Consultation on implementation of the revised large combustion plants directive
Response by Michael Clapham MP on behalf of the All Party Parliamentary Coalfield Communities Group.
The Coalfield Communities Group which came into being in 1997 has taken a close interest in Energy Policy and the impact on the UK Coal Industry and the communities that depend on it.
The two options
The UK Government must inform the European Commission by the end of November 2003 how it intends to implement the Large Combustion Plant Directive (LCPD) and two options have been put forward.
The first is the emission limit value approach (ELV). This limits sulphur emission concentrations from individual power stations and is usually complied with by fitting flue gas desulphurisation equipment. This is the route to be taken by other EU member states.
The second is a national emission reduction plan (NERP) based on National ceiling for sulphur dioxide which all power stations taken together must not exceed. In addition DEFRA is proposing to introduce an Emissions Trading Scheme linked to the national plan. This will principally allow generators with FGD plants who can keep within their limits to sell allowances to non-FGD plant.
DEFRA's preferred option is the national plan. I take the view that this option will discriminate against UK mined coal. The potential consequences of a drastic reduction in the market for indigenous coal could be the loss of an industry with an annual turnover of around £1 billion and up to 15,000 mining and related jobs. On balance, I consider that the emission limit value option would be less damaging to the UK Coal Industry and could provide a better environmental solution.
Economic case
DEFRA appear to base their preference for the national plan on the costs of compliance. The consultation document states that: "the emission limits approach would cost about £900 million over the period 2008 to 2024. The national plan approach would cost some £650 million." (Paragraph 5.7 p14) I am not in a position to challenge these figures or indeed the general cost-benefit analysis contained in the consultation document that attempts to take into account monetised benefits derived from impacts on human health.
However, the cost effectiveness of the proposed national plan is based on the assumption of an Electricity Supply Industry (ESI) coal burn of around 84 terawatt hours in 2010. This assumption is taken from the DTI forecasts set out in the Energy Paper 68. Since that paper was published at an all time low in coal consumption, the trend has reversed. Under the New Electricity Trading Arrangements (NETA) coal is the most competitive and flexible fuel and coal burn has increased. There is no longer any reason to assume that coal burn could not be maintained at the current level of around 120 terawatt hours. At current levels of coal burn, based on DEFRA's own calculations, the costs of compliance of emission value limits are the dame as the national plan. At higher levels of coal burn the emissions limit approach is less costly.
However, the key concern is the pressure the national plan approach puts on generators to switch to lower sulphur imported coal. Under the national plan the sulphur "bubble" for the ESI would fall to 144,000 tonnes per year which could imply power station consumption of just 20 million tonnes of coal per year compared to 50 million tonnes in 2002. Coal production in the UK in 2002 was 28.9 million tonnes.
Generators with non-FGD plants will endeavour to extend the operation of their plants in the only way they can by using low sulphur imported coal. Those with FGD will also take the option of using a significant amount of low-sulphur coal to give themselves head-room under the emissions ceiling resulting in saleable allowances under a trading scheme. The permutations are complex and not entirely predictable, but all this implies a much smaller market for UK-mined higher sulphur coal.
In the cost-benefit analysis put forward in the consultation document no account is taken of this potential impact on the UK Coal Industry. Without a market for much of its coal, colliery closures would be inevitable. The Government is supporting the coal industry currently with an investment aid package. It, therefore, seems nonsensical to promote a separate policy that will see that money wasted.
Environmental case
Under DEFRA's own projections the emission limit approach would lead to lower sulphur emissions. The consultation document refers to a 120,000 tonnes reduction from 2008 to 2024 for an emission limit value approach compared to just 700,000 tonnes over the same period for the national plan.
The Government's consultation document, therefore, concedes that the emission limit approach is consistently more effective in reducing sulphur emissions than the national plan at all coal burn scenarios. It does, however, have fewer benefits for reducing nitrogen dioxide at higher projections of coal burn.
A key consideration, however, is to compare the affect on generators' policy of the two options. Under the national plan there is no incentive to fit FGD and the most likely policy is to switch to low sulphur, imported fuel and opt in some cases for limited hours derogation.
The Government policy outlined in the 1998 White Paper (cm4071), Environment Agency Policy to implement the National Emissions Ceilings Directive, the UN Second Sulphur protocol and the Integrated Pollution Prevention and Control Directive has been to encourage generators to fit FGD equipment. This policy has been in part successful but more could be done. An emission limit approach provides further incentive to fit FGD to power station units and, therefore, complies with the Government's ongoing policy.
Furthermore, choosing a national plan instead of an emission limit approach will have no impact on carbon dioxide emissions to help compliance with the Kyoto Protocol. It will simply mean that low sulphur imported coal is used rather than UK mined coal.
In conclusion
The LCPD should be implemented in a way that does not disproportionately impact on UK mined coal.
DEFRA's preferred option – the national plan approach:
- Encourages generators to switch to low sulphur imported coal
- Does not take into account the potential impact on the UK Coal Industry and the jobs that depend upon it
- Provides no incentive to fit flue gas de-sulphurisation equipment
- Is based on out-of-date forecasts in Energy Paper 68
- Runs counter to the overall policy aims of secure and diverse energy supply
The Emissions Value Limit Option:
- Makes more environmental sense
- Has cost advantages if coal continues to make a significant contribution to the UK's energy needs
- Does not unfairly impact on UK mined coal
