European Power Cos Saw Carbon Emissions Rise In 2002

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Europe’s largest power generators saw their carbon emissions rise in 2002 despite a looming European Union law aimed at curbing emissions., PricewaterhouseCoopers’s (PWC.XX) Head of Climate Change Services Laurent Segalen said in a telephone interview.

Consultants PWC and French energy news service Enerpresse on Thursday will publish a report analyzing data on carbon dioxide emissions from Europe’s leading power companies. The European Carbon Factor report, now in its second year, also compares the European companies with their Japanese peers.

The report found that the 21 largest power generators in the E.U., which together account for some 75% of the European power sector’s total carbon dioxide emissions, released 693 million tons of carbon in 2002, an increase of 0.8% from 2001. Of the ten biggest emitters, seven reported higher emissions, while only three reduced their emissions, the report said.

A directive requires member countries to meet certain objectives, but allows national governments to decide how the objectives should be met. The new E.U. Emissions Allowance Trading directive is aimed at reducing Europe’s carbon emissions, but if it is to help the E.U. meet its Kyoto Protocol targets, some experts forecast power generators will have to cut their carbon output by as much as 100 million tons a year by 2012.

Europe’s five largest carbon emitters were RWE AG (RWE.XE) with 127 million tons of carbon, Enel S.P.A. (ENEL.MI), with 75 million tons of carbon, Vattenfall Europe AG (VTT.XE) with 68 million tons of carbon, E.On AG
(EOA.XE) with 64 million tons, and Endesa S.A. (ELE.MC) with 59 million tons, the report said.

Electricite de France (EDF.YY) saw the largest emissions increase, a jump of 20 million tons of carbon, mainly because of thermal-based generators acquired in the U.K., Germany, and Spain, the report said.

Iberic producers Iberdrola S.A. (IBE.MC), Union Fenosa S.A. (UNF.MC), and Electricidade de Portugal S.A. (EDPAM.LB), which had to turn to coal-fired plants after a drought limited hydropower use, also reported marked increases in emissions, the report said.

Two companies – Enel and E.On – saw the biggest decrease in emissions, cutting carbon output by 12 million tons each. Enel achieved its reduction by disposing of some assets, while E.On did so by reducing its use of coal-fired plants in the U.K. and maximizing its nuclear-based generation in Germany.

A bright spot for Europe’s power companies was that its carbon factor – the amount of carbon emitted as a proportion of electricity generated – was slightly lower in 2002, the report said. From 360 kilograms per megawatt-hour, the European average slipped to 358kg/MWh.

Segalen identified a number of trends which could have an impact on how much carbon is emitted in 2003. For example, Spain has had more rainfall this year, allowing for greater use of hydro power instead of fossil-fuel based plants. In addition, coal costs have gone up because freight prices have risen dramatically in recent months,


on the back of China’s growing demand for raw materials for its expanding steel industry, Segalen said. Higher freight prices could make coal-fired generation less economic, he said.

On the other hand, France suffered a lengthy drought this summer, which limited the amount of power that could be generated from hydro and nuclear sources, Segalen said. The heat drew down river water levels, and reduced the efficiency of nuclear plants. As a result, France had to import more electricity from countries like the U.K., which relies less on carbon-free generators like hydro and nuclear, he said.

“I’m sure that in the next 2-3 years, analysts are likely to look at the correspondence between the weather and the price of carbon,” Segalen said. Power companies will want to protect themselves against weather changes that could unexpectedly force them to rely on more carbon-emitting fuels, he said.

Turning to Europe’s performance relative to the U.S., Segalen said the greater reliance on coal in the U.S. results in higher emissions. “In the past 10 years, I haven’t seen much change in the (U.S.) energy mix,” he said. Indeed, the U.S. generates 50% more electricity than the E.U., but emits three times as much carbon, he said.

Against their Japanese peers, Europe’s power companies compare favorably, the report said. At 378kg/MWh, Japan’s carbon factor is higher than the E.U.’s, the report said.