The mining industry under the thumb of politicians: the environmental consequences of the Spanish Coal Decree

Abstract

Abstract The so-called Coal Decree (Royal Decree 143/2010) and subsequent Royal Decree 1221/2010 have modified the historical use of coal trends in the Spanish economy since 2010. The use of domestic coal in Spain's electricity sector will be promoted by the Royal Decree until 2014. This energy strategy on the one hand and political decision on the other were advanced under the flag of energy security and the fulfillment of the 9th Principle of the International Council of Mining and Metals (ICMM), which specified that sustainable development in mining areas should maintain, among other things, employment. The mutual understanding between the government and the local mining industry is confronted with vast criticism at the institutional, firm and social levels regarding: a) the disparities generated between electricity generation technologies; b) the increase of electricity market prices (The National Competition Commission reported the Royal Decree); and c) subsequent environmental harm. The Coal Decree has changed the gradual decrease of coal in the Spanish energy mix since the end of the 1990s. The environmental efficiency gains accumulated over the past several years would be lost as a result of this change of direction in policy. In the last fifteen years, the coal industry in Spain has been under pressure from political decisions that have forced the dismantling of the industry, a labor reconversion of mining areas, and the conversion of coal-fired power plants into combined-cycle gas power plants. This situation considerably reduced CO2 emissions from coal combustion in Spain, improving the environmental efficiency of the entire economy for many years. Nevertheless, the implementation of the Royal Decree has changed these trends. This paper will examine the environmental consequences of the Coal Decree from 2010 to 2014 based on actual economic and energy demand requirements and actual electricity mix composition. A post-Keynesian energy AGE model to forecast energy demand and the derived CO2 emissions will be applied to evaluate the change in the reduction of emissions observed in the electricity sector since 2005 and in the Spanish economy since 2010. The results will be compared to other alternative scenarios of CO2 emissions evolution.