In April 2021 Anna Borg, the CEO of energy giant Vattenfall, addressed a virtual crowd of business leaders and politicians at US president Joe Biden’s Leaders Summit on Climate. She proudly proclaimed that the company was “phasing out” its emissions and helping customers do the same. “This is not our sustainability strategy,” Borg said. “It's our business strategy. And it is sustainable.”
But there is a catch. Vattenfall has not actually phased out the vast majority of its emissions—it simply paid someone else to take them. Under its then-CEO Magnus Hall, the company struck a deal in 2016 to offload four of its most polluting power plants and several coal mines to Energetický a průmyslový holding (EPH), a private company controlled by Czech billionaire Daniel Křetínský, who partnered with private equity firm PPF Investments to acquire the assets. Křetínský, known as the “Czech Sphinx” for his inscrutable business practices, has long been buying up fossil fuel businesses for public companies looking to meet ambitious climate targets.
The deal made sense for Vattenfall. The state-owned company had been under pressure from the Swedish government to lower its carbon footprint by getting rid of the power plants and their coal pits, which sprawl across a vast stretch of eastern Germany close to the Polish border. Plus, low power prices and Germany’s decision to gradually cut its emissions had worsened the outlook for the plants. They had cost Vattenfall around $1.7 billion in losses in 2015 alone.
Thanks to the deal, the company cut its carbon emissions by 70 percent in one fell swoop. But offloading the plants did little to lessen the climate crisis: All of them are still running today and releasing close to the same amount of carbon dioxide. They produced 235 million tonnes in the four years following the sale, compared to 263 million between 2012 and 2015, when they were still owned by Vattenfall, according to EU data collected by the Europe Beyond Coal campaign. On a yearly basis, the plants make up roughly 8 percent of the entire emissions produced by Germany, Europe’s largest economy.
In a statement to WIRED, Vattenfall’s head of sustainability, Annika Ramsköld, defended the sale as a strategic decision to shift Vattenfall’s business to renewables and lower its carbon exposure.
Vattenfall is far from the only company that has ditched polluting assets to boast about green credentials. Major utilities, including Engie, E.ON, and AES, have also sold some of their most polluting power plants—in some cases to EPH, Křetínský’s company. Big oil companies have also been getting rid of oil and gas fields to reach emissions targets. The five largest Western oil firms have divested more than $28 billion in assets since 2018, according to consultancy Wood Mackenzie. Even Ørsted, the ultimate clean energy success story, in 2016 sold its fossil fuel business to Ineos Group, the chemicals giant owned by British billionaire Jim Ratcliffe, to help its much-lauded transformation into a wind power juggernaut.
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Energy companies’ sell-off of fossil fuel assets is “obviously a big problem,” says Pieter de Pous, a senior policy advisor at environmental think tank E3G. “It shows that they haven’t really taken this seriously.”
Plenty of firms have also closed coal plants and replaced them with cleaner alternatives: In Europe, coal generation has dropped by roughly 40 percent over the past decade, according to think tank Ember, while wind and solar power have grown, thanks to state subsidies and advances in renewable technology. But many of the coal plants that were simply sold off have stayed on the grid for years: In 2021, coal still made up 15 percent of the EU’s electricity mix, Ember’s data estimates.
Now, Europe’s ongoing shortage of natural gas has compounded the problem by both raising electricity prices and making it comparatively cheaper for power producers to fire up their coal plants. Experts say this dynamic could persist for years if gas remains scarce, which is not unlikely. On February 22, German chancellor Olaf Scholz reacted to Russia’s decision to send troops into Ukraine by halting the approvals process for Nordstream 2, the controversial gas pipeline that was due to significantly boost Europe’s imports of the fuel. Already, the gas crunch means the continent’s remaining coal plants have not only been running much more frequently, but also at higher profits. “Clearly, they’re making good money at the moment with a coal plant,” says Charles Moore, European program lead at Ember, “much to the detriment of the climate.”
Climate campaigners have long decried divestments that simply shift emissions elsewhere. Both Greenpeace and members of Sweden’s Green Party, at the time part of the country’s coalition government, were critical of the Vattenfall deal. Lately, large investors have struck a similar note. Larry Fink, chair and CEO of BlackRock, the world’s largest asset manager, lambasted energy companies for selling their assets instead of winding them down during last year’s COP26 climate summit in Glasgow. “That doesn’t change the world at all,” Fink said. “That’s window-dressing, that’s greenwashing.”
Vattenfall’s Ramsköld says the company has invested heavily in green energy and continued to lower its emissions by closing other coal power plants, including two in Germany and another in the Netherlands. The company says it plans to reduce its remaining emissions to 6 million tonnes by 2030, down from roughly 24 million tonnes that remained after the coal sale.
“This is anything but greenwashing,” she says.
Like Křetínský’s EPH, many of the new owners who have stepped in to buy utilities’ discarded fossil fuel plants are less beholden to outside pressure than public companies. Private equity firms alone have bought up $60 billion in oil, gas, and coal assets over the past two years, according to Pitchbook data cited by The Economist. While public utilities “do feel the pressure” to reduce their emissions, private equity firms simply lack the same level of disclosure, transparency, and accountability when it comes to their environmental impact, says Dan Bakal, senior program director for Climate and Energy at Ceres, a nonprofit that lobbies investors on climate action.
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EPH did not make Křetínský available for an interview and declined to comment on how its coal plants have been performing over the past year. Daniel Častvaj, a spokesperson for the company, points out that EPH has already reduced its annual emissions by close to 30 million tonnes since 2014, for example by closing down a coal plant in the UK and converting another to burn biomass. “In our decarbonization efforts, we strive to seek real solutions—not merely offloading but truly decommissioning the most carbon-intensive sources,” he says.
EPH will eventually have to close the coal plants it acquired from Vattenfall by 2038 at the latest as part of a phaseout deal negotiated by the German government, which will also see the company pocket $1.98 billion in compensation from the state. The fact that the plants will be running for that long, and that their operators are getting a handout on top, has been hugely controversial. With close to 2,500 coal power plants still in operation around the world, according to data gathered by Global Energy Monitor, de Pous says Germany’s experience could serve as a cautionary tale for other countries planning coal phaseouts in the future.
In the meantime, energy companies are free to keep offloading their emissions to willing buyers. “There’s always a cohort of opportunists out there [looking] to milk some assets right up to the very end,” de Pous says.
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