Coal in Europe - states still support a dying industry
In this series of short articles, some of AirClim's partner organisations provide an insight into the domestic situation of the coal industry in Hungary, Slovakia, Slovenia and Ukraine. Behind each article lies a larger report which can be found online. The articles describe a reality of continued state support for a crumbling crumbling industry that is damaging health, the environment, and national economies.
Hungary: choosing a dirty path to development
Hungary's coal resources total 3,300 million tonnes (Mt), mainly lignite, while the annual production is between 9-10 Mt. Although the reserves could last for centuries, consumption has been declining since the mid 1970s. After the changes of 1989, the old, polluting, uneconomic and state subsidised coal sector required radical reshaping. While all but one underground coal mine has subsequently been shut down, most of the outdated and inefficient power plants continue to operate.
The state-financed restructuring and the privatisation of the energy sector in the 1990s resulted in the preservation of these polluting and costly structures. The state continues to play a determining role in the process through its scheme of administrative support and financial subsidies, financed by taxpayers and electricity consumers. The biggest lignite power plant, Mátra, which is responsible for some ten per cent of total national carbon dioxide (CO2) emissions, is allowed to participate in the national support scheme designed for renewables due to its co-firing of wood. Other, smaller plants have also switched to wood fuel for the same reason, and are thus rewarded for burning biomass in an unsustainable way.
The Kyoto process does not effectively force the implementation of measures to decrease CO2 emissions due to Hungary's special base year, the average of 1985-87 emissions, and the collapse of heavy industry after 1989. In the EU-ETS mechanism, instead of the "polluter pays" principle, the "polluter profits" principle was applied: the largest emitters were given quotas for free, which can basically be regarded as an additional financial subsidy to these companies.
By ensuring the survival of these polluting structures, decision makers may have chosen the easier path. However, taking into account the fact that Hungary lies in one of the geographical regions most affected by climate change, a transition towards a sustainable energy system that seriously increases energy efficiency, energy conservation and renewables should be considered essential.
Energiaklub Climate Policy Institute and Applied Communications is a non-profit organisation based in Hungary, which for the last twenty years has been organising communication and awareness raising campaigns, trainings and conferences, carrying out research, and preparing proposals for decision makers.
In Slovakia, coal means jobs first
Despite the fact that Slovak brown coal and lignite resources are in the final phase of their exploitation, there has been little notable activity of late to manage Slovakia's necessary energy transition.
In 2008, the government and the management of the Slovak coal company Baňa Čáry decided to re-open the lignite mine at Čáry-Kuty, 70 km north-west of Bratislava. The mine resumed production in 2009, just three years after it was closed due to the ineffectiveness and decline of the brown coal industry in Slovakia. This event brought fresh air to the dying industry that has caused so much environmental and health damage in Slovakia. The area around towns Prievidza, Novaky and Handlova were and are still considered as the most polluted region of the country. Long-term health impacts related to the inhalation of dust and gaseous effluents from power plants has been observed in the population for several decades.
The new era of this mine would not be possible without the state subsidy of €3.6 million, or 30 per cent of investment costs. As a result, the total number of jobs will increase from 122 in 2007 to between 250 and 300 at the end of 2010, with the goal of producing between 0.2 and 0.5 million tonnes of lignite annually for the next 30 to 50 years. The employment question was the driving force behind this decision.
Apart from the direct subsidy, domestic brown coal for power production would not be possible without an additional government support mechanism – the decision that the coal power plant at Novaky is obliged to buy a certain amount of domestic coal. One can of course ask questions about the impacts of such policies on sustainability, the environment and the economy – especially given the large unused renewable energy potential – but at the end of the day, it is jobs that rule politics in Slovakia today.
The Foundation for Alternative Energy (FAE) is a Slovak non-governmental organisation committed to environmental protection through the promotion of sustainable energy development. Established in 1991, FAE's main objectives are to promote awareness, knowledge and use of renewable energy technologies.
Full report: Brown coal in Slovakia.
Slovenia: propping up the lignite industry
The lignite industry plays an important role in the Slovenian energy sector, as Šoštanj thermal power plant (ŠTTP), using lignite from the nearby Velenje mine, produces one third of Slovenian electricity. Both companies are important employers in the Šaleška valley and as such are the area's development engine.
However, it is a high time for the Šaleška valley to start identifying brighter and less polluting paths for their future. The Šaleška valley is one of the most polluted areas in Slovenia, while at the same time suffering severe damage due to ground immersion, which is a consequence of underground mining in Velenje. ŠTPP is also a major contributor to Slovenia's greenhouse gas emissions. The lignite industry imposes a high external cost which is not covered by the companies. If the full environmental and social costs were counted, neither the Velenje mine nor ŠTPP would see the construction of the planned 600 MW Block 6 as a profitable future investment. Slovenia: propping up the lignite industry
Instead, increased use of domestic renewable sources, such as solar, biomass and geothermal, would be considered as the best development option for the Šaleška valley and Slovene energy sector, accompanied by strong measures for efficient use energy.
Focus Association for Sustainable Development is an independent, non-profit environmental organisation. By providing examples, they show that environmentally and socially responsible life in possible. They focus on the issues of climate, energy, mobility, global responsibility and consumption. In the framework of these issues they organise various events, run campaigns and practically oriented projects, raise awareness, monitor, analyse, take part in decision-making processes, co-operate with a variety of stakeholders and work with the media.
Full report: Status and impact of the Slovenian lignite industry.
Ukraine: coal is a dirty and expensive Soviet relic
The coal sector of Ukraine no longer plays the role it had in the Soviet era. Coal mining has dropped significantly, and the quality of coal has decreased due to the depletion of seams. The country has instead inherited a wholly unprofitable economic sector that requires constant investment. The coal sector is also responsible for a number of social and environmental problems, which are aggravated with time, and which the state has neither political will nor financial resources to solve.
One of the key problems of the crisis in the coal sector is that coal prices do not even cover the operational costs of mining, let alone repair and maintenance costs and capital investment. The average production cost of coal is significantly higher than its selling price, and this gap is growing. International Energy Agency analysis suggests that coal prices are distorted due to the subsidisation of the coal sector, government interventions in fuel allocation and the influence of private monopoly buyers. In 2008, each tonne of coal sold incurred losses of 152 Ukrainian hryvni or about €15, and the coal sector received state funding of around 7,500 million Ukrainian hryvni, which is approximately three per cent of Ukraine's annual budget. In 2008, approximately 60 per cent of all money provided to support the sector was used to offset losses.
Local people are highly dependent on the coal industry. This is particularly so for some small towns and villages, where most people work for coal mining companies. The Soviet-era practice of establishing 'mono-industry' cities and villages results in significant social problems today, as companies close down and many people are left without jobs. Unfavourable social conditions, unemployment and poverty cause a high level of crime, drug addiction and HIV infection in the main coal mining regions of Ukraine.
Of course, the coal sector also causes a range of serious environmental problems, including air pollution and alteration of geological, hydrologic and hydrochemical conditions in the areas where coal mining companies are located. Ukraine is a party to the UN Framework Convention on Climate Change and the Kyoto Protocol and therefore is required to take certain steps to cut its greenhouse gas emissions. However, the country's energy policy threatens to achieve the opposite. According to the Energy Strategy, the percentage of coal in the energy balance will be increased from 22 per cent (43.5 million tonnes of equivalent fuel) in 2005 to 33 per cent (101 million tonnes) by 2030 in the base scenario. As a highly carbon-intensive fuel, increased use of coal will see greenhouse gas emissions in Ukraine almost double by 2030, to 350 million tonnes of carbon dioxide equivalent.
In order to solve the current problems in the coal sector, it is essential to do a number of things: to improve its profitability by shutting down unprofitable mines and privatising commercially promising ones, and to set a market price on coal and reduce its production cost, a precondition for the reduction of energy subsidies and their burden on the national budget.
The National Ecological Centre of Ukraine (NECU) is a nongovernmental not-for-profit organisation created in 1991. NECU works to bring environmental considerations into the core of any decision. The organisation has branches in a dozen Ukrainian cities. NECU works on issues such as biodiversity, energy, global climate change, transport, multilateral development banks, Russia, Caucasus and Central Asia.