Wednesday, July 17, 2024

How coal baron Daniel Křetínský’s EPH holding managed to masks greater than half of its carbon emissions

Within the introduction to one of many few interviews that Daniel Křetínský, the second richest individual within the Czech Republic, gave to the Czech media this summer season, Forbes journal requested the rhetorical query: “Who’s the one who is being portrayed in some media as a coal baron and one of many greatest air polluters, although it’s not true?” The brief reply could possibly be that Daniel Křetínský is a coal baron and one of many world’s greatest 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 fastidiously 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 accordance with the information now we have compiled, even a conservative view of its emissions locations it among the many three dirtiest corporations within the European Union. And there are not any related info to help the declare of being a “European decarbonisation chief”.

Actually, EPH experiences lower than half of its emissions in its carbon accounting, even after we use a conservative methodology. Furthermore, our evaluation exhibits that the facility vegetation in EPH’s portfolio are decarbonising extra slowly than the remainder of the EU energy sector.

EPH is certainly one of Europe’s three prime polluters

After all, it is vital for corporations to transparently report correct details about their carbon footprint for quite a lot of causes. It’s important as a result of it impacts an organization’s public picture. It impacts its public picture, which may additionally entice or deter buyers.

Investor attractiveness is, in any case, one of many foremost explanation why corporations maintain 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 may jeopardise its monetary efficiency.

Nevertheless, it’s not 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 under consideration. The European Central Financial institution, for instance, introduced final 12 months that it might regularly 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 isn’t simple. Other than the query of whether or not emissions must be attributed to the mining firm, the gas transporter, the facility plant proprietor, the buyer or the entire financial system, there may be additionally the query of tips on how to divide accountability among the many numerous shareholders of energy vegetation. Or, for instance, between those that personal the facility stations and people who function them.

There are a number of methods of allocating accountability for emissions. For now, it is going to be ample to say that typical carbon accounting approaches allocate emissions both by possession or by who controls the corporate.

However it will also be helpful to take a look at, for instance, the entire emissions from all of the actions by which the corporate is concerned, as we could also be occupied with info that typical carbon accounting strategies don’t have in mind. Every of those strategies has its execs and cons, which we are going to come again to.

The underside line is that every one of them place EPH among the many prime three CO2 emitters within the European Union – together with Germany’s RWE and Poland’s PGE. The precise rating inside the prime three could range relying on the tactic used.

An evaluation of information from the EU Emissions Buying and selling Scheme (EU ETS) exhibits that EPH, along with German listed RWE and Polish semi-public PGE, is liable for 1 / 4 of emissions from the power sector in your complete European Union. Right here we solely attribute emissions in accordance with possession, which is probably the most beneficial possibility for the three largest polluters. EPH alone is liable for about 6% of the entire emissions of the European power sector, once more utilizing a beneficial strategy.

EPH greenhouse gas emissions

Because the chart exhibits, the large three’s important share is because of the truth that every of them owns a disproportionate variety of the dirtiest vegetation. Eight of the ten dirtiest energy stations within the European Union are owned by these corporations. All eight burn lignite.

EPH co-owns three of the ten dirtiest vegetation. And a fourth is shut behind in eleventh place. These are the German lignite energy vegetation of the Lausitz-based LEAG group, which EPH owns along with the Czech funding group PPF. Collectively, these vegetation emitted nearly 56 megatonnes of CO2 final 12 months, or 7.6% of the emissions of your complete power sector within the European Union.

Why a lot? On the one hand, they’re actually big vegetation, so logically they produce extra emissions. However they’re additionally very inefficient. Lusatian energy vegetation 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 vegetation 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 experiences lower than half of its emissions

And the Lusatian energy vegetation merely don’t seem within the whole record of EPH’s emissions offered within the report. The corporate discloses 23 megatonnes of greenhouse gasoline emissions. Nevertheless, our evaluation exhibits that even a conservative strategy 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.

EPH greenhouse gas emissions

The Greenhouse Fuel Protocol customary, some of the broadly used carbon accounting methodologies for corporations, provides 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 strategy is pretty easy, however EPH has not chosen it. Underneath the second strategy, the corporate information all emissions from the operations it controls in its carbon accounts. In doing so, it should additionally assess the circumstances the place it workouts management collectively with different entities.

If the calculation relies on monetary management and is collectively exercised by companion corporations, they need to add the emissions for these belongings in accordance with their respective shares. Nevertheless, 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 vegetation 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.

Due to this fact, if it selected the monetary management methodology, it must report its share of emissions. Nevertheless, EPH states that it experiences its information in accordance with the operational management methodology, i.e. primarily based on whether or not it may well 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 entire. However, EPH doesn’t embrace in its whole 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 entire. However, EPH doesn’t embrace in its whole 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 corporations subsequently maintain 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 observe.

EPH appears to pay attention to this. Though the 2021 report doesn’t embrace the emissions of the Lusatian energy vegetation within the whole, we are able to at the least nonetheless discover them within the appendix “Foremost LEAG figures” (on web page 315). Within the newest report, nonetheless, even this reference has been dropped.

“It actually places the corporate in a greater mild,” feedback Lia Wagner, an analyst at Urgewald, a German organisation that specialises in researching fossil gas corporations after which offering information on them to monetary establishments. The hassle to distance itself from LEAG is confirmed by the truth that, since this summer season, EPH not even lists LEAG as one of many corporations 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”. Nevertheless, that is extraordinarily deceptive, notably within the case of the Lausitz energy vegetation, 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 vegetation past 2030. “LEAG and the nearly emission-free Slovenské elektrarne are usually not included in EPH’s sustainability report as a result of that is consistent 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’s not liable for LEAG’s emissions

It’s troublesome to evaluate from public sources whether or not EPH’s carbon accounting itself is appropriate, at the least from a proper perspective, as we don’t have entry to contracts between shareholders, for instance. Nevertheless, 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’s not in opposition to the regulation, I believe the corporate deserves criticism for this. It undoubtedly 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 actually been in a number one position within the three way partnership for a very long time and is subsequently liable 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 whole shareholding in LEAG represented a 50% share in financial rights (for the reason that 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 companion).” 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 nearly all of the shares, exhibits that every one members of the Board of Administrators and two of the three members of the Supervisory Board are EPH staff. Due to this fact, it’s debatable as to which precise share of the difficulty must be counted as EPH’s personal. Nevertheless, a zero share doesn’t mirror actuality.

Křetínský shifts its dirtiest assets 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 date, now we have analysed the newest out there emissions information 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 corporations now collectively personal a full 70% of LEAG, i.e. a controlling stake. The transaction was coincidentally reported by the enterprise every day E15, co-owned by Daniel Křetínský.

EPH plans to regularly 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 facility vegetation, 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 by way of shareholdings. As soon as once more alongside Germany’s RWE and Poland’s PGE.

On this method, a parallel company construction will allow EPH to formally divest itself of its lignite assets, 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 have the ability to fake that it’ll abandon coal-fired energy technology itself by 2030.

“The truth that two authorized entities have the identical house owners doesn’t imply that one is liable for the opposite,” wrote Daniel Častvaj, spokesman for EPH, in a response to Deník Referendum on the choice to separate lignite assets. 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 assets to recultivate the panorama affected by mining.

Karsten Smid, a researcher at Greenpeace’s German headquarters in Hamburg, expresses comparable issues. “Recultivation would require an funding of round three to 10 billion euros. Nevertheless, it’s at present unclear whether or not the corporate has these funds,” he instructed Deník Referendum. Nevertheless, EPH spokesman Daniel Častvaj instructed Deník Referendum that “mining corporations make provisions for recultivation in accordance with the related legal guidelines and rules”.

However recultivation isn’t the one concern. 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’ll nearly fully section out coal-fired energy technology by the top of 2025. It’s subsequently doable that the switch of soiled assets is meant to assist EPH meet the factors for acquiring financing from, for instance, inexperienced bonds. These have stricter local weather affect necessities than typical bonds.

EPH energy vegetation lag behind European development 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 in the present day, the corporate sees itself as “a pacesetter within the power transition in Europe”. This declare was echoed, for instance, by the then editor-in-chief of Křetínský’s media outlet 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 vegetation – lively and retired – at present owned by EPH and in contrast it with your complete power sector within the European Union during the last ten years. A overview of the discount in emissions in comparison with 2013 exhibits that the facility vegetation by which EPH has an curiosity are following the European development and have lagged behind lately.

The corporate was 5 proportion factors worse off than the European energy sector final 12 months. We see an analogous development if we take the common of the primary three years.

EPH greenhouse gas emissions european trend

One would possibly ask whether or not the evaluation is biassed by the truth that now we have included all of the assets 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.

Nevertheless, the development is confirmed even when we take 2019 as a baseline, for the reason that energy plant portfolio has not modified a lot since then till 2022. On the idea of the out there information, it’s subsequently unimaginable to conclude that EPH is main the decarbonisation of the European Union, because it claims to be.

Up to now, now we have been lenient with the most important polluters in our calculations. Nevertheless, the share strategy now we have used to this point doesn’t have in mind who truly makes the choices concerning the operation of the plant, particularly in the long run. This too is controversial, as now we have seen.

Nevertheless, can there be a justification for the duty to reveal full emissions information for all operations by which corporations or their house owners are concerned? Such a requirement could seem counterintuitive, as it might inevitably result in double counting of an identical emissions to a number of shareholders.

However even such an strategy appears completely legit. If the said intention of local weather coverage is to section out greenhouse gas-emitting power sources and redirect assets in the direction of non-emitting applied sciences, the market, along with the general public sector, ought to encourage buyers and shareholders to keep away from even partial possession of carbon emitting sources.

This strategy is sort of widespread after we contemplate the distribution of accountability for numerous different pathological behaviours or transgressions. Even when a number of perpetrators commit a criminal offense collectively, every is held absolutely accountable. It’s subsequently applicable to require that the total local weather affect of all operations by which corporations or shareholders are concerned, both via possession or operational management, be accounted for.

EPH gas emissions

It’s clear from the graph that the diploma of accountability for the Lusatian energy vegetation that we attribute to EPH has a really important affect 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 necessary it’s to know the total local weather affect of corporations if we wish to incentivise them to maneuver quickly away from fossil fuels.

On the European stage, the position of carbon accounting is at present being debated. A brand new European directive units out guidelines for so-called non-financial reporting. Giant corporations must report on the environmental and social impacts of their actions beginning in 2024. The benefit is that corporations is not going to solely have to clarify how local weather change and decarbonisation may threaten their monetary efficiency, but in addition how their enterprise itself impacts the atmosphere and society.

Nevertheless, the not too long ago 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 unimaginable to make the fitting selections, in each the private and non-private sectors. However higher data on the true local weather affect of corporations 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 affect of EPH additionally reveals a deeper downside with our present strategy to reworking society to a zero-carbon economic system. To date, 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 ascertain guidelines that make ‘artistic’ carbon accounting, as practised by EPH, unimaginable, and to eradicate the potential of gaining an unfair benefit by intentionally creating parallel corporations into which soiled operations are transferred in order that the unique firm can compete for inexperienced subsidies and funding.

Large polluters like EPH routinely tout their constructive environmental, social and governance rankings and entice monetary buyers to purchase their bonds and finance their operations, although the fact of their local weather impacts is basically completely different. The instance of EPH exhibits that the present strategy merely doesn’t result in a redirection of assets away from soiled industries in the direction of greener types of enterprise. Governments themselves must take a way more lively position in figuring out the place private and non-private assets are channelled.


Deník Referendum has been analysing the emissions of EPH and different European corporations for a number of months. The information tracks CO2 emissions and emissions of different much less important greenhouse gases, transformed into what is named CO2 equal (CO2eq).

The information on emissions from particular person energy and warmth technology vegetation are primarily based on the European and UK Emissions Buying and selling Scheme (EU/UK ETS) databases, with just a few 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 lively items and operates the opposite for EnBW. Nevertheless, the emissions of each items are reported collectively within the EU ETS as they’ve a standard operator (LEAG). The distinction between the collectively reported emissions and the separate unit immediately owned by LEAG is subsequently calculated by subtracting the emissions reported in LEAG’s sustainability report from the entire 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 positioning. The emissions information for the separate energy plant may subsequently not be separated and added to RWE’s emissions.

Information on the possession of particular person energy vegetation 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 suppose tank’s analysis, primarily as a result of overlooking modifications in possession. We then added the precise possession share for every useful resource owned or co-owned by certainly one of these three corporations.

As a part of our lenient strategy to company carbon accounting, in monitoring whole emissions now we have not attributed emissions to corporations from sources that they function however don’t personal. As a substitute, now we have attributed emissions from these kind of operations within the case of the participation methodology within the final graph, which tracks the total emissions of all operations by which corporations take part not directly.

In our analysis, we solely tracked emissions from energy and warmth vegetation. For instance, we didn’t embrace emissions from pure gasoline storage services. These could also be included within the whole emissions reported by particular person corporations. Nevertheless, they often have a negligible affect on whole emissions.

EPH, for instance, contains emissions from storage and logistics in its carbon accounting, however these are solely a small fraction of the entire. Nevertheless, it’s troublesome 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 experiences and the emissions for which it’s truly accountable.

To trace the decarbonisation development in Europe’s power sector over the previous decade, information on whole emissions from European energy and warmth vegetation relies on analysis by the think-tank Ember. Their database makes it doable to extract the sectoral class of electrical energy and warmth from the record of emissions from all actions coated by the EU ETS. This makes it doable to trace the EU-wide decarbonisation development of the sector and evaluate it with the emissions from EPH energy and warmth vegetation.

We’ve got additionally used this Ember database in an analogous strategy to assemble the graph displaying the share of the three largest emitters within the European energy sector’s emissions in 2022. Nevertheless, right here we needed to clear the information utilizing the latest information within the EU ETS database.

👉 Authentic article in Deník Referendum. Revealed in collaboration with VSquare.

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