Proposed EU Emissions Cuts Would End Coal Use by 2040

The European Commission has proposed a significant emissions cut. First recommended by the European Scientific Advisory Board on Climate Change (ESABCC), the target would see European Union nations cut their annual net emissions by a whopping 90% from the 1990 level by 2024. The recently endorsed target compares to the Fit-for-55 package’s 55% emissions target by 2030 and implies the end of coal use.

European Commissioner for Energy Kadri Simson says the EU’s executive arm is sending “a clear message to investors” that the regional bloc will stay true to decarbonization efforts and offer stability and predictability long term. Simson added that the proposal was also a message to EU citizens that cleaner energy solutions are incoming and the EU would accompany its citizens in the transition to clean energy. According to Simson, the share of electricity in energy consumption will increase from 25% in 2030 to 50% in 2040.

However, energy from hydropower, wind, solar and other low-carbon technologies will cover the increase in electricity consumption.

Poland would be significantly affected by such a decarbonization strategy as it still draws 70% of its electricity from coal-fired plants. With a tentative 2049 coal phaseout target, the new Polish government has pledged to provide a definitive deadline for phasing out coal use in the country.

According to the European Commission’s recent announcement, coal would be phased out in the region by 2040 alongside a massive 80% reduction in fossil fuel use for energy compared to 2021. The commission’s impact assessment noted that coal’s share in final electricity consumption would be small by the end of the decade before “disappearing shortly” after 2040, thanks to energy imports.

Electricity production in the regional bloc would be carbon free by 2040, and the energy industry would decarbonize “shortly after,” the commission notes. Some of the conditions required to meet the commission’s proposed emissions targets include a greater focus on a just and equitable energy transition, a strategic dialog about the framework required post-2030 and the European industry’s competitiveness.

The commission noted that setting a climate target for 2040 will help citizens, investors, industries and governments in Europe make informed decisions that will keep the bloc on track to achieving carbon neutrality by 2050. Fairness, solidarity and social policies will be key to the energy-transition process and should benefit everyone in society, especially the most vulnerable and those who will struggle to adapt the most, the commission says.

As the use of coal to generate electricity winds down, major players in the coal industry such as Alliance Resource Partners L.P. (NASDAQ: ARLP) could find themselves looking for new verticals to serve if they wish to remain with coal as their main commodity of trade.

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