* U.S. emissions predicted to fall as EU emissions rise in
* German producers make 6.5 euro profit on coal burn, loss
* Trend expected to reverse in 2013 as economics shift
By Barbara Lewis and Karolin Schaps
BRUSSELS/LONDON, Sept 25 Shale gas has jolted
traditional roles in the planet's climate drama, giving cleaner
fuel to the United States, whose displaced coal has headed to
Europe to pollute the old continent.
It is an ironic twist for the European Union, whose energy
policy is largely based on promoting renewables and a target to
cut emissions b y 20 percent by 2020. The U.S. did not ratify the
Kyoto Protocol to combat global emissions and its national goals
are far less ambitious than Europe's.
Analysts at Point Carbon, a Thomson Reuters company,
estimate increased EU coal-use will drive a 2.2 percent rise in
EU carbon emissions this year, after a 1.8 percent drop in 2011.
U.S. emissions, meanwhile, are expected to fall by roughly
the same amount - 2.4 percent - chiefly because of reduced coal
use, according to estimates from the U.S. Energy Information
Still the U.S. remains a bigger emitter than the EU as a
whole, ranking second in the world after China, and the 2012
trend is not expected to last as U.S. coal burn will rebound and
the share of renewable sources in Europe will rise, cutting
"The renewable energy sector is to a large extent
politically-determined. EU member states have committed to
legally-binding renewables 2020 targets and therefore, we expect
to see renewable energy capacity grow," Morten Hultberg
Buchgreitz, acting deputy chief executive of DONG Energy's
wind power division, said.
EUROPEAN POWER PRODUCERS BENEFIT FROM CHEAPER COAL
While shale gas production has provided a glut of cheap
energy in the U.S. it has also driven out an oversupply of
lower-cost coal to Europe.
U.S. coal exports to Europe rose 29 percent in the first
quarter of this year compared with the same time in 2011, a
trend that has curbed European gas demand by around 3 billion
cubic feet per day, according to Bernstein Research.
European gas demand, on the other hand, has dipped in power
plants as prices rose, driven by a pricing link to a rising oil
market and increased competition for liquefied natural gas as
Japan replaces lost atomic power following its nuclear disaster
Germany offers a stark illustration of this price
difference. Its power producers have so far this year earned an
average of 6.5 euros per megawatt-hour (MWh) for power produced
the following month in coal plants, compared with a 7.9 euro per
MWh loss when burning gas, Reuters data showed.
GRAPHICS: GERMAN MONTH-AHEAD CLEAN DARK VS CLEAN SPARK SPREADS:
Coal burn varies as utilities constantly assess profit
margins of gas compared with coal-fired plants. Figures depend
on costs for fuel, carbon permits and electricity prices.
"In Europe it would take a 50 percent increase in coal
prices to erase the price advantage over natural gas," said
Paolo Coghe, senior analyst at Societe Generale.
In France, which is mainly powered by nuclear plants but
uses coal and gas when demand dictates, coal plants generated 44
percent more electricity over the first eight months of 2012
than in the same period in 2011.
Britain's coal use was 43 percent higher in the first half
of this year compared with a year ago, grid operator data from
both countries showed.
TREND COULD END AFTER WINTER
Although compelling, the trend might not outlast the winter.
Some of the coal plants in question are set to shut at the
end of the winter as generators expect to race through operating
hours allocated under the EU's Large Combustion Plant Directive
(LCPD) on curbing harmful emissions.
"Coal generation has been running hard, boosting emissions
across Europe, but to such an extent that opted-out LCPD coal
plant are using up their allocated hours bringing forward the
expected closure of these plants," said Andrew Horstead, head of
research at energy consultancy Utilyx.
In Britain, for instance, coal plant owners E.ON,
RWE and Scottish Power have announced plant
closure dates for the end of March 2013, also influenced by
higher British carbon allowances prices from April next year
when a price floor will take effect.
The EU Emissions Trading Scheme (ETS), which earlier this
year hit a record low and at around 7 euros per tonne
is still far too weak to discourage coal burning, is also
expected to rally.
From the next phase of the market (2013-2020) most permits
will be auctioned rather than allocated for free, which will add
to the cost of coal.
In addition, the European Commission has put forward
proposals to remove some of the surplus allowances generated by
At the same time, the U.S. government's EIA predicts coal
burning in the United States will rebound, driving up fossil
fuel emissions by 2.8 percent in 2013 as shale gas becomes less
cheap - it sees a 19 percent rise in the cost of gas for power,
while coal generation costs are flat.
(Additional reporting by Nina Chestney and Henning Gloystein in
London, editing by William Hardy)