Coal Trading an Awkward Contradiction for Climate-Talks Sponsor

The sparkling blue waters of an Alpine hydroelectric dam dominate Electricite de France SA’s latest advertisement plugging its sponsorship of climate-change talks in Paris at the end of the year.

While renewable-energy plants and the world’s largest fleet of nuclear reactors allow the state-controlled utility to boast of low-carbon emissions, they are linked to an inconvenient truth: EDF is one of the world’s biggest coal traders and a major importer of the fuel into Europe.

That disconnect illustrates the dilemma facing Europe’s biggest power producer as more than 190 nations work toward an agreement on curbing global warming. Pressure is increasing for energy companies to join a growing chorus, ranging from investment funds and oil majors to medical professionals and churches, calling time on coal, the fossil fuel that’s the biggest source of greenhouse gas emissions.

“Coal is in the hot seat,” said Jacques Percebois, an energy economics professor at the University of Montpellier in southern France. “Public rejection of coal is starting to grow.”

A spokesman for EDF, which shipped 94 million metric tons of coal last year, declined to comment. Coal-fired generation accounts for about 6 percent of the company’s power production.

France wants to “reorient” companies in which the state is a shareholder toward cleaner fuels and renewables, Finance Minister Michel Sapin said in May. The government owns 84.5 percent of EDF and 33.3 percent of Engie, the utility formerly known as GDF Suez SA.

Rebranding Move

Last month, Engie CEO Gerard Mestrallet announced his company won’t be involved in a new coal plant in South Africa. That apparent shift in policy comes after he defended the use of coal by countries like South Africa at a shareholders’ meeting in May.

“There is a change in behavior of business,” Mestrallet said in an interview with Bloomberg TV before the announcement.

Since rebranding itself in April, Engie, also a sponsor of the climate talks, has pledged to accelerate its move into renewable energy. It generates about a fifth of its electricity from coal plants and doubled its usage of the fuel between 2008 and 2014, company figures show.

Fellow French energy giant Total SA plans to pull out of the coal business, CEO Patrick Pouyanne announced in June, as many of Europe’s biggest oil companies promote natural gas as a cleaner alternative.

“I still have a coal business and I have to get out of it,” he said. “I can’t say that coal is the enemy of gas and then continue to produce coal like some of my colleagues. I will get out of coal.”

Project Backing

Policy makers also appear less willing to back coal projects. Last month, Japan’s Environmental Minister Yoshio Mochizuki said approving a coal-fired plant by a venture between Osaka Gas Co. and Electric Power Development Co. is “difficult,” given the need to cut emissions.

The country started burning more coal and natural gas following the 2011 Fukushima disaster that reduced nuclear output. Also last month, South Korea scrapped plans to build four coal-fired plants in favor of more nuclear.

So far, those moves haven’t dented the outlook for coal’s prominence within the global energy mix. Taking into account countries’ pledges toward a climate agreement, by 2030 coal’s share of energy-related carbon dioxide emissions will fall by just 3 percentage points to 41 percent, according to a study published last month by the Paris-based International Energy Agency.

Coal Demand

While global coal demand is expected to grow over the next five years, led by China, demand in the U.S. is forecast to fall amid increasing shale gas production, according to the IEA. Demand in Europe will also decline after a spike in use over the past few years as Germany imported more of the fuel to replace shuttered nuclear plants, the IEA said.

“Globally we do not expect the end of coal because countries looking at how to get power cheaply will still consider coal plants,” said Josef Pospisil, a utilities analyst at Fitch Ratings Ltd.

Still, coal is getting bad press. Doctors have called for the fuel to be phased out on health grounds, while Pope Francis pinpointed it as a major carbon emitter.

As environmental campaigners tap public anger to put pressure on energy companies, France’s EDF and Engie have come under scrutiny as sponsors of the climate talks.

Friends of the Earth’s Malika Peyraut called Engie’s South African U-turn “a good first step” as the campaigner sets its sights on halting half a dozen other coal projects backed by the utility, including one in Turkey.

“We want EDF and Engie to vow not to invest in any more coal plants otherwise their sponsorship of the Paris talks is hypocritical,” she said. “They have to bite the bullet even if it means giving up juicy contracts.”

For more, read this QuickTake: A Global Push to Save the Planet

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