Morning after: Coal’s days are over, taxpayers face clean-up bills

Coal is inevitably on its way out of the EU energy mix, but the public is facing a double legacy of environmental damage and footing the bill for the remediation costs, as current EU liability rules for companies are not doing their job.

Europe passed a milestone this spring when 50% of the coal power capacity either has closed or announced closure dates before 2030. Coal is not only incompatible with EU climate goals, but also increasingly unprofitable. It could not be clearer: we are in the end game for coal in Europe, and a phase-out is as inevitable as it is necessary.

This is great news for people and the environment across the EU. Yet, while moving beyond coal will improve air quality and reduce the number of premature deaths, coal impacts won’t just end with the phase-out: on the contrary, we will have to deal with them for decades to come. Lowered groundwater levels, hazardous substances and mine pits take decades to restore and remediate. In Germany, national and federal state governments still transfer around 300 million euros a year to LMBV, the company in charge of the restoration of the lignite mines that closed after the reunification of Germany. Similar sums are only to be expected when remaining lignite mines in Germany, Poland and the rest of Europe close.

The EU Environmental Liability Directive (ELD), which aims to prevent and remediate environmental damage by holding operators responsible and implementing the ‘polluters pays’ principle, is not fit for purpose to deal with the mine remediation costs. The limitations of the Directive, in particular the narrow scope of activities covered and the restrictive definition of ‘environmental damage’, were pointed out by ClientEarth already in 2015, when the Directive was reviewed. 

On May 20th, with an overwhelming plenary vote, the European Parliament called on the Commission to revise the ELD and strengthen existing EU rules on environmental liability for companies.

The ELD is not strictly focused on coal – rather the opposite, as coal mining is one of the operations that do not trigger strict liability under the Directive. However, coal operations and the ongoing coal phase-out across Europe is exposing several weaknesses with the ELD in its current form.

Firstly, the Directive only covers a limited set of operations and coal mining is not among them, despite the severe negative environmental impacts it inflicts, during operation as well as after closure. To have any effect, the list of activities covered by the Directive must be extended and all coal mine operations should be explicitly covered.

While EU leaders call for a world-wide end to coal subsidies that slow down the process of coal phase-out, governments are using public money to keep a polluting industry alive and let citizens foot the bill for cleaning up the damage. Germany’s coal phase-out law allows the state to bail out major coal operators RWE and LEAG by 4,35 billion euros, and part of this gigantic sum is destined to rehabilitation costs.

Similarly, Poland is planning a major restructuring of its coal sector, where a state agency (NABE) would take over several units as well as the lignite mines of Turów and Bełchatów. If this happens, the state would not only take over an unprofitable and polluting business, but also inherit the future remediation costs, at the expenses of taxpayers.

As ETS prices are making coal plants increasingly costly to operate, there is risk that companies go bankrupt before they can be held accountable for the damage they have inflicted. The European Parliament rightly recommends that mandatory financial securities are set aside while companies are still operating, to avoid that taxpayers are left with the bill if a company goes insolvent. This would also reduce the burden for the public when states bail out coal.

Similarly, it is also crucial that chain and parental liability are introduced. Currently, companies can shield off risks by splitting off profitable renewables from unprofitable coal through company reconstructions. This strategy has already been used by RWE as noted by Green Budget Germany.

A third issue that has limited the effectiveness of the ELD is article 8.4, which shields companies from liability if they have been operating within their permit, meaning that a company can knowingly pollute and harm the environment as long as they have a permit. This inherently limits the accountability, as coal corporations that are fuelling climate change and other negative environmental impacts are not held liable.

We are now seeing the effects of decades of fossil fuel burning. Coal combustion is also the main emitter of mercury, a neurotoxin that is extremely hard to clean up once it has entered the environment due to high costs and the large areas affected. Mercury pollution is also one of the main causes for surface waters to fail good chemical status in Europe). The European Parliament now proposes a reversed burden of proof, meaning that the permit defence should only be used when an operator can prove they could not have known about the danger their activity is causing.

Environmental impacts are never for free, and if polluters and not kept accountable for the damage they inflict, it will be the public who bears the costs. The coal phase-out is happening fast. It is a key moment for the Commission to tighten company liability rules now to make sure the public will not be left with the bill.