How can the EU survive without Russian coal? | Business | Economic and financial news from a German perspective | DW

The European Commission has proposed a ban on the purchase of Russian coal as part of new sanctions against Moscow in response to apparent war crimes committed by Russian forces in the Ukrainian town of Bucha.

An embargo on coal from Russia, the EU’s largest coal supplier accounting for around 45% of total imports, could inflict further hardship on the 27-member bloc already reeling from severe energy shortages and high oil and gas prices.

Several EU countries have been importing more coal from Russia in recent months as they look for ways to reduce electricity generation costs following an unprecedented rise in gas prices. Coal, the dirtiest fossil fuel, is much cheaper for electricity generation.

How dependent is the EU on Russia for coal?

As EU countries drastically reduce their production and consumption of highly polluting coal to combat climate change, their reliance on imported coal, particularly from Russia, has increased significantly over the past two decades. .

Russia, the world’s third-largest coal exporter behind Indonesia and Australia, accounts for 45% of total EU coal imports. When it comes to thermal coal, which is used to generate electricity and heat, that figure rises to 70%, according to Brussels think tank Bruegel. Russian metallurgical coal, used to make iron and steel, accounts for around 20-30% of EU coal imports.

Russia’s share of EU imports of hard coal, an aggregate of anthracite and bituminous coal which has the highest carbon content, has risen from less than 10% in 1990 to more than half in 2020 .

Germany, Poland, Italy and the Netherlands are among those most dependent on Russian coal, which represents more than 65% of the total imports of each of these countries.

How fast can the EU wean off Russian coal?

The German Association of Coal Importers (VdKi) said that coal imports from Russia to Germany could be replaced within months. He named the United States, Colombia, South Africa and Australia among the countries most likely to fill the void.

“There is a well-functioning global market. There are enough quantities available,” Alexander Bethe, chairman of VdKi’s board, said in a statement. “Germany imported about 18 million tons of hard coal from Russia last year. This is only about 2% of total world trade.”

Avoiding Russian coal could be much easier and cheaper than replacing Russian natural gas, because unlike gas, coal doesn’t need to be liquefied for transportation or require an extensive network of pipelines.

“It was only aggressive Russian pressure over the past decade to gain market share in the EU that drove out other suppliers,” Bruegel analysts wrote in a blog post. “In principle, shipments from countries that have reduced their exports to the EU are still widely available to replace Russian coal.”

Analysts have also suggested the shortfall could be made up by increasing domestic production in an emergency. They called on policymakers to assess whether a temporary relaxation of environmental rules would be needed to allow the use of more readily available types of coal.

Rystad Energy analysts, however, said coal consumers “will find it difficult to source coal from alternative producers as the balance between supply and demand for international marine thermal coal is extremely tight.”

What impact would the coal embargo have on the EU economy?

Increased demand from the EU will further drive up global coal prices, which would mean even higher energy bills for households and businesses. This could push up inflation which is already at its highest level since the bloc’s inception. Energy shortages could worsen next winter when the demand for heating increases.

Despite efforts to limit the use of coal to generate electricity, this highly polluting fossil fuel continues to represent around 15% of the European electricity mix.

“Higher coal demand, lower coal supply and more complex logistics will increase the cost of coal imports and could lead to temporary local disruptions,” Bruegel analysts said. “However, the halt in Russian coal imports does not appear to result in dramatic supply disruptions overall.”

What is Germany’s position on the elimination of Russian coal?

Germany has indicated it will support a ban on Russian coal, with Economy Minister Robert Habeck saying the country will become independent of Russian coal by autumn this year.

Berlin, which is trying to get rid of Russian energy quickly, has been reluctant to sanction Russian fossil fuels, warning that such a move could have serious repercussions for its people and economy.

As the atrocities committed by Russian forces in Ukraine are highlighted, Germany seems more willing to harm Russian fossil fuel exports, the country’s main source of income, despite the economic costs.

German Foreign Minister Annalena Baerbock said on Tuesday the EU was working on a plan to completely cut ties with Russian fossil fuels, starting with coal.

Edited by: Hardy Graupner

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