A war on coal is playing out in central Europe

Coal’s reputation has suffered great damage due to a growing number of analytical reports describing it as the most accessible fruit to stop global warming. Particularly among OECD countries, getting out of coal (often suffering heavy financial losses just to get rid of it) has become a contagious habit. Thermal coal remains the main target because its use in the production of electricity provokes much more public reaction than, for example, metallurgical coal, an indispensable part of the steel industry as we know it. As much as coal pollutes the skies of the Old Continent, the abruptness of anti-coal sentiment is almost certain to generate conflicts between the remaining producers and their neighbors. The diplomatic quarrel between Poland and the Czech Republic certainly goes in this direction.

It should come as no surprise that the assault is coming at the back of Europe in search of more coal (albeit on a temporary basis). The speed at which European gas prices have increased has outpaced the simultaneous appreciation of coal, thus limiting opportunities to switch from coal to gas. This is quite a development because it goes completely against two major trends in the coal industry. First of all, carbon prices always hover around EUR 50 per tonne of CO2, about double what they were a year ago. Second, the coal market has gone through some sort of supply crisis – China’s ban on Australian coal has pushed up prices globally, while heavy rains in the southern hemisphere this year hampered exports from Indonesia and partially Australia.

In the context of all of the above, Central Europe has turned into a legal battleground. The Czech Republic took legal action against Poland, the absolute heavyweight in Central and Eastern Europe’s coal production, claiming Warsaw’s about-face on its coal energy commitments was an obstacle immediate to its long-term sustainability – including, but not limited to, its pollution and potential drying out groundwater currently used as drinking water on the Czech side. Turow’s coal mine is one of the largest and oldest in Europe, producing for 117 years already, since 1904. With Turow’s license to operate exhausted, the coal mine was to be gradually closed, propelling Poland towards a greener future.

The Polish government, however, decided to extend Turow’s permit until 2044, which means that the surface mine would be extended and the 2 GW coal-fired adjacent to the mine would be kept alive. Turow is Poland’s second coal project after Belchatow, unlike the latter, however, it is located right next to two borders, those with Germany and the Czech Republic. Considering that the extension of the Turow coal project would bring the surface mine 70 meters from the Czech border, it is not surprising that the Czech government has sued Poland for violating EU environmental regulations. Prague alleges that the decision was taken without the required rounds of public consultations and without carrying out a necessary environmental impact assessment.

The Polish government faces a doubly difficult task. Not only is coal cheap to mine in the country and plentiful in terms of reserves, but it also plays a symbolic role in Polish history, as a manifestation of the local miners’ revolts in Soviet times that have brought down the communist regime there. Being perhaps the nation’s only commercially viable offer for energy self-sufficiency, Poland’s coal fields are also located in the southern Silesian region, i.e. far from the most profitable wind farms. the Baltic Sea and future nuclear power plants (also located along the Baltic Sea Coast). Essentially, this means that Warsaw is fully aware that if it were to close its coal mines in Silesia, new, non-polluting production sites that could supplant coal would be far from traditional coal regions. Besides the direct economics of exports and imports, this also has far-reaching social implications.

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Poland is working on the creation of a new state-owned mining company, presumably by the end of 2022, ready to take over all coal assets from private producers who could leave the country as debts undermine coal profitability. Nationalization of the coal sector has many drawbacks and one obvious advantage: the European Commission would have a harder time forcing regional governments to obey. Brussels effectively sided with Prague on the Turow coal-fired power plant issue, saying the Bogatynia region (where Turow is located) would not receive funds from the EU’s just transition program. For a country that remains the biggest beneficiary of EU funds (between 2014 and 2020, Warsaw received 106 billion euros from the EU budget), this is a serious threat, not to be taken at face value. slight.

The final outcome of the Czech-Polish coal conflict largely depends on the flexibility of the Polish side. Czech authorities have previously claimed that provided Poland puts in place long-term monitoring systems for groundwater and noise levels, ensure that no subsidence occurs on the Czech and German side as a result. of coal mining and guarantees financial compensation if any of the above conditions are not met, then he could bite the bullet and drop his claim to the Court of Justice of the European Union. Warsaw appears willing to settle the deal out of court with its southern neighbor, with Prime Minister Morawiecki going so far as to declare that Poland will spend up to 45 million euros to prevent the loss and pollution of groundwater. Fearing long-standing conflicts with Poland, the Czech authorities could agree to such a deal – sparking an end to the first of many European coal “wars” to come.

By Gerald Jansen for Oil Octobers

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