November 18, 2013
Today in Warsaw, the International Coal & Climate Summit organised by the World Coal Association started. While it might be no great surprise that the World Coal Association decided to organise this event to coincide with the UN climate change conference, we were, however, astonished to find that the Polish government is not only presiding over the UN conference, but also hosting the coal summit in the premises of its Ministry of Economy. How can the Polish Government realistically endorse a conference in support of the world’s most polluting fuel while also directing international talks on how to avoid catastrophic climate change?
Two-thirds of presently available fossil fuel reserves need to be kept underground
In order to have a 50% chance of keeping global temperature increases to less than 2°C, the International Energy Agency has calculated that nations can only afford to emit 880 gigatonnes of CO2. If they are all burnt, currently available fossil fuel reserves would emit 2860 gigatonnes of CO2. This is why the IEA is saying that more than 2/3 of all fossil reserves must be left underground in order to stay on the ‘safe’ side of global warming. These figures do not take into account the potential for reducing emissions using carbon capture and storage – because this remains an unproven technology.
Carbon Capture and Storage (CCS) – even if used at large scale it is not a game changer
Fossil fuel companies are claiming great things for the potential role CCS can play to reduce emissions, and therefore allow them to burn more coal, oil and gas. The IEA also considers CCS to be a necessary part of decarbonisation efforts. Their scenarios foresee that ‘large scale’ CCS would reduce global CO2 emissions by about 90 gigatonnes by 2050. That is on average about 2.3 gigatonnes of CO2 removed a year for the next 38 years. Presently, CCS removes about 0.1 gigatonne of CO2 a year from worldwide emissions. Given the present costs of CCS, it is not at all clear whether this degree of expansion is possible. But let’s leave aside whether this is doable, or cost-effective. Let’s say – for the argument’s sake – hooray! We love it. Let’s do it. Does that help? By no means!
90 gigatonnes of CO2 is only about 3% of the emissions that would be released if all presently available fossil fuel reserves were burnt. In other words, even with the worldwide rollout of CCS, the simple fact that at least two-thirds of fossil fuels have to stay under ground remains unavoidable. Regardless of whether we could accept CCS or not as a complementary climate measure to decarbonise fossil fuels – it is not a game changer at all.
The carbon bubble
These numbers also show that the majority of fossil fuel reserves held by coal, oil and gas companies risk becoming stranded assets if the 2°C target is met. Their current value is based on the exploitation of resources that have to stay in the ground for the good of humanity. The investment and economic implications of using only a small part of the available reserves have not yet been assessed but it’s clear already that coal, oil and gas companies and their investors are running an extremely risky business.
In particular the coal industry with its very carbon intensive output is an immediate concern for investors. As outlined by Goldman Sachs recently, the window for coal investments is closing rapidly and most thermal coal growth projects will already struggle to earn a positive return for their owners. This trend would be accelerated by the implementation of a realistic carbon price which takes into account the external costs of burning fossil fuels – such as the serious and expensive health impacts.
Poland has a choice
No one in their right mind would say that Poland should shut down its mines and coal power plants tomorrow. Change needs to come rationally, over time, and through a long-term development perspective. But until the government starts realizing that burning coal is costing the Polish society a hefty 2.9-8.2 billion euros annually, the old arguments about the cheapness of the energy source will prevail. This unfortunate myth has yet to be busted, as the Chancellery of the Prime Minister’s Office recently published an analysis showing that by 2060 the cheapest (and optimal) energy mix for Poland would be 100% coal. There is, however a ray of light at the end of the tunnel, as the analysis also includes development pathways showing an 80% emissions reduction scenario and a 50% renewable energy scenario. Although they are portrayed as more expensive, this shows that at least there is interest in looking into these options.
Poland’s renewable energy potential hasn’t yet been tapped. The Poles are still waiting for a comprehensive renewable energy law that would help boost investment and reduce the risks and impacts of their current reliance on coal. The recently published proposal for a tender based feed-in-tariff system is seen not only as biased towards existing large power companies using biomass and onshore wind, but also leaves out completely support for micro-installations. Energy efficiency, coupled with large scale, small scale and micro scale renewable energy could hold the answer for Poles who what to protect their health and the environment. A study recently published by the European Environment Agency study shows that Poland has the second-dirtiest air quality in Europe. In 2011, six out of the top 10 most polluted cities in Europe were in Poland. Poland also had the highest levels of benzo(a)pyrene, a carcinogenic hydrocarbon that’s found in coal tar and also comes from wood burning and car exhaust. But the Polish Government is hosting industry summits rather than developing the policies they need.
The Polish government justifies its coal drive by citing energy security concerns that can only be alleviated by exploiting domestic resources rather than relying, for example, on Russian gas. However, Poland is already a net importer of coal and, in an energy irony, about two-thirds of those imports come from… Russia!
Poland does not have to remain dependent on coal. Recent research has shown that by 2030 Poland can halve its coal demand, quadruple its renewable energy use and create 100,000 new jobs in the energy sector, equalling employment in the country’s coal industry. According to the comprehensive np2050.pl report, sustainable development is also seen as the only way not to fall into the middle income trap, which would significantly hinder further growth.
Both studies state that the Polish government has a once-in-a-generation opportunity to create a modern, efficient, lower carbon energy system as ageing power plants come up for replacement. If they fail to take this chance, they will be locking the country into a devastating new era of coal-fired power.
Poland’s choice is clear.