Within the introduction to one of many few interviews that Daniel Křetínský, the second richest particular person within the Czech Republic, gave to the Czech media this summer time, Forbes journal requested the rhetorical query: “Who’s the one that is being portrayed in some media as a coal baron and one of many largest air polluters, although it isn’t true?” The quick reply may very well be that Daniel Křetínský is a coal baron and one of many world’s largest polluters, though he tries to fake it is not true. However how is it that Křetínský and his firm, Energetický a průmyslový holding (EPH), handle to maintain up the looks?
The corporate’s rigorously cultivated picture is linked to the carbon accounting it makes use of to current itself to the general public. EPH claims to be a “chief in European decarbonisation”. However in keeping with the information we have now compiled, even a conservative view of its emissions locations it among the many three dirtiest firms within the European Union. And there aren’t any related info to assist the declare of being a “European decarbonisation chief”.
The truth is, EPH stories lower than half of its emissions in its carbon accounting, even once we use a conservative methodology. Furthermore, our evaluation reveals that the ability crops in EPH’s portfolio are decarbonising extra slowly than the remainder of the EU energy sector.
EPH is one among Europe’s three high polluters
After all, it is necessary for firms to transparently report correct details about their carbon footprint for plenty of causes. It’s important as a result of it impacts an organization’s public picture. It impacts its public picture, which may additionally appeal to or deter traders.
Investor attractiveness is, in spite of everything, one of many fundamental explanation why firms preserve local weather accounts. On the idea of local weather accounting, they usually fee an environmental, social and governance (ESG) score. This determines the extent to which an organization is uncovered to the chance that, for instance, local weather change or the decarbonisation of the economic system might jeopardise its monetary efficiency.
Nonetheless, it isn’t solely the non-public sector that’s making selections primarily based on local weather accounting; governments and public establishments are additionally more and more taking it into consideration. The European Central Financial institution, for instance, introduced final 12 months that it will progressively decarbonise its company bond portfolio, though it will definitely backtracked from its authentic plans this 12 months.
However allocating accountability for greenhouse gasoline emissions within the power sector will not be simple. Aside from the query of whether or not emissions ought to be attributed to the mining firm, the gas transporter, the ability plant proprietor, the buyer or the entire financial system, there may be additionally the query of find out how to divide accountability among the many numerous shareholders of energy crops. Or, for instance, between those that personal the ability stations and people who function them.
There are a number of methods of allocating accountability for emissions. For now, it will likely be ample to say that standard carbon accounting approaches allocate emissions both by possession or by who controls the corporate.
But it surely can be helpful to take a look at, for instance, the full emissions from all of the actions wherein the corporate is concerned, as we could also be excited about info that standard carbon accounting strategies don’t consider. Every of those strategies has its professionals and cons, which we are going to come again to.
The underside line is that every one of them place EPH among the many high three CO2 emitters within the European Union – together with Germany’s RWE and Poland’s PGE. The precise rating inside the high three might range relying on the tactic used.
An evaluation of knowledge from the EU Emissions Buying and selling Scheme (EU ETS) reveals that EPH, along with German listed RWE and Polish semi-public PGE, is accountable for 1 / 4 of emissions from the power sector in the whole European Union. Right here we solely attribute emissions in keeping with possession, which is essentially the most beneficial possibility for the three largest polluters. EPH alone is accountable for about 6% of the full emissions of the European power sector, once more utilizing a beneficial method.
Because the chart reveals, the massive three’s vital share is because of the truth that every of them owns a disproportionate variety of the dirtiest crops. Eight of the ten dirtiest energy stations within the European Union are owned by these firms. All eight burn lignite.
EPH co-owns three of the ten dirtiest crops. And a fourth is shut behind in eleventh place. These are the German lignite energy crops of the Lausitz-based LEAG group, which EPH owns along with the Czech funding group PPF. Collectively, these crops emitted virtually 56 megatonnes of CO2 final 12 months, or 7.6% of the emissions of the whole power sector within the European Union.
Why a lot? On the one hand, they’re actually big crops, so logically they produce extra emissions. However they’re additionally very inefficient. Lusatian energy crops emit about 4 occasions as many grams of greenhouse gases per kilowatt-hour of power as the common European energy plant.
The emission depth of the Lusatian energy crops can be about twice as excessive because the sources disclosed by EPH in its sustainability report. They’re so soiled that their carbon depth even exceeds the higher restrict for coal within the modelling tables of the Intergovernmental Panel on Local weather Change (IPCC).
EPH stories lower than half of its emissions
And the Lusatian energy crops merely don’t seem within the complete record of EPH’s emissions offered within the report. The corporate discloses 23 megatonnes of greenhouse gasoline emissions. Nonetheless, our evaluation reveals that even a conservative method would attribute round 47 megatonnes of greenhouse gases to the corporate in 2022. To place it bluntly, EPH declares lower than half of its emissions.
The Greenhouse Gasoline Protocol customary, probably the most broadly used carbon accounting methodologies for firms, gives two fundamental methods to account for emissions. An organization can account for emissions primarily based on its possession stake, or primarily based on whether or not it workouts monetary or operational management over the asset.
The primary method is pretty simple, however EPH has not chosen it. Below the second method, the corporate data all emissions from the operations it controls in its carbon accounts. In doing so, it should additionally assess the instances the place it workouts management collectively with different entities.
If the calculation is predicated on monetary management and is collectively exercised by associate firms, they need to add the emissions for these belongings in keeping with their respective shares. Nonetheless, EPH has not chosen this methodology both. It calculates its emissions utilizing the operational management methodology, which can contain contractual preparations between the enterprise companions.
LEAG’s extremely polluting Lusatian energy crops are one such three way partnership. EPH states in its 2022 Sustainability Report that it workouts joint management over the corporate, i.e. it doesn’t make selections alone, however along with one other shareholder.
Subsequently, if it selected the monetary management methodology, it must report its share of emissions. Nonetheless, EPH states that it stories its knowledge in keeping with the operational management methodology, i.e. primarily based on whether or not it could actually make selections on the corporate’s operations.
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For instance, EPH counts negligible emissions from the Czech cogeneration plant Plzeňská teplárenská, the place it has administration management, though it owns barely 1 / 4 of the full. Alternatively, EPH doesn’t embrace in its complete emissions the Greenho
For instance, EPH counts negligible emissions from the Czech cogeneration plant Plzeňská teplárenská, of which it has administration management, though it owns barely 1 / 4 of the full. Alternatively, EPH doesn’t embrace in its complete emissions the greenhouse gases emitted by LEAG, Slovenské elektrárne and the Italian gas-fired energy plant Scandale, over which it claims to have neither monetary nor operational management.
The person firms subsequently preserve their carbon accounts separate. They report their very own emissions, however EPH itself doesn’t account for them in any respect. That is clearly a deliberate follow.
EPH appears to concentrate on this. Though the 2021 report doesn’t embrace the emissions of the Lusatian energy crops within the complete, we are able to not less than nonetheless discover them within the appendix “Predominant LEAG figures” (on web page 315). Within the newest report, nonetheless, even this reference has been dropped.
“It definitely places the corporate in a greater mild,” feedback Lia Wagner, an analyst at Urgewald, a German organisation that specialises in researching fossil gas firms after which offering knowledge on them to monetary establishments. The trouble to distance itself from LEAG is confirmed by the truth that, since this summer time, EPH now not even lists LEAG as one of many firms in its portfolio on its web site.
The ensuing image of EPH’s emissions is subsequently the results of the selection of carbon accounting methodology. The operational methodology used assigns accountability for emissions to the choice maker within the “medium time period”. Nonetheless, that is extraordinarily deceptive, significantly within the case of the Lausitz energy crops, the place the long-term horizon is essential from a local weather perspective.
LEAG and MIBRAG, which is wholly owned by EPH, are the one power producers in Germany planning to function lignite-fired energy crops past 2030. “LEAG and the nearly emission-free Slovenské elektrarne should not included in EPH’s sustainability report as a result of that is in keeping with worldwide methodology,” EPH spokesman Daniel Častvaj confirmed when requested by Deník Referendum why EPH doesn’t declare the substantial quantity of emissions for which it’s truly accountable.
EPH shouldn’t declare it isn’t accountable for LEAG’s emissions
It’s tough to guage from public sources whether or not EPH’s carbon accounting itself is right, not less than from a proper perspective, as we shouldn’t have entry to contracts between shareholders, for instance. Nonetheless, the truth that the corporate presents itself to the general public on the idea of those figures gives the look of a deliberate misrepresentation.
“Even when it isn’t towards the regulation, I feel the corporate deserves criticism for this. It positively makes them look higher than they’re,” Lia Wagner from Urgewald instructed Deník Referendum.
The corporate’s exterior communication offers the clear impression that EPH has the truth is been in a number one function within the three way partnership for a very long time and is subsequently accountable for LEAG’s operations. That is confirmed by the assertion of the opposite shareholder within the PPF Group in this 12 months’s half-yearly report on the corporate’s monetary efficiency.
In it, PPF says: “As of 30 June 2023, the Group’s complete shareholding in LEAG represented a 50% share in financial rights (because the acquisition in 2016, the Group’s authorized efficient possession is zero, it solely has joint management over LEAG via the contractual preparations with the three way partnership associate).” PPF subsequently considers itself to be a monetary investor solely.
Lastly, a have a look at the entry within the Business Register of LEAG Holding, a.s., via which EPH and PPF collectively personal the vast majority of the shares, reveals that every one members of the Board of Administrators and two of the three members of the Supervisory Board are EPH workers. Subsequently, it’s debatable as to which precise share of the difficulty ought to be counted as EPH’s personal. Nonetheless, a zero share doesn’t replicate actuality.
Křetínský shifts its dirtiest sources to a brand new firm
The truth that Křetínský itself is conscious of that is proven by one other manoeuvre it has launched this 12 months. To this point, we have now analysed the most recent out there emissions knowledge for 2022.
In October this 12 months, nonetheless, PPF offered 20% of its stake in LEAG for one euro to EP Power Transition, a brand new sister firm of EPH with the identical possession construction. The 2 firms now collectively personal a full 70% of LEAG, i.e. a controlling stake. The transaction was coincidentally reported by the enterprise day by day E15, co-owned by Daniel Křetínský.
EPH plans to progressively switch its remaining 50% stake in LEAG to EP Power Transitions, and finally additionally its lignite-fired energy plant in Schkopau, Saxony-Anhalt. Along with the ability crops, EPH may also switch its German open forged lignite mines to the brand new construction, making EPH the third largest coal mining firm within the European Union when it comes to shareholdings. As soon as once more alongside Germany’s RWE and Poland’s PGE.
On this manner, a parallel company construction will allow EPH to formally divest itself of its lignite sources, which it doesn’t intend to stop mining till after 2030, the 12 months to which the German authorities has dedicated itself within the coalition settlement. Formally, EPH will be capable to fake that it’s going to abandon coal-fired energy era itself by 2030.
“The truth that two authorized entities have the identical homeowners doesn’t imply that one is accountable for the opposite,” wrote Daniel Častvaj, spokesman for EPH, in a response to Deník Referendum on the choice to separate lignite sources. This not directly confirms the usefulness of the entire operation. With out the creation of this construction, EPH itself would have needed to consolidate the corporate and take accountability for it.
The German organisation Urgewald, talked about above, can be essential of the brand new construction. Amongst different issues, it’s involved that EP Power Transition is not going to have ample sources to recultivate the panorama affected by mining.
Karsten Smid, a researcher at Greenpeace’s German headquarters in Hamburg, expresses related issues. “Recultivation would require an funding of round three to 10 billion euros. Nonetheless, it’s at present unclear whether or not the corporate has these funds,” he instructed Deník Referendum. Nonetheless, EPH spokesman Daniel Častvaj instructed Deník Referendum that “mining firms make provisions for recultivation in accordance with the related legal guidelines and rules”.
However recultivation will not be the one challenge. Even the formal separation of the dirtiest power sources from the remainder of the corporate raises severe questions. “EPH wants bond financing. However banks and different monetary establishments are already relying on the truth that coal has no future. The brand new accounting construction will assist the corporate look comparatively inexperienced and proceed to draw financing,” says Smid.
The plan to create a framework for elevating inexperienced finance can be talked about by EPH in its sustainability report, alongside the declare that it’s going to virtually fully section out coal-fired energy era by the tip of 2025. It’s subsequently attainable that the switch of soiled sources is meant to assist EPH meet the factors for acquiring financing from, for instance, inexperienced bonds. These have stricter local weather influence necessities than standard bonds.
EPH energy crops lag behind European pattern in decarbonisation
“EPH is a European chief in decarbonisation and the transition from coal to scrub power,” EPH proclaimed in its presentation final 12 months. Even at present, the corporate sees itself as “a frontrunner within the power transition in Europe”. This declare was echoed, for instance, by the then editor-in-chief of Křetínský’s media outlet Data.cz. However even on this case, the corporate’s self-portrayal is at odds with actuality.
We’ve got analysed the information for all energy and heating crops – energetic and retired – at present owned by EPH and in contrast it with the whole power sector within the European Union during the last ten years. A assessment of the discount in emissions in comparison with 2013 reveals that the ability crops wherein EPH has an curiosity are following the European pattern and have lagged behind in recent times.
The corporate was 5 share factors worse off than the European energy sector final 12 months. We see the same pattern if we take the common of the primary three years.
One may ask whether or not the evaluation is biassed by the truth that we have now included all of the sources at present owned by the corporate, together with those who weren’t a part of the holding ten years in the past. In any case, EPH’s asset construction has modified past recognition over the previous ten years.
Nonetheless, the pattern is confirmed even when we take 2019 as a baseline, because the energy plant portfolio has not modified a lot since then till 2022. On the idea of the out there knowledge, it’s subsequently not possible to conclude that EPH is main the decarbonisation of the European Union, because it claims to be.
Previously, we have now been lenient with the largest polluters in our calculations. Nonetheless, the share method we have now used to date doesn’t consider who truly makes the choices in regards to the operation of the plant, particularly in the long run. This too is controversial, as we have now seen.
Nonetheless, can there be a justification for the duty to reveal full emissions knowledge for all operations wherein firms or their homeowners are concerned? Such a requirement could seem counterintuitive, as it will inevitably result in double counting of an identical emissions to a number of shareholders.
However even such an method appears completely official. If the said purpose of local weather coverage is to section out greenhouse gas-emitting power sources and redirect sources in the direction of non-emitting applied sciences, the market, along with the general public sector, ought to encourage traders and shareholders to keep away from even partial possession of carbon emitting sources.
This method is sort of widespread once we take into account the distribution of accountability for numerous different pathological behaviours or transgressions. Even when a number of perpetrators commit against the law collectively, every is held totally accountable. It’s subsequently applicable to require that the complete local weather influence of all operations wherein firms or shareholders are concerned, both via possession or operational management, be accounted for.
It’s clear from the graph that the diploma of accountability for the Lusatian energy crops that we attribute to EPH has a really vital influence on the corporate’s local weather accounting. For each RWE and PGE, the reported emissions don’t differ considerably from these attributed to them underneath the share or participation methodology. The instance of EPH subsequently illustrates how vital it’s to know the complete local weather influence of firms if we wish to incentivise them to maneuver quickly away from fossil fuels.
On the European degree, the function of carbon accounting is at present being debated. A brand new European directive units out guidelines for so-called non-financial reporting. Massive firms must report on the environmental and social impacts of their actions beginning in 2024. The benefit is that firms is not going to solely have to clarify how local weather change and decarbonisation might threaten their monetary efficiency, but additionally how their enterprise itself impacts the setting and society.
Nonetheless, the just lately adopted model has moved away from obligatory reporting on emissions specifically, leaving it on a voluntary foundation. Scientists have sharply criticised the European legislators for this.
With out correct data it’s not possible to make the suitable selections, in each the private and non-private sectors. However higher data on the true local weather influence of firms is just one small piece of the puzzle.
📺 Watch Deník Referendum’s editor-in-chief Jakub Patocka’s intervention on EPH’s emssions on the European Parliament in November 2023.
Assessing the true local weather influence of EPH additionally reveals a deeper downside with our present method to remodeling society to a zero-carbon economic system. To this point, governments have largely left the tempo and nature of the transformation to the non-public finance sector.
It’s about setting guidelines. The fundamental place to begin would appear to be for the European Union and its member states to determine guidelines that make ‘inventive’ carbon accounting, as practised by EPH, not possible, and to remove the potential for gaining an unfair benefit by intentionally creating parallel firms into which soiled operations are transferred in order that the unique firm can compete for inexperienced subsidies and funding.
Huge polluters like EPH routinely tout their optimistic environmental, social and governance scores and appeal to monetary traders to purchase their bonds and finance their operations, although the truth of their local weather impacts is essentially totally different. The instance of EPH reveals that the present method merely doesn’t result in a redirection of sources away from soiled industries in the direction of greener types of enterprise. Governments themselves must take a way more energetic function in figuring out the place private and non-private sources are channelled.
METHODOLOGY
Deník Referendum has been analysing the emissions of EPH and different European firms for a number of months. The info tracks CO2 emissions and emissions of different much less vital greenhouse gases, transformed into what is named CO2 equal (CO2eq).
The info on emissions from particular person energy and warmth era crops are primarily based on the European and UK Emissions Buying and selling Scheme (EU/UK ETS) databases, with a couple of exceptions. The primary is the emissions determine for the Denizli energy plant in Turkey, which comes from the RWE Sustainability Report.
One other partial exception is the determine for the Lippendorf plant, the place LEAG owns solely one of many two energetic items and operates the opposite for EnBW. Nonetheless, the emissions of each items are reported collectively within the EU ETS as they’ve a typical operator (LEAG). The distinction between the collectively reported emissions and the separate unit straight owned by LEAG is subsequently calculated by subtracting the emissions reported in LEAG’s sustainability report from the full of its verified emissions within the EU ETS database.
The reverse case is the Dutch Swentibold energy plant owned by RWE, whose emissions are reported by a separate entity along with different actions on the location. The emissions knowledge for the separate energy plant might subsequently not be separated and added to RWE’s emissions.
Information on the possession of particular person energy crops are primarily based on analysis by the impartial power think-tank Ember. These had been subsequently verified, specifically for RWE, PGE and EPH, and corrected for errors within the assume tank’s analysis, primarily as a consequence of overlooking adjustments in possession. We then added the precise possession share for every useful resource owned or co-owned by one among these three firms.
As a part of our lenient method to company carbon accounting, in monitoring complete emissions we have now not attributed emissions to firms from sources that they function however don’t personal. As a substitute, we have now attributed emissions from most of these operations within the case of the participation methodology within the final graph, which tracks the complete emissions of all operations wherein firms take part in a roundabout way.
In our analysis, we solely tracked emissions from energy and warmth crops. For instance, we didn’t embrace emissions from pure gasoline storage services. These could also be included within the complete emissions reported by particular person firms. Nonetheless, they typically have a negligible influence on complete emissions.
EPH, for instance, contains emissions from storage and logistics in its carbon accounting, however these are solely a small fraction of the full. Nonetheless, it’s tough to separate these from the corporate’s carbon accounting. And it’s higher for EPH to incorporate them, as this reduces the distinction between the emissions it stories and the emissions for which it’s truly accountable.
To trace the decarbonisation pattern in Europe’s power sector over the previous decade, knowledge on complete emissions from European energy and warmth crops is predicated on analysis by the think-tank Ember. Their database makes it attainable to extract the sectoral class of electrical energy and warmth from the record of emissions from all actions lined by the EU ETS. This makes it attainable to trace the EU-wide decarbonisation pattern of the sector and examine it with the emissions from EPH energy and warmth crops.
We’ve got additionally used this Ember database in the same strategy to assemble the graph displaying the share of the three largest emitters within the European energy sector’s emissions in 2022. Nonetheless, right here we needed to clear the information utilizing the newest knowledge within the EU ETS database.
👉 Unique article in Deník Referendum. Printed in collaboration with VSquare.
