On 7 April, after days of wrangling, all 27 EU governments agreed to ban the import of Russian coal and other solid fossil fuels from 10 August 2022. Between now and then, new contracts cannot be signed. It is the first time the EU has touched energy supplies in its sanctions against Russia for the invasion of Ukraine and follows reports of atrocities committed by Russian soldiers in the area around Kyiv.
Russia is Europe’s largest supplier of thermal coal – the type used in power stations – and provides Germany with more than half of its supplies. EU hard coal imports from Russia rose from 7% of coal imports in 1990 to 54% in 2020. While at first glance this might make a ban on Russian coal imports seem significant, the reality is that it is a large percentage of a small number.
The EU has slowly been phasing out solid fossil fuels over the past three decades, bringing down coal consumption from 1,200 million tonnes (mt) in 1990 to 427mt in 2020. Both consumption and production have decreased, the latter faster than the former. This has resulted in an increase of coal imports from 30% of consumption in 1990 to 60% today for hard thermal coal. But coal accounts for only 13% of EU electricity generation today, far lower than the 38% generated by renewables. Coal use has halved since 2015, while the use of renewables has doubled.
One small step
“At the end of the day it’s not such a big deal,” says Simone Tagliapietra, a senior fellow with the Brussels-based think tank Bruegel. “Every day we pay Russia around €15m for coal, while we pay them €850m for oil and gas. This is a first step and it’s the easiest one to take.”
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“Between the three fossil fuels we import from Russia, coal is the easiest to replace because it is a simple commodity,” he adds. “If we don’t get it from Russia, we will in the matter of months fully [switch] our imports – without major disruption to our supply chains – to other countries in the world that have spare capacity.”
The ban’s announcement has caused a surge in the price of coal worldwide, however, a price that was already going up along with gas prices (which quadrupled over the past year). Coal prices in northwest Europe jumped to their highest level in a month on 6 April, prompting fears of a domino effect into other commodity prices. Those prices are not expected to go down any time soon because supply is now tighter than ever. The two major coal-consuming economies of the world – China and India – have recently increased their coal consumption as skyrocketing natural gas prices have incentivised more coal use for power generation. The world’s main coal producers – Indonesia, Australia, Russia, Colombia, South Africa and the US – are struggling to keep up with demand, although they do have the capacity to increase production.
However, Tagliapietra says he believes all this is short term. “Of course, the coal market is a bit tight so there are already implications in terms of price but this is not something so significant. We need to put things into perspective here.”
Other experts agree. “The price increase for coal resulting from the embargo should be rather short-lived,” says Karen Pittel from the Munich-based think tank ifo Institute, describing it as “temporarily unpleasant but tolerable” for the German economy, among the hardest hit. There are existing coal stocks, in contrast to gas, she notes, and domestically-mined lignite (‘brown’ coal which is more polluting) can replace hard coal in power generation. Russia is likely to seek other buyers for its coal which will lower the market price in the longer term. The German association of coal importers (VDKi) has said Russian coal can be substituted in a few months. According to Bruegel, there are 2.6 million tonnes of coal stocked at EU ports, which would cover about three weeks of Russian imports. And there is further coal stocked at power plants.
More coal in the short term
The coal ban, coupled with soaring prices, would seemingly discourage coal use. But in fact coal use has been rising due to the high gas price, and that growth has not shown any sign of slowing. European utilities have been switching from gas to coal-fired power generation. In its 2022 European Electricity Review, think tank Ember reports that, in the second half of 2021, coal replacing natural gas in the electricity mix was equivalent to 5% of total coal power generation.
“What’s confusing for a lot of people is that in the next couple of years we’re probably going to see the life of some coal plants being extended for a few years [to fill the gap left by Russian gas, which the EU has committed to exiting entirely by 2027],” says Lauri Myllyvirta, an analyst with the research organisation Centre for Research on Energy and Clean Air. “But the metric to look at is how fast we are reducing the overall consumption of fossil fuels. Shifts between coal and gas on the margins shouldn’t really be used to judge that progress.”
Much may be determined by whether the EU takes the next step and bans Russian oil as well – or even oil and gas (the latter remaining unlikely because of the EU’s higher gas dependence and greater difficulty in replacing it). As a solid fuel that can be loaded onto ships, coal is the easiest fossil replacement for either of these other fuels (though energy efficiency might be easier).
“A gas ban would be bullish for coal because you’d be trying to get more coal in the short term,” says Myllyvirta. “But we should think of this in years not weeks. Three years down the line, the situation will not justify having invested in a lot of coal supply or transport capacity.”
A full ban on Russian oil and gas would likely mean the EU has to mine more coal to make up the difference in the short term. Global production is ramping up in anticipation. The US is already increasing its domestic coal production by 25 million tonnes (4%) in 2022 as a response to the Ukraine-Russia crisis, according to the US Energy Information Administration – even as domestic consumption is expected to decrease by 7 million tonnes. Poland has been pushing for environmental rules to be temporarily relaxed to allow the use of more easily available – but dirtier – coal types like lignite rather than the thermal coal imported from Russia.
Across Europe, there have been announcements of a short-term coal revival. Italian Prime Minister Mario Draghi said shortly after the Russian invasions that “it could be necessary to reopen coal plants to cover eventual shortfalls in the immediate term.” Greece announced last week it is extending the operation of its coal-fired power plants from the planned closure of next year to 2028, in a move Prime Minister Kyriakos Mitsotakis called a “temporary measure”. Germany has announced the creation of a coal reserve to secure supply and is delaying the final closure of some coal plants “until further notice”, keeping them on standby for longer. The Czech Republic had planned to end coal mining by 2033 but the government is now reconsidering, and they have already decided to delay a ban on old coal-fired boilers by two years. Romania is temporarily restarting coal-fired plants that had been idle. Frans Timmermans, the EU Commission’s vice-president for the Green Deal, seemed to give his blessing to all of this when he said last month that these temporary moves are not out of step with the EU’s climate goals. "There are no taboos in this situation,” he said.
But not all of the moves are temporary. Poland, which was supposed to phase out coal by 2049 – one year before being required to do so by EU law – is now talking about extending that timeline. Deputy Prime Minister Jacek Sasin said last week coal should be used in Poland “in a much longer perspective than until 2049”.
But Kathrin Gutmann, director of the Europe Beyond Coal campaign, believes governments will not be able to justify long-term policy shifts in favour of coal – even if Russian oil and gas is banned. There is little prospect of the Commission adjusting climate targets because of the Ukraine War. “The impact of a gas ban, if you look ahead toward 2023, 2024, 2025, in creating a bullish market for coal will only have been temporary. What will make all the difference is reducing energy demand and building solar and wind. If those things are done now, then coal will only have a temporary reprieve.”
Some climate campaigners think the EU banning coal without banning oil and gas shows national leaders are still not serious about the energy transition.
“The reluctance by governments to hit imports of Russian oil and gas is proof that they’re desperately trying to keep a broken energy system alive,” says Greenpeace campaigner Silvia Pastorelli. “Diversifying sources of fossil fuels will only increase exposure to future wars and environmental destruction. Whether it’s oil from Saudi Arabia, fracked gas from the US or uranium from Kazakhstan, these are blood fuels, which accelerate the climate and nature crisis.”
There has been particular frustration that the EU’s instinct so far has been a ‘gas for gas’ approach, rushing to secure new deals to import liquified natural gas (LNG) to replace Russian pipeline gas. The EU’s capacity to receive the LNG from these new deals would require vast investment in missing infrastructure, risking fossil fuel lock-in or stranded assets, when it could instead rapidly adopt and implement the 'Fit for 55’ climate and energy package to the same effect.
The only clear thing at the moment is there is a major disruption to the global energy system, and nowhere is that disruption being felt more intensely than in Europe. While initial developments suggest climate policy might be in danger as countries panic-buy coal, Tagliapietra says there is still good reason to believe this crisis will accelerate climate action rather than decelerate it.
“This is, as far as energy’s concerned, a fossil fuel crisis,” he says. “The reason why we’re in this situation is because of our over-reliance on fossil fuels, so I think that ultimately, in the medium to long term, Europe will come out of this situation greener than before.”
“All this will accelerate the green transition and implementation of the European Green Deal,” he sums up. “After the oil crisis of the 1970s, people starting to consume gas and electricity instead of oil."