Bloomberg reports that European utilities are poised to add more coal-fired power capacity than natural gas in the next four years.
Power producers from EON AG to RWE AG (RWE) will open six times more coal-burning plants than gas-fed units by 2015, UBS AG said in a Sept. 5 research note. Profits at coal-fired power stations may more than double by then, according to a Goldman Sachs Group Inc. report published on Sept. 13.
The economics of this is driven by nothing intrinsic, but rather by a regulatory failure.
Carbon is falling as the European Commission seeks to fix a glut of permits through 2020 in the world’s biggest greenhouse- gas market by traded volume. This year’s supplies have been inflated by credits that the European regulator has banned and need to be handed in by emitters before May.
Effective regulation of the fast-moving marketplace by the slow and noisy political process is difficult. Some argue that this makes it unnecessary but that is obviously counterproductive in a case like this where huge costs are externalized without any special effort on the part of the producer.
The only feasible answer to bad regulation is good regulation.