Soaring energy costs make Europeans poor

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

As more people are affected by rising energy costs across Europe it is time for EU leaders to finally re-balance the energy debate and put affordability and security of supply on a par with decarbonisation goals, argues Milton Catelin.

Milton Catelin is Chief Executive of the World Coal Association

Over the past few years Europeans have seen their energy costs locked into an upward spiral, deteriorating the competitiveness of European businesses and putting more households at risk of energy poverty.

Across Europe, average electricity prices for households and industries have increased by 29% between 2005 and 2011. Over the same period of time electricity prices in the USA increased by only 5% and in Japan by 1%.

In the UK household electricity prices jumped even higher – we’re seeing an increase of over 80% since 2005. This was paralleled by an unprecedented surge in the number of households affected by energy poverty in the UK, from 2 million to 5 million.

Europe has allowed the problem of energy poverty to grow out of proportion as many households struggle to pay their energy bills or are unable to maintain sufficient level of heating during winter. Today between 50 and 125 million people are affected by energy poverty in Europe. In Bulgaria, Portugal, Lithuania, Romania, Cyprus, Latvia and Malta over 30% of people are unable to keep their homes warm and face disproportionately high energy bills. Meanwhile over 20% of people living in Greece, Poland, Italy, Hungary and Spain face the same challenges.

The problem of fuel poverty in Europe goes beyond mere considerations of comfort. In England and Wales, 27,000 people die each year because of cold temperatures and 10% of this is directly attributed to fuel poverty. Extrapolating these figures to the EU level, well over 20,000 people could be dying because of unaffordable fuel every year in Europe. However, this is a very conservative estimate. Bjorn Lomborg estimates that around 1.5 million people could be dying prematurely each year because of the cold.

Governments know that current climate policy initiatives, including the EU ETS and 2020 targets increase energy prices for households in Europe. The UK Department of Energy and Climate Change (DECC) said in its impact assessment report that the EU’s 2020 decarbonisation targets and related policy initiatives will result in an increased number of households living in energy poverty by up to 1.4 million before 2020.

It is not uncommon for EU decision makers to deplore the high share of coal in the EU’s electricity mix, currently at around 27%. Yet, growing consumption of coal globally and stable coal consumption in Europe should not come as a surprise – coal is among the world’s most affordable fuels for electricity generation.

In the EU coal-fired power plants generate electricity at half the price of offshore wind turbines and a quarter of the price of solar PVs – not to mention the additional comparative advantage of coal in terms of non-intermittent energy supply which does not need back-up generation capacity.

What we mustn’t forget during the current economic crisis is the fact that most of the coal used in the EU is produced domestically. Over 60% of coal used in the EU is produced domestically, as opposed to 33% of natural gas. Coal mining provides almost 600,000 jobs in the EU and the use of an indigenous energy resource allows many countries to maintain a healthy balance of payments. The value of EU-wide coal and lignite production totals more than € 27 billion each year. Euracoal calculates that if coal used in the EU was replaced by natural gas, then the annual cost would exceed €50 billion, with the entire sum leaving the EU to finance imported natural gas from elsewhere.

Keeping affordable coal as part of the EU energy supply does not mean accepting the status quo on climate change. Greenhouse gas emissions from coal can and should be reduced. Replacing old coal-fired power plants by state of-the-art technology can reduce GHG emissions per unit of energy by around 35%. More efficient coal power plants make it also more economic to deploy carbon capture and storage technology by substantially reducing the amount of CO2 that needs to be captured per unit of energy – an important factor if you know that capturing CO2 is the most expensive component of CCS technology applied at power plants.

As more people are affected by rising energy costs across Europe it is time for  EU leaders to finally re-balance the energy debate and put affordability and security of supply on a par with decarbonisation goals. High energy prices and ideological calls to phase-out coal – the most abundant and affordable energy fuel Europe is endowed with are the last thing crisis-stricken Europe needs.

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