Royal Dutch Shell has attacked the “ridiculous” impact of European energy policy, warning that governments are erasing the environmental benefits from expensive renewables by allowing coal use to increase.
Europe is burning more coal, while demand for gas – which emits much less CO2 than coal – is declining Photo: GETTY IMAGES
Andrew Brown, one of Shell’s most senior executives, also warned that shale gas would not have the same impact in the UK as it has in the US, where is has been heralded as a new era of cheap energy.
In an interview with The Daily Telegraph, Mr Brown, Shell’s upstream international director, said the UK and Europe were “missing a trick” in their policies.
“There are a lot of subsidies going towards renewables. Gas and coal are having to compete to be taken into power generation,” he said.
Because cheap gas is reducing coal demand in the US, there is “a lot of cheap coal in the marketplace”. As a result, Europe is burning more coal, while demand for gas – which emits much less CO2 than coal – is declining.
“You have this ridiculous situation where cash-strapped Europe is putting a lot of money into renewables to reduce CO2, meanwhile allowing … the power generators to take much more coal and back out gas,” he said.
“All the benefits you’re getting from the renewable energy are being counteracted by far too much coal.”
Mr Brown said the EU’s Emission Trading Scheme (ETS), designed to reduce emissions by placing a price on carbon, “doesn’t work”. “CO2 is priced at such a low level it’s meaningless,” he said. “We want a higher CO2 price. Power generators would then make the right economic decision for Europe, for gas. Renewables and gas work very well together.”
Germany is one of the most high profile cases of a country that has invested heavily in renewables to curb carbon emissions – but is now burning increasing volumes of polluting coal.
The UK has also seen an increase in coal-fired generation as the economics have become more attractive than burning gas – although many of the most polluting coal plants will be forced to close over the next three years.
Many within Government are enthusiastic about gas and believe UK shale gas will ensure cheap supplies. The Chancellor has said he is mulling shale gas tax breaks “so Britain is not left behind as gas prices tumble on the other side of the Atlantic”.
But Mr Brown cautioned: “There is potential here but it won’t change the UK gas market as has happened in America.” Shale gas could however “play an important role in helping the UK with its energy security”, he said.
The Government is expected to allow controversial “fracking” for shale gas in the UK to resume within weeks.
A spokesman for the Department of Energy and Climate Change said it agreed that “the EU Emissions Trading System needs to be strengthened” and so was pressing for Europe to adopt a 2020 emissions reductions target.
This was also why it had introduced the carbon price floor in the UK, which will push carbon costs above current ETS levels, he said.