There is a widely held view that tough EU air pollution rules will force most coal-fired power stations to  close by the early 2020s. But that simply isn’t true, according to campaign group Sandbag.

It explains why in a new report called ” Europe’s failure to quit coal“. Its plant-by-plant analysis finds that 110 gigawatts of EU coal capacity – nearly three-quarters of the total – will be able to stay open despite air pollution rules.

The remaining 40 gigawatts could stay open too, Sandbag says, with 14 gigawatts of that in the UK. It adds that recent policy changes make it more attractive for UK plant to continue to operate.

We’ve taken a look at why Sandbag says everyone’s been getting it wrong on coal.

Climate targets

There’s broad consensus that there isn’t room to keep burning coal unabated if we are to meet climate targets. Coal makes the highest-emissions electricity, but recently it’s been cheap to burn and has been enjoying something of a renaissance.

Analysts including the International Energy Agency say that’s just a temporary blip, however. The National Grid agrees and expects all UK coal plants to close by 2023. Late last year climate and energy minister Baroness Verma said:

“All sides in this debate can agree that we neither expect nor desire large amounts of unabated coal to be operating in the 2020s.”

People expect coal plants to close because of the EU industrial emissions directive (IED). This sets emission limits for pollutants including sulphur dioxide (SOx), nitrogen oxides (NOx) and mercury.

The rules are due to kick in from 2016 but there are various exemptions that mean coal plants can operate limited hours until as late as 2023. After that there’s no escape. A 200 microgram per cubic metre limit for NOx is thought to be particularly difficult and costly to meet – as much as â?¬180 million per gigawatt of capacity. That’s why National Grid thinks plants will close in 2023 at the latest.

EU coal database

Sandbag isn’t so sure. It has collated a massive database of all the EU’s coal-fired power stations and then checked each plant to see if it will comply with the IED or if it has announced firm plans to do so in future, by building NOx abatement equipment.

Only one coal plant has announced that it will close because of the IED, Sandbag says. Apart from that most coal plants have plans to become IED compliant or are already, it says. For instance in Germany, where there is 46 gigawatts of coal capacity, only 4.3 gigawatts is not yet compliant.

Across the EU 110 out of 150 gigawatts are or will become IED compliant. The remaining 40 gigawatts could become compliant too if it invests in NOx abatement. Sandbag says technological changes and flexibility in the rules means compliance will be much less costly than that â?¬180 million per gigawatt figure.

It had been thought that the only way to comply would be to install selective catalytic reduction that turns NOx into nitrogen and water. But cheaper options such as selective non-catalytic reduction are now available, it says.

Sandbag’s report says:

“There is a real, preventable threat many coal power stations will invest to stay open, creating high-carbon lock-in into the 2030s.”

UK policy changes

For the UK the situation is even worse, Sandbag says. That’s because of two recent policy changes that make it more favourable to invest in keeping old coal plants open.

The first change is a new “capacity market” that will offer subsidies to power stations that promise to be available in future. The market was designed to make sure gas plants stay open to provide back-up when the wind isn’t blowing and the sun doesn’t shine.

But coal plants can bid into the market too, potentially receiving subsidy for up to 15 years. The way the market has been set up means it will benefit old coal rather than new gas, according to analysts Bloomberg New Energy Finance.

The government says there are investment thresholds that will make it difficult for old coal to secure these long-term subsidies.

Baroness Verma said:

“Even if an existing [coal] plant could justify making that level of capital investment, it would be unlikely to do so. Modelling demonstrates that the wider market conditions, such as the carbon price floor, will make coal uneconomic in the 2030s.”

The carbon price floor is a top-up tax designed to bolster the currently low carbon price under the EU emissions trading scheme, now trading at â?¬6 per tonne. We’ve described the price floor in more detail here.

This is where Sandbag’s second problematic policy change comes in. In this year’s budget the chancellor froze the level of the price floor, a move that Sandbag says will make coal relatively more profitable during 2017-2020. It adds that freezing the price has set a dangerous precedent indicating that further amendments can be expected.

The price floor is part of a complicated three-way calculus that determines how profitable coal will be in future, depending on the relative price of coal versus gas and the cost of emitting a tonne of carbon dioxide.

Market forces may reverse the recent shift from gas to coal-fired electricity that has been driven by cheap coal. But we can’t be sure this will happen, and if it doesn’t UK and EU climate targets will be in serious jeopardy.

Policy prescription

So what should we be doing to make sure we aren’t stuck with coal in the 2030s? Sandbag has a policy wish-list that includes fixing the emissions trading scheme and setting carbon emissions limits for power plants.

It also wants tighter pollution limits under the IED. The technical reference documents behind these limits are currently being revised with the new version due for publication next year. This could see the NOx limit tightened from the current 200 micrograms per cubic metre down to anything between 65 and 180 micrograms, according to a draft text.

The lower end of that range would not automatically see coal plants close across the EU but it would make a “huge difference” to their economic viability, says Sandbag policy analyst Dave Jones, because they wouldn’t be able to get away with cheaper NOx abatement options.

Sandbag’s wish-list is broadly the same as the policy prescription issued by a several other NGOs earlier this week, on the back of their ‘ Dirty 30‘ report on the EU’s top 30 coal emitters. The two reports in a week are part of a wider NGO push that is attempting to put the spotlight on coal.

Unlike much of the climate problem, which is diffuse and consequently hard to target, there are relatively few coal plants each emitting huge quantities of CO2. Shutting them would be a big step towards tackling the climate problem.