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A difficult outlook for coal generation in Europe, according to The EIU

Published by , Editorial Assistant
World Coal,

A new report released by The Economist Intelligence Unit (The EIU) finds that coal use in Europe has been in decline since 2013. Competitive natural gas prices, growth in renewables generation, EU air quality directives and weak electricity consumption have combined to make the market environment a tough one for coal fired power, a scenario that will continue to constrain coal generation going forward, the report finds. Coal use in the power sector did increase in Europe in the first few years of the decade, but this was a temporary phase and the longer term trend of gradual decline in the region has resumed, research from The EIU published in the report finds.

In the last two years the retirement of coal capacity in the UK has driven the fall in coal generation in Europe, largely driven by the UK's own carbon price floor. Falls in coal use elsewhere have been incremental, but in the Netherlands and Germany some steps have been taken to reduce coal capacity while smaller coal users such as France and Finland have pledged to phase out coal generation as well. "An inflection point has been reached where some states in the region are becoming more pro-active in addressing reliance on coal-fired power," said Peter Kiernan, Lead Energy Analyst at The Economist Intelligence Unit.

In exploring the policy and market landscape for coal generation in Europe, the report argues that while EU-wide policies such as emissions reduction targets, renewables mandates, air quality directives and the emissions trading scheme have set the framework for de-carbonisation of Europe's power sector, directly addressing the issue of coal reliance has been largely left to member states. Yet given the overall policy climate and market conditions that are emerging the report argues that coal generation in Europe is likely to face a constrained environment going forward. Coal generation in Europe is heavily concentrated in less than half a dozen states, meaning that policies that address unabated coal usage among the region's major coal users stand to make a significant difference to Europe's coal reliance overall.

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