Polish Electricity Committee's comments on the report of the Joint Research Centre of the European Commission "EU coal regions: opportunities and challenges for the future"

The Joint Research Centre of the European Commission published the EU Coal Regions Report on July 31, 2018. The Report presents current levels of coal production in these regions, its consumption in power plants, jobs in coal mines and power plants. The Report also aims to provide a forecast on the future development of the mining regions and the transition measures for the cessation of coal production for energy purposes. The scope of the report covers hard coal and lignite mining as well as the power industry using these fuels.

Polish Committee for Electrical Energy (" PKEE ") welcomes the publication of the Report itself, which presents the economic and social consequences of the phasing out of coal-fired power generation. It should be noted that this is the first document of its kind. Until now, when preparing similar documents and formal assessments of the impact of climate and energy regulations, the economic impact of the proposed solutions has only been evaluated at the pan-European level.

We would like to stress the necessity to assess the effects of decarbonisation policy taking into account local conditions of those member states, which have relatively high employment in hard coal and lignite mining as well as in coal-fired power generation - i.e. and high share of coal in their energy mixes. PKEE's comments on the most important conclusions of the Report are presented below.

Key findings of the report

In 2015. Coal (both hard coal and lignite) accounted for 24% of the energy mix of all EU countries. In the same period, the share of coal in the energy mixes in 14 Member States exceeded 20%, including more than 40% in 5 Member States. At the same time, in 2015, the installed capacity207 of coal-fired power plants (both hard coal and lignite) in the EU is about 150 GW, the number of mines was 128 and the total annual production of hard coal and lignite was about 500 million tonnes. The EU coal sector employed about 237,000 people according to 2015 data, of which about 80% were employed in coal and lignite mining. The number of indirect jobs in the EU that depend on coal activities was about 215,000 in 2015. This means that about 452,000 people were employed in the coal and dependent sectors across the EU in 2015, and these jobs are concentrated in just a few regions, including Silesia Province in Poland, Yugoiztochen in Bulgaria, Severozapad and Moravskoslezsko in the Czech Republic, Muenster in Germany and Sud-Vest Oltenia in Romania.

The number of jobs in the Polish coal sector is about 112,000, which is about 50% of all jobs in this sector in the entire EU. According to the Report, 31 mines in the EU are planned to close in 2018 alone. The number of mining jobs at risk is also estimated to be about 109,000, or about 60% of all jobs in the sector. In parallel to the closure of mines, coal-fired power plants will also be phased out, which will lead to a reduction in the installed capacity of these power plants from about 150 GW in 2016 to about 105 GW in 2025 and approx. 55 GW in 2030. This will result in an additional loss of 15,000 jobs between 2020 and 2025 and another 18,000 jobs between 2025 and 2030. in Poland by 2025. Approx. 35%, and by 2030. Another 30% of coal-fired capacity to be phased out. The assessments suggest that the combined closure of mines and decommissioning of coal-fired power plants in the EU will result in the loss of about 27,000 jobs by 2020. However, the cumulative loss of mining jobs will be as high as 77 000 in 2025 and 160 000 in 2030 across the European Union. In Silesia Province alone, the number of jobs in the coal sector will decrease by 2030. According to maps showing the number of jobs at risk in the coal sector up to 2030 at NUTS-2 level, the possibility of losing jobs in this sector covers most of Poland, with the exception of only three provinces.

The report also shows that the regions with the highest risk of job losses are in the relatively low income Member States, namely Poland, Bulgaria, the Czech Republic and Romania. In addition, there is also a relatively high risk of job losses in mining and energy in Germany.

According to the Report, interim measures adequate to the magnitude of the challenges facing coal regions include: carbon capture and storage (CCS), reuse of mine sites as locations for renewable energy sources, including hydroelectricity, and reclamation of sites for industrial and service jobs. Unfortunately, these activities are described in the Report in rather general terms, often without providing details.

PKEE comments  

The European Commission confirms that the regions dependent on coal are less prosperous, which means that they require significant financial investment in the transformation and are not in a position to finance it themselves. At the same time, the regions most affected by the negative impact of mine closures and decommissioning of coal-fired power plants are those located in Poland. The level of risk of loss of direct and indirect jobs in the coal sector in Poland and the geographical range of these losses indicate that these issues are structural in nature, although the Report does not mention this. In our view, it is desirable to develop and implement systemic solutions at the pan-European level to ensure financing of the low-carbon transition in lower income member states.

In our view, the remedies proposed by the European Commission are far from adequate for the properly identified scale of challenges facing coal-dependent regions. In particular, they do not take into account the risks associated with the unprofitability of CCS technologies and the expected resistance of local communities to the construction of underground carbon stores in their vicinity. Controversy may also arise from the conversion of decommissioned coal mines and power plants into wind and PV farms, as suggested in the Report. In our view, further growth of RES will not compensate for the disproportion between job losses and potential "green" employment. This is not only due to a completely different technological environment, but also to a limited demand for operational work in RES installations. Even more doubts may be raised by the proposed transformation of coal regions into tourist attractions without a reliable analysis of how to carry out such a transformation.

The weakest point of the report is the lack of quantification of the possibilities for retraining employees, taking into account the current level of development of clean coal technologies and the potential for development of RES in individual coal regions. The European Commission's report also fails to provide a reliable analysis of how a retraining programme should be carried out for the nearly half a million workers at risk of losing their jobs.

Regional Policy and the Cohesion Fund could be important sources of funding. However, with increased reduction ambitions after 2021, which have already been approved with the amendment to the EU ETS Directive, the funds available for this purpose are to be reduced in the multiannual financial framework for 2021-2027. Conclusions of the Commission's report confirm the necessity of establishing a special fund dedicated exclusively to regions dependent on coal during the transition - Just Energy Transition Fund. However, the European Parliament's demand to establish such a fund was not reflected in the legislative proposals recently presented by the European Commission.

The European Commission notes that coal mining regions are currently characterised by low unemployment rates, which should allow them to absorb these consequences. Unfortunately, the Report lacks current European experience with employment restructuring in mining regions. The closure of the coal industry can lead to structural and long-term social and economic problems - as exemplified by the post-industrial region of Wales.

At the same time, the assumption of retirement of about 70% of the installed capacity of coal-fired power plants in Poland by 2030 is completely unrealistic. Meeting it would pose a serious threat to energy supply security. Consequently, the entire Polish economy would have to bear the costs of implementing the decarbonisation policy.

To sum up: the European Commission's report minimises the assessment of the negative consequences of restructuring the coal sector, which will mainly affect local communities. The report does not indicate well justified proposals for corrective measures, while ignoring such consequences as depopulation of mining regions as a result of migration, loss of human capital or increase in poverty. The Report shows that it is local communities that will pay the most for meeting the obligations, the benefits of which will be distributed globally. Therefore, a fair distribution of the costs of decarbonisation, coupled with financing sources adequate to the scale of the identified challenges, should be a necessary condition for the transition to a "green" EU economy.