Norwegian gas giant insists on rapid coal phase out

2057466280_04d5e7fd0b_oA phase-out of coal has long been on the cards. Now, a study by Norwegian energy giant Statoil has shown that it needs to be done quickly if climate targets are to be met. EurActiv’s partner WirtschaftsWoche reports.

How Germany, the rest of Europe and the international community at large are going to meet the climate targets agreed at the Un Climate Change Conference in December remains a complex issue.

But for Norwegian gas and oil company Statoil, which published its annual energy report on Thursday (9 June), it’s pretty clear; a phase-out of coal technologies has to happen and it has to happen soon.

Currently, 30% of global energy needs are satisfied by coal and this figure rises to as much as 40% for electricity. From Statoil’s point of view, this has to change.

“We need rapid changes in the electricity and private transport sectors. Additionally, we need significant increases in energy efficiency in all sectors,” said Eirik Waerness, chief economist at the energy firm.

Waerness added that how coal is used over the next few years will be decisive for future CO2 levels. Depending on whether a strong or weak climate policy is pursued, emissions could rise or decrease by between 0.8% and 3.1%, respectively, by 2040.

Over the next quarter-decade, between 17 and 32 billion tonnes of CO2 could be thrown into the atmosphere. By comparison, 32 billion were emitted in 2013.

EU member states have committed themselves to reducing greenhouse gas emissions by at least 20% in comparison with 1990 levels, by 2020. At the same time, energy efficiency needs to increase by 20%, as does renewable energy’s share of the market. For 2030, the target for emission reduction is 40% and for renewables and efficiency it is 27%.

It will only be possible to meet these obligations if European countries phase out coal in the medium and long term. The leaders of the G7 agreed to this very measure at their meeting last year in Bavaria. But how will it be done?

Berlin could, as it is doing with nuclear energy, decide to phase out coal completely. But this would certainly be a complex and expensive initiative. Germany would have to negotiate with each provider the terms of ceasing production.

But the main problem that would face the country would be that German-produced emissions would simply move abroad. Up to now an energy exporter, Germany would transition to an importer, meaning CO2 emissions would just be produced by somebody else.

Andreas Löschel, professor of energy and resource economics at the University of Münster, said that the problem needs a European solution in order for a coal phase out to make sense. “A Europe-wide CO2 price would be the preferred option to meet our climate goals,” he added.

One tonne should cost between €20 and €30, so that energy producers would have the incentive to rely on efficient power stations and technologies besides coal.

That would please gas companies like Statoil. Gas plays an important role in heating these days and, according to the European Commission, 46% of heating is done with gas.

Energy expert Löschel said that this number would be slashed if measures were introduced to increase energy efficiency, especially when it comes to construction.

At the same time, demand for electricity from gas power plants would increase if coal became too expensive. However, it would still be difficult to predict companies like Statoil increasing their market share.

Currently the second largest supplier of natural gas in Europe, the Norwegian company claims a 15% market share. But Löschel forecasted that Statoil would be gazumped by their Russian competitors. “Russian gas is often much cheaper,” he said.