out date. In January 2019, Germany’s ‘coal commis- seen as essential in order to meet its legal greenhouse gas emission reduction tar- sion’ published a detailed coal phase-out Slovakia proposal. The commission brought to- gets. In a joint statement in June 2019 the newly gether stakeholders from industry, trade inaugurated president and prime minister unions, NGOs, academics and represen- announced that Slovakia will stop burn- tatives of villages threatened by mining. A ing coal to produce electricity by the end phase-out date of 2038 was agreed. Ger- of 2023. Later in 2019, Slovakia joined the many is the only country to agree a date Powering Past Coal Alliance to show its later than the 2030 date that is needed to commitment to phasing out coal. keep temperatures below 1.5 degrees.

Element No. 1 Lessons from Europe

Policies that Ambitious worked well

The 2025 phase-out date announced Spain shows policies can lay the back in 2015 initially seemed ambi- ground for an ambitious phase-out. tious as 40% of UK electricity was In Spain, coal mine closures, tighter generated from coal in 2012. But - pollution limits, and a higher carbon with hindsight - an earlier date was price means that half of Spain’s coal possible, as most - if not all - coal capacity may close in 2020. Spain’s plants will likely close by 2022. This Balearic Islands have already legislat- has been helped by subsequent ed to phase out coal by 2025. When policies such as a large investment Spain does commit to a phase-out in offshore wind, and a high carbon date, which is expected to be includ- price. ed in a new climate change and ener- gy transition law, the government can The Netherlands will phase out coal be more ambitious than previously by 2030. This will involve closing thought possible. three new large coal plants, which were commissioned around 2015, Portugal made a provisional an- after only 15 years in operation. There nouncement initiating a discussion on is a two-track approach, retiring older coal, and then followed it up with a plants in the 2020s, and a stop-dead much more ambitious pledge. In 2017, date for all coal plants in 2030. This Portugal joined the PPCA committing gives a predictable pathway to phase to close its coal plants “before 2030.” out coal. After discussions over two years, the prime minister announced in 2019 that the country would be coal-free Plans need a phase-out date and by 2023. Portugal is unlikely to be the last country to bring forward the pathway consistent with 1.5℃ degrees phase-out date, as governments re- alise phasing out coal is more urgent - and easier - than they imagined. To stay under 1.5 degrees, global coal generation must fall 80% by 2030, OECD nations should end coal use entirely by 2030, and all coal-fired power stations in the world must close by 2040. This is according to Climate Analytics, who analysed the IPCC analysis in the context of coal generation.

On the ground 6 /22

Policies that didn’t work well

Greece announced that it would The Netherlands’ 2030 phase-out Despite the bottom-up progress The French 2022 coal phase-out date phase out coal by 2028, which is date is the latest possible date to in Spain on coal, there is not yet an is not ambitious as less than 2% of considered ambitious as coal still respect the 1.5-degree threshold. For agreed phase-out date. Planning France’s electricity is from coal. Only contributed 33% of total electricity an advanced country like the Nether- for investment in Spain’s electricity one of four coal power plants have supply in 2018 and was even higher lands, this feels quite weak. It is also a system is made more difficult without announced a closure date, the fate historically. It is also considered am- consequence of not blocking new coal knowing when the coal plants will of the others beyond 2022 remains bitious because it’s the first phase- power plants go online between 2014 close. unclear and they could possibly con- out of a lignite-producing country in and 2016, a period when it was already tinue burning coal. the EU. obvious that coal power plants were The 2029 coal phase-out date is not not compatible with climate ambition. ambitious, considering Finland is The EU has not tackled coal directly Slovakia is planning to phase out committing to be carbon neutral by because it does not have the author- coal by 2023. The power plants were Germany’s coal commission was 2035, and as there is less than 2GW of ity to decide the fuel mix of member unlikely to continue past 2023, due formed only after years of inaction quite old operational coal capacity in state. However, EU policies have to their age and investment needed. on coal, making the need for ambi- Finland. The 2029 coal ban does not indirectly led to the decline of coal - However, a coal phase-out is still tion even more pressing. The 2038 include peat, which is also burnt in through renewables targets, energy useful, meaning Slovakia can focus coal phase-out date is much later Finland. efficiency targets, total greenhouse on planning to its future. Also, as than 2030, which is what is needed gas emission targets, stricter pollu- the first eastern European country to be compliant with keeping the The 2030 coal phase-out date of tion limits, carbon pricing, and work- to explicitly pledge a phase-out, global temperature increase below Hungary is not ambitious. There is shops on regional transition. this helps neighbouring countries to 1.5 degrees. one plant in Hungary, and its permit focus on what they can do to phase expires at the end of 2025, so it’s out coal. Italy’s 2025 phase-out date is not possible the plant closes as early particularly ambitious, given only 6% as 2025. The plant is losing money, of Italy’s electricity came from coal in so no-one is likely to fund to keep it the first half of 2019. The phase-out in open after that date. Italy also comes with an expectation of needing to replace coal with new gas capacity. The 2017 announcement has not yet been followed up with any action. Element No. 2 Lessons from Europe

Policies that Legislated worked well

The UK government is to legislate the Finland has imposed a law that phase-out using an “emissions perfor- makes it illegal to burn coal in mance standard” of 450g/KWh. There energy production after 1 May 2029. are two loopholes that coal plants can It is the first phase-out decision use to get under 450g, but these are enshrined in law. considered low-risk - firstly biomass co-firing is unlikely as there are no The French coal phase-out is legis- new subsidies for it, and secondly lated through the energy and cli- carbon capture and storage is neither mate law. An emissions performance economically nor technically possible standard of 550g/MWh will prevent in the timescales required.. the burning of coal from January 2022. A planned loophole will allow Netherlands has two pieces of leg- coal plants to generate up to around islation. First, legislation based on 700 hours a year after this date - efficiency will phase-out the two older although this is loophole exists, in plants: coal can only be burnt in plants part, to keep one coal plant online with at least 44% efficiency by latest which is needed to ensure security at the end of 2024. Second, a total of supply in the local network. ban on burning coal in power plants will impact the most efficient plants in 2030. The wording “burning coal” is used so that the plants are not forced to close, so the Dutch government says no compensation needs to be paid. Both mechanisms are already agreed in law.

Plans should be written into law v An announcement to phase out coal is not enough. It should be written into law to prevent the risk of backtracking with the change of governments, and to avoid loopholes. It should give a clear planning horizon for closures. On the ground 8 /22

Policies UK coal phase-out that didn’t unites political work well leaders

The legislation for Germany has not There are no actions yet taken to The leaders of the three main parties made a yet happened. It is complicated as it legislate the Italian coal phase-out. joint pledge to act on climate change in 2015. It includes lignite phase-out contracts, Rather it is only described as a “goal”. was signed by the Conservative prime minister hard coal closure auctions, region- Implementation currently relies on David Cameron, the Liberal Democrat coalition al transition plans and lots more. indirect measures such as the de- Despite the coal commission rec- velopment of renewable capacity, partner Nick Clegg, and the Labour party leader ommendations, there are still a lot of gas capacity and adequate storage Ed Miliband. The pledge included the phrase “to details to legislate on. The legislation development. end the use unabated coal for power genera- was initially supposed to be adopt- tion”. PM David Cameron (left), Nick ed by the end of 2019, but this will Clegg (middle) and Ed Miliband likely be agreed in 2020, in danger of (right) / Photo: PA leading to an overall delay in getting This meant the coal phase-out served to unite vital early closures. the parties, rather than divide them. It also meant there was always a strong enough com- mitment that the phase-out would never be re- versed or watered down by future governments. Element No. 3 Lessons from Europe

Policies that Just worked well

In the Netherlands there is a fund to The Spanish government achieved assist workers affected by the shut- a historic agreement to close mines down of the coal power plants. It has with the coal mining unions. €250 a budget of €22 million and is aimed million was pledged to support a just at workers of the five coal power transition through a variety of instru- plants who request assistance to find ments. Although coal mines were a new job or want to be retrained. A required to close by the end of 2018, special unit composed by govern- this win-win agreement successfully ment officials and union representa- broke the deadlock. In addition, the tives has been created to assist the ministry for ecological transition is 200 workers affected by the early obliging operators who want to close phase-out of the Hemweg power a coal plant to present a just transi- plant, which is expected to close by tion plan for their workers before it the end of 2019. authorises the closure.

In its draft structural transition law, Hungary is seeking two sources of the German government has com- European money to help. First, funds mitted to invest €40 billion in affect- from the European carbon pricing ed coal regions, including invest- scheme will help replace lignite with ments in infrastructure, education, renewable and sustainable energy innovation, economic restructuring technologies, keeping the workforce and social safety nets for workers. and supply chains in place. Second, The coal commission ensured the Hungary has also submitted a pro- engagement of many relevant posal for the affected regions’ tran- stakeholders including from civil sition, including planning, re-skilling society and trade unions to ensure and implementing pilot post-mining sustainable development for regions landscaping and renewable ener- and a high quality just transition for gy projects that are based on the No one is left behind workers. pre-existing lignite workforce.

It should ensure participation of trade unions and communities, securing a just and fair transition for all. It should also boost the regional economy and include regeneration of coal mines. On the ground 10 /22

Policies New hope for that didn’t just transition in work well Romania’s Jiu Valley

Greece is the first EU member state A clear weak point in the UK’s coal Six mayors from the historic mining region of to establish a national ‘just transition phase-out is that there is no overrid- Jiu Valley, Romania, recently agreed to work fund’ using part of the public revenue ing transition plan. The only evidence together on a transition from a coal-based from auctioning carbon allowances. of just transition policy is either by the economy to a diversified sustainable one. This The fund was set up with public con- companies (e.g. redeployed workers), commitment occurred during a meeting of the sultation, and it seems there are no or local government (e.g. retraining EU Commission’s Platform for Coal Regions in hidden, backdoor subsidies for lignite. schemes). Transition, for which the Jiu Valley is a priority However, the plan is still rather vague and the available funds insufficient In France, some political will and region in 2019. Decade-long efforts precede this for addressing the huge challenge of public money is missing to transform positive turn in the poverty-stricken recent his- Local artist Ion Barbu Photo: Adrian Catu transforming the local economies. the coal phase-out into an opportu- tory of the valley. Ion Barbu was one of the first nity for region growth. The law also to believe in its future. The local artist animated There is a just transition plan for foresees a special support for work- the community to stop the demolition of the Upper Nitra, Slovakia’s largest lig- ers and subcontractors. However, the local mine’s buildings. He and his group put up nite region which was elaborated in budgetary transposition hasn’t been exhibitions and theatre shows there. The docu- a participatory way including local decided yet. mentary Planet Petrila (2016) shows the success perspectives. An initiative connecting and was screened at international film festivals. the local, regional, national and EU authorities agreed on the “Transfor- mation Action Plan”.

As part of the new EU Green Deal it was announced in December 2019 that “a proposal for a Just Transition Mechanism, including a Just Transi- tion Fund, and a Sustainable Europe Investment Plan” will be agreed in January 2020. Also, the EU has set up a platform called “Coal Regions in Transition” for sharing best prac- tice on just transition in coal regions, which has been useful for convening local stakeholders. Element No. 4 Lessons from Europe

Policies that Clean worked well

The UK government is prioritising Germany has set a target to increase offshore wind. Policy stability has its renewable electricity from 35% in resulted in massive investment and 2018 to 65% in 12 years - from 2018 to collapsing prices. The latest offshore 2030. The target will be met primarily wind auction results were €50/MWh with onshore wind, offshore wind and in 2019 prices. The Conservative solar. This share of renewables - if government has pledged to increase reached - would be enough to com- offshore wind to 40GW by 2030. Even plement the current coal phase-out by 2025 when coal must be phased pathway, but not fast enough so that out, the UK will already be generating the phase-out could be accelerated. more from wind, solar and biomass than it ever did from coal. The UK’s The Spanish government approved new nuclear plant will not help phase the plan proposing an ambitious 74% out coal: it will come online after coal of electricity is met from renewables is phased out. in 2030, up from 38% in 2018. Because of this, the government envisages The Dutch climate agreement sets a clean electricity replacing coal by target to raise renewables electricity 2030, forecasting near-zero coal generation from 15% to 75% in only capacity by 2030. 12 years - from 2018 to 2030. The coal phase-out was announced at Portugal has an ambitious target of the same time that the renewables 80% from renewable electricity by package was announced, envisioning 2030. This will easily enable the rapid an explicit coal to clean transition. phase out of coal by 2023 and lead to reduced gas power plant utilization Wind and solar by 2030. Solar is complementary to the reduced hydro generation during explicitly replaces coal drought. The last solar energy auc- tion yielded record low prices - bids Wind and solar investment should be explicitly linked averaged €20/MWh, with one bid as to closing coal plants. Only wind and solar give the full low as €15/MWh. benefits of a coal phase-out in terms of jobs, investment, energy self-sufficiency, cheap energy, clean air, and reduced CO2 emissions. On the ground 12 /22

Policies One trillion dollars: that didn’t The potential of work well offshore wind

France’s low coal generation will easi- Onshore wind deployment is coming The International Energy Agency released a ly be met with new renewable capac- to a halt in Germany, threatening report in October 2019, saying global offshore ity. Macron announced in 2018 that by the coal phase-out. This is because wind investment could reach $1 trillion to 2040. 2030, the production of onshore wind a proposed change in planning law They project that EU capacity alone could rise farms will be tripled and the amount makes it very hard to approve any from 20 GW today to 180 GW by 2040. The lobby of solar photovoltaic multiplied by onshore wind farms. Even without this five. problem, a faster deployment would group WindEurope say it could even reach 450 be needed if the coal trajectory is to GW by 2050. The EU has a target for 32% of all en- be accelerated so that the phase-out ergy (not electricity) from renewables comes earlier than the inadequate The latest auction prices in Europe continue to by 2030. This means almost doubling 2038 date. fall as the technology improves. General Electric renewables in 13 years (in 2017, the says its latest turbine, the 12 MW Haliade-X (pic- EU achieved 17% of energy from The Italian national energy strate- tured), will achieve 63% utilisation in Europe’s renewables). This may need to be gy target is 55% of electricity from North Sea – higher than most fossil plants even accelerated even further to respect renewables by 2030, which includes Haliade-X 12 MW prototype achieve. Photo: General Electric the Paris Climate Agreement. The EU building 30GW of solar. However, also requires every country to submit actions to build more wind and solar EU countries are counting on offshore wind not a “National Energy and Climate Plan” to displace coal generation, are so far (NECP), which helps focus countries lacking. only to generate electricity to replace coal, but on speeding up their electricity tran- also to manufacture hydrogen to help decar- sition from coal to clean. bonise aviation, shipping and steel-making. The Danish company Ørsted is already planning a 5GW “offshore wind island,” which includes the production of green hydrogen. Element No. 5 Lessons from Europe

Policies that Direct worked well

The gas bridge was initially a threat, The increase in fossil gas burn in 2019 but strong renewables growth means from coal-gas switching in Spain UK fossil gas generation will fall by should be temporary. It is not fore- 2025, even as coal is phased out. The seen that new gas plants will be built UK’s capacity market gives generous or that old coal plants will be convert- 15-year contracts to build new gas ed to gas. plants, but despite this, only 2 large gas plants have been announced to The rate of renewables growth in be built since 2014. Portugal should mean that the share of gas generation will reduce from It seems a fossil gas bridge will be 27% to near-zero by 2030. avoided in the Netherlands, as re- newables growth should be strong The problem of coal in Finland is enough to reduce gas generation by more with heat than electricity. 19% 2030, at the same time as phasing of district heating is from coal, com- out coal. pared to 7% of electricity. There is a risk, because of heat, that Finland The fossil gas bridge in Germany is walks into a biomass trap: in a busi- expected to be small, although this ness-as-usual scenario coal for heat- is not certain. Some new gas peakers ing would be covered mostly with will be built, but the total volume of biomass or fossil gas. Progress has gas generation is not expected to started though: there is state fund- increase. The gas peakers are being ing available for “beyond burning” built both to cover gaps in wind and technologies to replace coal, and the Avoids a bridge into fossil gas solar, and to ensure stability on local government is revising energy taxa- parts of the network. tion in order to make beyond burning or unsustainable biomass technologies such as industrial-scale heat pumps, a more lucrative option. It should avoid new gas or biomass plants - and especially the conversion of coal plants to gas, biomass or waste plants. The climate benefits are not what they promise: fossil gas production leaks methane, and biomass life-cycle emissions are far from zero. On the ground 14 /22

Policies What’s that didn’t with the work well gas?

The UK government decided early to There is a big risk of a gas bridge One could be mistaken for thinking Europe is in subsidise biomass - the Drax power in Italy: the phase out of coal so far a gas boom. Russia is building a new pipeline, plant alone will get €12 billion in has resulted in new authorisation Nordstream 2 (pictured), whilst the US is boast- subsidies over a decade, mostly for requests for gas power plants, also ing about stepping up LNG exports. burning imported US wood pellets. supported by a lucrative capacity But the costs of wind and solar have market which excludes renewable fallen so much since the contracts and storage technologies. But this extra won’t be burnt in the power sector, were signed that it’s clear burning because Europe is building very few new gas biomass is an expensive mistake. Coal plant owners in France - like in power plants. In the 5 years from 2016 to 2020, 8GW will have been built, compared to 20GW in Installation of Nord Stream 2 pipeline many countries across Europe - are Photo: Bernd Wuestneck/dpa (AP) Biomass is a large - and possibly pushing the government to pay them the US in 2018 alone. growing - problem in the Nether- to convert their plants to biomass. The economics for new gas plants just don’t lands. Four coal plants have been Although the government is less stack up. First, the future utilisation will be too awarded €3.6 billion in subsidies to keen, this lobbying pressure still low, as more wind and solar come online. Sec- co-fire biomass with coal over 8 years. means there is a considerable threat ond, the requirement to completely decarbo- Co-firing under these contracts start- of a biomass bridge. EDF claims to nise means even low-utilisation gas plants may ed in 2019. While the current govern- work on a biomass conversion plan be prevented from running in the future. Third, ment coalition agreement includes for the Cordemais coal plant; it is an end to new subsidies for coal to unclear what EPH plans with the two financing is harder; for example, the European biomass projects, coal operators still coal plants it recently acquired from Investment Bank (EIB) has just changed its rules propose to convert three of these Uniper. that prevent any investment into fossil infra- same coal plants to fire only biomass. structure. There is a big threat of a fossil gas Coal also plays a role in heating in bridge in Greece. One new 826 MW Germany, and conversions of district plant has been inaugurated and is ex- heating systems from coal to gas are pected to come online in 2021; there increasing gas consumption. How- are plans for at least 1-2 more plants. ever, there is an increasing focus on There are several interests pushing how these will be converted to burn for the conversion of Ptolemaida 5 non-fossil gas in the future - either (PPC’s new lignite power plant ex- hydrogen or biogas. pected to come online in 2022) to a biomass plant using imported fuel. Element No. 6 Lessons from Europe

Policies that Reliable worked well

The UK has a capacity market, so Spain has an overcapacity of about there have been few concerns about 40%, so there are no concerns cur- “keeping the lights on” as coal plants rently on keeping the lights on as have closed. The capacity market has coal closes. Indeed, the grid operator funded over 10GW of new capacity - showed that 5GW of coal capaci- some fossil (two big gas plants and ty could easily be retired from the lots of small gas plants), but mostly system today, out of the 10GW oper- interconnectors, demand response ational. and storage. These investments have enabled coal plants to quickly close The Portuguese grid operator has without risking the lights going out. started the procedures to build two new high voltage lines, anticipating The Netherlands are investing heavily the closure of one of the coal plants. in new forms of flexibility, like de- These lines will keep the lights on mand-side response, a wind offshore when the coal plant closes. strategy for the North Sea, new interconnectors with UK, Germany, The EU has prevented countries Belgium and Denmark, hydrogen, and paying “capacity contracts” to subsi- storage. dise uneconomic coal plants. In the UK, coal plants were paid to keep the German network companies are lights on, slowing the closure of coal proactively engaged in the transition. plants, and in Poland 15-year con- Hydrogen is increasingly seen as a tracts are even planned to encourage preferable solution to fossil gas. new coal plants. The EU therefore brought in a law that - using an emissions performance standard of 550 gCO2/KWh - will prevent capac- Keeps the lights on ity contracts being paid to coal plants from 2025. It should maximise investment into electricity storage, interconnectors and demand response. Gas peakers should be built only by exception and only if there is a larger plan underway to build enough renewables that their utilisation is minimised. On the ground 16 /22

Policies Retired coal plants could that didn’t become the home of next work well generation energy storage.

The major flaw of the UK capacity In Spain, there seems to be no coher- Siemens Gamesa recently inaugurated the first mechanism is that coal power plants ent plan to maximise the deployment storage facility using volcanic rocks (cold lava) will get payments until 2022. These of storage, interconnection, and de- as a medium. The 1.000 tons of rock are capable will total €600 million from 2017 mand response. These will be need- of storing heat, which is injected via hot air gen- to 2021. These crowd out capacity ed to complete the coal phase-out. erated from renewable energy. When electricity investments to help replace coal. The problem is eventually being Although Italy’s capacity market is demand peaks, the rocks can back-stream the addressed: an emissions perfor- designed to keep the lights on but stored energy using a steam turbine. With this, many parts of old thermal power stations, like mance standard will eventually be could create a dash for gas. It is Thermal energy storage TESIS introduced to avoid payments to coal designed in a way to encourage new turbines, can be put to new use, saving jobs at Photo: DLR (CC-BY 3.0) after 2022. fossil gas plants and does not give the same time. Other institutions are doing re- enough opportunities to storage and search on similar post-lithium storage materials, other technologies. e.g. the German Aerospace Center is testing liquid salt as energy storage in a test facility. Element No. 7 Lessons from Europe

Policies that Economic worked well

There is a single carbon market The German coal commission has across the whole of Europe (EU-ETS), recommended cancelling permits where every coal power plant - and from the EU carbon market, as coal other big emitter - must purchase an is phased out. This should prevent allocation for every tonne of CO2 they the situation that the German phase- emit. The market was reformed in out causes oversupply and reduces 2017, and only following this did price carbon price. rise to a reasonable level of €15-€30 per tonne. The price in 2019 of around The Dutch coalition agreement €25/tonne impacted coal power includes a minimum carbon price of plants in three ways. First, it meant €18/tCO2 in 2020 €43/tCO2 by 2030. coal was more expensive to burn than This means even if the EU-ETS price gas throughout 2019. Second, it has collapses, the Dutch carbon price will stripped away profitability, making not collapse. This was announced an estimated 4 out of 5 coal plants alongside the coal phase-out and uneconomic in Europe in 2019. Third, renewables plan, providing a solid it means wind and solar can often 3-point plan for the electricity tran- compete without subsidies, encour- sition. aging governments to substantially scale-up wind and solar ambitions. In 2018, Portugal introduced a levy on the use of coal for electricity produc- Additional to the EU-ETS, the UK tion, which will be gradually phased implemented a carbon tax on power in. This single-fuel tax isolates coal generation. The tax was £5/t in 2013, and means a faster coal phase-out is Coal should pay a carbon price rising to £18/t by 2015 (around €6/ inevitable. MWh rising to €20/MWh). With the EU-ETS price, this means a total Carbon pricing is a useful policy to help phase out coal carbon price for power plants of over but should never be the only policy. A higher carbon price €40/tonne This accelerated the will accelerate closures, but by itself will not guarantee electricity transition by speeding up all coal plants will close. Carbon tax revenues can help the closure of coal plants and making finance the transition and reduce fuel poverty. This new offshore wind policies cheaper. necessitates a full “polluter pays” approach, so coal plants should not get free allocations. On the ground 18 /22

Policies Collapsing that didn’t coal work well economics

The EU-ETS, which was set up in A minimum carbon price was prom- In October 2019, Carbon Tracker Initiative 2005, had a very slow start and was ised in the Dutch coalition agreement. released research showing 79% of EU coal largely ineffective for over a decade. The level being implemented now is generators were loss-making in 2019, in a report Until 2017, carbon price was mostly much lower than what was announced entitled “Apocoalypse Now”. They said, “owing well below €10/tonne, doing little to and is even lower than the ETS price: to relentless competition from ever lower cost reduce emissions. Policy makers have €12/tCO2 in 2020 €32/tCO2 by 2030. wind, solar, batteries and demand response, struggled to set a framework to give The Dutch government determined coupled with a preponderance of inexpensive a meaningful carbon price. Until 2013, this was the level necessary to hit gas, these losses could be sustained for the coal power plants were given free 2030 electricity sector targets. Matthew Gray, lead author of the allocations for most of their needs, foreseeable future”. “Apocoalypse Now” report which encouraged them to stay open; The German coal commission did not Photo: Carbon Tracker and even from 2013 to 2020 there is a provide a definitive recommendation They continue to say “we now believe that EU fund (Article 10C) where carbon allo- for carbon pricing, so the German policymakers should actively prepare for no cations were perversely given for free government decided to rely only on hard coal or lignite power generation by 2030. and could be even be used for invest- the EU-ETS. If the EU carbon price This situation, and the political response to it, ments in coal plant upgrades. collapses, then the coal phase-out in will have implications for investors. If some gov- Germany may be harder than expect- ernments remain pro-coal over the long-term, ed. they will be forced to choose between destroy- ing shareholder value, depleting fiscal resources or undermining economic competitiveness”. Element No. 8 Lessons from Europe

Policies that Healthy worked well

The EU has a process of tightening air Many UK coal plants had to make an pollution standards, which forces the “invest or close” decision in 2015 and dirtiest coal plants to invest or close. 2016. But because the government The EU’s Industrial Emissions Direc- had already signalled a coal phase- tive has a “best reference” (BREF) out for 2025, and other measures like policy, where standards are updated a high carbon price were in force, no every seven years. In 2021, SO2 and new investment was made by the NOx limits will tighten substantial- utilities, and the existing dirty coal ly, with which many plants across plants were closed. Europe will not be able to comply. This means utilities must choose: do they invest more money into old coal plants, or do they close them?

Closes dirtiest plants first

Dirtiest coal plants should close first, to realise immediate health benefits. This could be done through tightening pollution limits, although those should encourage closure, rather than further investment into dirty coal plants. On the ground 20 /22

Policies No life-extension that didn’t for Mallorca’s dirty work well coal plant

The German coal commission did not Decision-makers in Greece had a very Josep Vich grew up in Alcudia, Mallorca, and provide a recommendation to tighten “creative” way of interpreting EU limits believes the sinus and asthma problems he has the pollution limits. In 2009, German and granted a derogation to Amyn- suffered throughout his life relate to air pollution coal plants had some of the tightest taio – one of the dirtiest coal plants in from the one power plant on the island and dust pollution limits in the world. But as the EU. The decision was to extend an from the coal that feeds it. The coal is shipped technology developed, pollution limits existing hours derogation from 17,500 in and brought with trucks to the plant. “When have remained unchanged. Germany hours to 32,000, against the intention is dragging its feet with even trans- of the EU law. I was a child, I remember people repeatedly posing the basic EU standards into complained that when someone sneezed in a tissue, black matter came out.” In 2019, the Local resident Josep Vich law. The dirtiest two coal companies Photo: Greg McNevin / Europe in Europe are RWE and EPH, which is operator of the power plant and the local and Beyond Coal due to their lignite plants in Germa- central governments struck a deal to reduce ny. RWE’s plants are in a particularly operating time and close the last units by 2025. densely populated region, with 46 This comes after intentions had been voiced million people living within 200 km of to upgrade the plant to meet new EU pollution their main mine. standards which would have significantly pro- longed the lifetime of the plant. The EU allowed coal plant investment “subsidies” through their emissions trading scheme (EU-ETS). Poland and Czech Republic transferred “free permits” from the EU-ETS to coal plant operators, conditional on investment upgrades, especially relating to meet- ing tightening pollution limits. This subsidy changed the economics of “invest or close”, and undoubtedly led to old coal plants deciding to invest, rather than closing. Element No. 9 Lessons from Europe

Policies that Smart worked well

The UK has avoided a pay-out for The Dutch phase-out law will “pre- utilities because coal plants are vent coal being burnt” from 2030, so uneconomic and are likely to close coal plants are not explicitly forced well before the 2025 deadline. Three to close. The Dutch government says key policies helped to influence the this means no compensation needs economics of coal plants in the UK: to be paid. Although two of the three a significant carbon price, the fall in coal operators are already signalling electricity prices and coal plant utili- they will take the government to sation because of renewables growth court to demand compensation, it is and tightening pollution limits. doubtful that they will be successful.

No compensation is to be paid in Finland. The energy companies want- ed to have compensation but the Finnish constitutional law committee, in a significant ruling, decided that “companies and other traders cannot reasonably expect the legislation governing their business to remain unchanged”.

Avoids pay-off for closure

It should not use tax-payers money to pay polluting assets to close. This would reward fossil companies for bad decisions and create perverse incentives, slowing the transition and making a phase-out unnecessarily expensive. Governments should also be careful not to subsidise coal through capacity mechanisms or expensive balancing contracts. On the ground 22 /22

Policies Germany: the that didn’t public pays work well to close coal?

The German coal commission agreed It seems the bad policy precedent In 2015, the German economy and energy utilities should be paid to close plants from Germany is spreading to other minister Sigmar Gabriel agreed to make big and mines, even though the public countries: the owner of the Hungarian payments to coal plants in return for them sees it increasingly as a waste of lignite power plant that will have to stopping to burn lignite, to cut CO2 emissions taxpayer money. Lignite operators close is demanding compensation, to meet climate obligations. From 2016 to 2022 will agree a package with the Fed- referring to the German coal phase- €1.6 billion will be paid to keep 8 lignite power eral government. Hard coal plants out. plants in a reserve. They so far have not been will enter an auction to close in the required to run once. The “lignite reserve”, as it mid-2020s. Given the poor economics of both lignite and hard coal, offering was known, was always seen as a backdoor to German minister Sigmar Gabriel compensation might be incompatible pay compensation to coal plants, funded from Photo: Imago/Marius Schwarz with EU state aid law. electricity consumers. Solving the coal puzzle Lessons from four years of coal phase-out policy in Europe

December 2019

Written and researched by: Over 20 experts on coal phase-out policy across 10 European countries helped to input into this report. We’d like to give a huge thanks to all these individ- uals. Their inputs were collated and edited by Elena Bixel at Europe Beyond Coal and Dave Jones at Sandbag.

Graphic design by: Designers for Climate Sandbag is a London-based climate think tank specialising in using data and policy to show how countries can swiftly transition from coal to clean energy. sandbagsmarter climate policy www.sandbag.org.uk

Europe Beyond Coal is an alliance of civil society groups working to catalyse the closures of coal mines and power plants, prevent the building of any new coal projects and hasten the just transition to clean, renewable energy and energy efficiency. Our groups are devoting their time, energy and resources to this inde- pendent campaign to make Europe coal free by 2030 or sooner.

www.beyond-coal.eu sandbagsmarter climate policy