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THE JOURNAL OF ENERGY AND DEVELOPMENT

Fotios Chatzitheodoridis, Argyrios D. Kolokontes, and Lavrentios Vasiliadis,

“Lignite Mining and Lignite-Fired Power Generation in Western Macedonia of Greece: Economy and Environment,”
Volume 33, Number 2

Copyright 2010

LIGNITE MINING AND LIGNITE-FIRED POWER GENERATION IN WESTERN MACEDONIA OF GREECE: ECONOMY AND ENVIRONMENT
Fotios Chatzitheodoridis, Argyrios D. Kolokontes, and Lavrentios Vasiliadis*

Introduction

T

he region of Western Macedonia is located in the northwestern part of Greece and is one of the largest lignite centers world-wide. More than one-eighth of the region’s surface is used for the lignite mining. The electrification of Greece during the post-World War II period was based on this large quantity of lignite in Western Macedonia. This area, even today, is the major source for the production

*Fotios Chatzitheodoridis, Assistant Professor in Rural and Regional Development at The Technological Educational Institution of Western Macedonia (Greece), also teaches at The University of Central Greece. An economist, the author holds a Ph.D. in environmental studies (University of Aegean) and has worked for the Greek Ministry of Rural Development and Foods and Aristotle University of Thessaloniki (Greece). His research interests cover sustainable development, regional planning, environmental economics, and policy analysis. Argyrios D. Kolokontes, who has a M.A. in agricultural economics from Aristotle University of Thessaloniki and currently is a Ph.D. candidate in the Department of Agricultural Economics, is teaching at the Technological Institute of Western Macedonia. His research interests include regional economics, investments evaluation, and international trade. Lavrentios Vasiliadis has a B.A. in political science and public administration from the University of Athens and both a M.Sc. in regional and urban planning and a Ph.D. in regional planning from the London School of Economics and Political Science. Currently, he teaches at Democritus University of Thrace in the Department of International Economic Relations and Development. His research interests include regional and urban development, foreign direct investment, economic theory, and industrial organization. The Journal of Energy and Development, Vol. 33, No. 2 Copyright Ó 2010 by the International Research Center for Energy and Economic Development (ICEED). All rights reserved.

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of electricity in Greece.1 The power generated by lignite-fired plants in the region amounts to 4,438 megawatts (MW), which is almost 84 percent of the total lignitefired generation industry of Greece (5,288 MW). At the same time, the lignite power generation of Western Macedonia contributes a third (33.39 percent) of the total capacity (13,292.16 MW) of the country’s power generation system.2 Changes coming from market liberalization in Greece, coupled with the increasing focus on the use of natural gas and renewable resources and the planning of the Public Power Corporation S.A, suggest that the crucial role of the region in meeting the country’s energy needs is not likely to change in the near to medium term. Between 2012-2016, the overall established national power generating capacity is expected to reach 15,990.18 MW with the lignite-powered capacity anticipated to provide 6,145 MW, of which 5,295 MW will be generated by lignite-fired stations in Western Macedonia, that is, 33.11 percent and 86.17 percent, respectively.3 Despite the dominant role played by lignite-power generation in meeting Greece’s energy needs, longer-term challenges exist for this industry in Western Macedonia. From a long-term perspective, the increasing preference being placed on renewable resources and natural gas, the planned development and exploitation of lignite reserves in other regions of Greece, the depletion of the major exploitable lignite pits in Western Macedonia, and aging energy plants in Western Macedonia could cause considerable problems for the region in terms of its productive infrastructure, output, income, and employment. Western Macedonia consists of four prefectures: Kozani, Florina, Kastoria, and Grevena. The first two prefectures form the eastern part of the region, where the lignite is found. Since the end of World War II, Kozani has been the site of the largest energy production units of the country; during the period 2000-2010 the prefecture of Florina increasingly has contributed more to the mining of lignite for power generation. Although these economic activities create employment in the region, at the same time they cause some of the most significant problems for Western Macedonia, including the developmental duality between its eastern and western portions and the related intraregional inequalities, the developmental dependence of Kozani and Florina prefectures on lignite mining, the detachment from other traditional economic activities of the region, as well as the gradual increase of unemployment rates due to the slow development of staggered economic activities. Other consequences arise because of these mining and energy production activities; these externalities include environmental impacts, health issues for the inhabitants, and the costs to the quality of the living standard.4 Given the historic importance of Western Macedonian lignite mining and its use in power generation, in combination with some of the negative developmental and environmental externatilities this has produced, our paper presents an inputoutput analysis that shows there is a more balanced development plan for utilizing lignite for power generation in the western part of the region. The results from our

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modeling indicate that a different development policy should be adopted for the eastern portion of Western Macedonia. Moreover, there must be a long-term plan based on fostering economic activities capable of improving the economic conditions for the citizens of this region in the coming post-lignite era. We begin this study with a discussion of the methodology and data sources utilized. A description of the exploitation of lignite deposits at the regional and national level follows. Then, the economical and environmental effects from the energy minerals mining and energy production sectors in Western Macedonia are presented. The prospects for the development of other economic activities in the region and the long-term rebuilding of its productive structure are underlined by the multipliers and elasticities of input-output analysis. The last section includes the conclusions.

Methodology and Data For this paper, secondary data are used from the Greek Regulatory Authority for Energy (RAE), the Public Power Corporation S.A. (PPC), and the National Statistical Service of Greece (NSSG), as well as from the European Environment Agency (EEA). Using these data, the sectors of energy minerals mining and energy production in the region of Western Macedonia are analyzed as far as their economic contribution and environmental repercussions are concerned. An input-output (I-O) regional model has been applied for the calculation of type I multipliers and elasticities.5 The national intersectoral transactions matrix of 1999 was adjusted to a pattern of 29 sectors for the construction of the regional matrix.6 The secondary simulation of direct and total requirements matrices of Western Macedonia has been based on the techniques of simple (SLQ) and cross-industry (CILQ) location quotients. The type I output, employment, and income multipliers, together with the relevant elasticities, were calculated for the definition of the alternative economic activities that could be developed in the region by the same funds applied to subsidies, but with more multiplicative effects on output, employment, and income and with fewer environmental externalities.7

Lignite Mining and Energy Production Greece is ranked second in the production of lignite within the European Union, third in Europe overall, and fourth worldwide, following Germany, the United States, and Russia.8 During the post-World War II period lignite mines and plants operating in Aliveri Evia and Ptolemaida Kozani supported the

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electrification of the country. The Alivery Evia’s basin was exhausted in the early 1980s with considerable repercussions on the employment situation and subsequent migration from the area. Today, the lignite center of Ptolemaida in Kozani has become one of the largest in the world. With the exception of Megalopolis in the Arkadia prefecture, there are no other lignite deposits in use in Greece at this time (2009). Nevertheless, the most important proven and unexploited deposit of 900 million to 1 billion tons is located in the wider area of Drama prefecture.9 Moreover, unexploited lignite reserves of between 150 to170 million tons also are located in the Ellasona area of the Larisa prefecture, while a large peat deposit (4 billion cubic meters) has been found in Philoppi in the Kavala prefecture.10 The PPC—with the majority of shares held by the Greek government— dominates the Greek market of energy minerals mining and energy production as it holds extraction rights for approximately 60 percent of the country’s lignite deposits.11 In 2006 in the bridged mainland Greek power generation system and using the criterion of installed power, the PPC possessed 95.3 percent of the total generation capacity of the national market; it covered 90 percent of the mainland demand.12 PPC is the only company in Greece that owns lignite-fired plants for energy production. Comparing lignite-based power generation as a percentage of the country’s overall power generation shows a marked declining trend: in 2004 the lignite-based generation represented 66.5 percent of the overall power generation; in 2005 this percentage was 64.7 percent; in 2006 it represented 58.43 percent; and by early 2010 it had fallen but still had a significant market share with 39.78 percent of the total.13 The proven and exploitable lignite reserves of Greece are estimated to be between 3.1 to 3.2 billion tons. In Western Macedonia, the areas of FlorinaAmintaio-Ptolemaida-Kozani (in the Florina and Kozani prefectures) account for approximately 1.82 billion tons of lignite, the equivalent of 57 percent of the country’s exploitable reserves.14 The lignite deposit of the Ptolemaida-Florina area, compared with the rest of Greek reserves, contains the largest calorific value, ranging from between 1,261 to 1,615 kilocalories per gram (kcal/gr) in the Ptolemaida area and 1,927 to 2,257 kcal/gr in the Florina area.15 Lignite mining during the past 25 years has experienced significant growth following the country’s increasing demand for electricity. From 1980 (22.7 million tons) until 1990 (49.9 million tons) there was an increase of 119.82 percent, while in 2002 the highest production of lignite in the history of Greece was recorded (70.3 million tons), representing an increase of 209.69 percent over the 1980 level. Since 2003, the national production of lignite has stabilized at around 62 million tons with mild fluctuations from year to year. In 2006 the production reached the 62.5-million-ton level of which 49 million tons were mined from Western Macedonia. This means that 78.4 percent of Greece’s lignite production for 2006 came from Western Macedonia.16

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Financial Effects: Table 1 shows that since 1997 the sector of energy and nonenergy minerals mining in Western Macedonia has steadily accounted for more than the one-third of the gross sectoral output at the national level. Over the last few years, this figure has reached 40 percent. During the period from 1995-2003, on average the energy and non-energy minerals mining sector has contributed 8.21 percent of regional gross output.17 Between 2000 and 2003 this figure has consistently remained above the average. In the same period, the share of the regional gross output of the sector to the gross domestic product (GDP) of Greece on average reached 0.23 percent. According to the National Statistical Service of Greece (NSSG), the energy and non-energy minerals sector employs 5.44 percent of the economically active population of the Western Macedonia region and, in particular, the extraction of lignite employs 5.09 percent.18 The regional employment in the sector of energy and non-energy minerals mining represents 28.73 percent of the corresponding sectoral national employment. Focusing on the activity of lignite mining, Western Macedonia employs 78.99 percent of the national sectoral total. It is obvious that,

Table 1

DIACHRONIC CONTRIBUTION OF THE MINING AND ENERGY SECTORS TO THE GROSS NATIONAL SECTORAL OUTPUT, THE GROSS OUTPUT OF WESTERN MACEDONIA, AND THE GROSS DOMESTIC PRODUCT (GDP) OF GREECE, 1995-2003 (in percent) Contribution of Energy and Non-Energy Minerals Mining Sector of Western Contribution of Western Macedonia’s Macedonia to Energy Sector to Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 Average
a

a

Gross National Regional GDP of Gross National Regional GDP of Sectoral Output Gross Output Greece Sectoral Output Gross Output Greece 31.47 31.51 34.67 39.40 38.07 37.70 37.69 38.75 39.09 36.48 7.35 7.62 7.51 8.41 7.02 8.68 8.73 9.60 8.93 8.21 0.20 0.21 0.22 0.24 0.20 0.24 0.23 0.26 0.24 0.23 22.76 21.91 19.10 19.22 19.25 18.66 18.09 17.51 17.18 19.30 19.54 17.15 13.35 13.77 13.76 11.94 11.95 11.35 11.49 13.81 0.54 0.47 0.38 0.40 0.39 0.33 0.32 0.31 0.31 0.38

The energy sector refers to lignite-fired power generation. Source: Authors’ calculations.

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in terms of employment, the extraction of lignite provides the bulk of the region’s employment in the energy and non-energy minerals mining sector. It is worth noting that although Western Macedonia is the dominant producing region of lignite mining in Greece, this capital-intensive activity contributes only 5.09 percent to the regional employment, a very low rate compared to other laborintensive activities such as the agriculture-livestock-hunting-forestry sector, which constitutes 19.27 percent of the regional employment, the commerce sector providing 11.38 percent, the construction sector some 9.46 percent, and the textile sector 8.41 percent.19 The contribution of the energy sector of Western Macedonia to the national sectoral output during the period of 1995 to 2003 averaged 19.30 percent (table 1), while the sectoral contribution to the regional gross output was 13.81 percent, stabilizing around 11 percent since 2000.20 In both cases, a decreasing percentage trend is observed due to a variety of factors, including the first private-sector initiatives that have been developed as a result of Greece’s market liberalization.21 However, the sectoral regional gross output consistently increased in value from e2,039 million in 1995 to e3,435 million in 2003, and a possible interpretation of this (besides inflation) could be that it is the result of attempts to restructure the regional productive bases in the other two prefectures of the region. As far as employment is concerned, the capital-intensive power-generation sector in Western Macedonia employs 14.43 percent of the sector’s national total, while at a regional level this percentage is 5.51 percent, which is significantly lower in relation to what other labor-intensive sectors contribute to the regional employment.22 The sectors of energy and non-energy minerals mining and energy production contribute more to the formation of regional gross output than to job creation. According to the NSSG, during the period from 1998 to 2005 the national unemployment rate decreased from 11.2 percent to 9.6 percent, whereas a contrary trend has emerged in Western Macedonia were the region’s unemployment rate has increased to 18 percent — recording the highest levels of any other area in Greece.23 Table 2 highlights the unequal development between the eastern part (the prefectures of Kozani and Florina) and western part (the prefectures of Grevena and Kastoria) of the Western Macedonia region in terms of the energy and nonenergy minerals mining sector and the energy production sector. This unequal development explains why there is an over-concentration of the population in the Kozani prefecture. Despite the fact that initially the economic activities surrounding lignite mining and energy generation did create new jobs in Kozani, the dwindling of the lignite production base of the prefecture finally resulted in an economic dead-end for the community. Table 3 shows that on average during the period from 1995 to 2003, 34.25 percent of Kozani prefecture’s GDP came from energy and non-energy minerals mining activities and energy production, and this highlights the economic dependence of this prefecture on the finite resource of available lignite deposits.

LIGNITE MINING AND ELECTRICITY: GREECE Table 2
DIACHRONIC CONTRIBUTION OF WESTERN MACEDONIA PREFECTURES TO THE GROSS REGIONAL SECTORAL OUTPUT OF THE ENERGY AND NON-ENERGY MINERALS MINING SECTOR AND THE ENERGY PRODUCTION SECTOR, 1995-2003 (in percent) Prefecture 1995 1996 1997 1998 1999 2000 2001 2002

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2003

Energy and Non-Energy Minerals Mining Sector Kozani 93.35 93.34 86.34 86.91 Florina 5.60 5.60 13.17 12.65 Grevena 0.92 0.93 0.06 0.05 Kastoria 0.13 0.13 0.43 0.39 a Energy Production Sector Kozani 97.49 97.39 96.42 96.27 Florina 1.23 1.28 1.75 1.97 Grevena 0.57 0.59 0.84 0.80 Kastoria 0.71 0.73 0.98 0.96
a

77.42 21.97 0.04 0.57 96.31 1.93 0.81 0.96

73.66 25.14 0.04 1.17 96.07 2.16 0.84 0.94

75.92 22.93 0.03 1.10 95.89 2.23 0.91 0.98

74.71 23.26 0.01 1.14 95.81 2.23 0.96 1.00

74.43 24.41 0.01 1.14 95.72 2.24 1.03 1.01

The energy sector refers to lignite-fired power generation. Source: Authors’ calculations.

Table 3
CONTRIBUTION OF THE ENERGY AND NON-ENERGY MINERALS MINING SECTOR AND ELECTRICITY PRODUCTION SECTOR TO THE GROSS DOMESTIC PRODUCT OF THE KOZANI AND FLORINA PREFECTURES, 1995-2003 Kozani Prefecture Florina Prefecture

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 Average
a

Energy/ NonEnergy/ NonEnergy Energy Total Total Energy Contribution Energy Contribution Mineral Mineral Production Production Mining Mining by Both by Both a a Sector Sector Sector Sector Sectors Sectors 10.99 11.57 11.16 12.50 9.43 11.26 11.74 12.75 11.88 11.46 30.54 27.16 22.16 22.67 23.01 20.21 20.29 19.34 19.65 22.78 41.53 38.73 33.32 35.16 32.45 31.47 32.02 32.09 31.54 34.25 3.04 3.10 6.45 6.89 9.62 13.10 11.85 12.87 12.60 8.84 1.78 1.59 1.52 1.75 1.66 1.55 1.57 1.46 1.49 1.60 4.82 4.70 7.97 8.65 11.27 14.65 13.42 14.33 14.09 10.43

Energy production sector refers to lignite-fired power production. Source: Authors’ calculations.

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The contribution of the Kozani prefecture to the regional sectoral gross output of mining and energy generation has been decreasing while that of the Florina prefecture has been increasing (tables 2 and 3). Specifically, during the period from 1995 to 2003 the contribution of these sectors to the GDP of Florina prefecture has increased from 4.82 percent to 14.09 percent. Based on the structure of its GDP and employment patterns, the most important sector in the Florina prefecture remains the agriculture-livestock-hunting-forestry sector, while other important activities are those of commerce, education, hotels, and restaurants. Compared to Kozani and Florina, the other two prefectures of the region— Kastoria and Grevena—have virtually no activity in the two sectors in question. The agriculture-livestock-hunting-forestry sector remains the most important economic driver for Grevena, representing an increasing proportion of 43.47 percent during the 1995 to 2003 time frame. The contribution of this sector to the GDP of Grevena reached 28.33 percent in 2003. Commerce, as well as hotels and restaurants, also are identified as significant economic activities in Grevena. In the prefecture of Kastoria, commerce is the single most important sector to the prefecture’s GDP. In 2003, its sectoral gross output contributed 21.21 percent to the prefecture’s GDP with an increasing ratio change of 58.36 percent during the years 1995 to 2003. The financial sector also has increased significantly, up by 58.22 percent during this period, contributing 12.92 percent of Kastoria’s GDP in 2003. Additionally, the sector of hotels and restaurants is very important for the Kastoria prefecture.

Environmental Effects: Apart from the intraregional inequalities, the activities

of lignite mining and power generation are connected with issues of environmental protection and health. Currently, the energy policy of the European Union (EU) in the framework of its commitment to meeting the Kyoto Protocol has issued a number of directives for reducing greenhouse gas emissions and, in particular, curbing carbon dioxide (CO2) emissions.24 These directives are targeted mainly toward the adoption of innovative low-carbon technologies for lignite-fired power plants, e.g., by lowering carbon before or after combustion.25 The directives also call for the development of technologies for carbon capture and storage (CCS) into underground reservoirs and the encouragement of other more environmentally friendly technologies of renewable energy resources.26 To date, none of the lignite-fired power plants in Greece have implemented CCS procedure.27 The EU environmental legislation is gradually becoming stricter. The thought behind the quantification of environmental externalities and their pricing through the newly created market for trading greenhouse gas emissions, changes the operating environment for lignite power generation. The inauguration in 2005 of the European Emissions Trading Scheme (ETS) directs the lignite-fired power plants either to install and implement the low-carbon technologies or to

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gradually withdraw themselves from the newly liberalized and more competitive market.28 Within this framework an energy plan is required that will take into account the directives set by the EU, the demands of the integrated and liberalized energy market, emissions trading, the prospects for the creation of new employment opportunities in the fields of technological innovation, and the exploitation of renewable resources for energy production in order to develop a secure and consistent energy supply as well as the protection of the environment. Table 4 presents the lignite-fired power stations of Western Macedonia, including generation and emissions.29 Their generation capacity is 4,438 MW with an increasingly trend into the foreseeable future. More precisely, according to its Strategic Plan, the PPC applied in 2007 to the RAE for the establishment in the region of two new lignite-fired power plants of 900 MW additional power (one in Florina and one in Kozani prefecture).30 Public Power Corporation also plans to shut down the LCWM-LIPTOL Station by 2015.31 Thus, the lignite-fired power capacity of Western Macedonia will reach 5,295 MW. The energy sector is responsible for 62 percent of the greenhouse gas emissions in Greece, and that is expected to increase in 2010 to account for 65 percent.32 The largest lignite-fired power unit in Western Macedonia and in Greece (Saint Dimitrios station), which is located in Kozani prefecture, has been defined as the dirtiest in Europe in a survey by the World Wildlife Fund in 2005.33 Apart from the CO2 emissions (37,298,000 tons in 2004) that burdens the environment of Western Macedonia, table 4 presents the emissions of carbon monoxide (CO), nitrogen oxides (NOx), and sulfur oxides (SOx) that are released in the air by the lignite-fired power plants over the 2002 and 2004 time period. Measurements of the environmental impacts from the mining and transport activities associated with lignite are not included in this assessment (e.g., the dust). For example, in research conducted in 2005 in Western Macedonia that analyzed the effects of air pollution on the health of children aged 9 to 12 years, in a sample of 3,559 children it was found that chronic rhinitis and infectious and acute bronchitis appeared at least two times more frequently in Kozani and Florina compared to the other two prefectures.34 Input-Output Analysis Results Table 5 shows the key sectors for the improvement of living standards for the inhabitants of the Western Macedonia region. The sectors of commerce, construction, mining, and energy had comparatively middle or low type I multipliers in our analysis but high elasticity indices due to their significant size (11.38 percent, 9.46 percent, 5.09 percent, and 5.51 percent of the regional employment, respectively). According to their ranking based on elasticities, these sectors are appropriate for the dispersion of their multiplier effects on the regional output,

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LIGNITE-FIRED POWER GENERATION PLANTS OF WESTERN MACEDONIA: POWER a CAPACITY (in megawatts — MW) AND EMISSIONS (in thousand tons), 2002 AND 2004 Lignite-Fired Station/Emissions Saint Dimitrios Carbon monoxide (CO) Carbon dioxide (CO2) Nitrogen oxides (NOx) Sulfur oxides (SOx) Kardia CO CO2 NOx SOx Ptolemaida CO CO2 NOx SOx b Amyntaio CO CO2 NOx SOx b Melitis CO CO2 NOx SOx LCWM/LIPTOL CO CO2 NOx SOx c Total CO CO2 NOx SOx
a

Power (MW) 1,595

2002

2004

5.1 (M) 13,900 (C) 19.8 (M) 23.6 (M) 1,250 2.2 (M) 10,200 (C) 15.8 (M) 17.2 (M) 620 1.7 (M) 5,510 (C) 7.2 (M) 9.3 (M) 600 3.3 (M) 5,480 (C) 6.0 (M) 24.2 (M) 330 N.A. N.A. N.A. N.A. 43 N.A. N.A. N.A. N.A. 4,438 >12.3 (M) >35,090 (C) >48.8 (M) >74.3(M+E)

5.5 (M) 13,500 (C) 21.6 (M) 7.0 (M) 2.3 (M) 11,000 (C) 19.9 (M) 11.7(M) 2.8 (M) 5,140 (C) 7.6 (M) 14.0 (M) 5.1 (M) 4,670 C) 7.5 (M) 35.8 (M) N.A. 2,630 (C) 2.0 (M) 3.0 (M) N.A. 358 (C) 0.8 (E) 1.2 (E) >15.7 (M) 37,298 (C) 59.4(M+E) 72.7 (M+E)

M, C, E, and N.A. state either the size that has been measured, calculated, estimated, or not available, respectively. b Amyntaio and Melitis Stations are in Florina prefecture; others are in Kozani prefecture. c > indicates that the real size is larger than that given. Sources: European Environment Agency (EEA), The European Pollution Emission Register (Copenhagen, Denmark: EEA, 2007), also available at www.eper.sec.eu.int, and Public Power Corporation S.A. (PPC), First Public Report for the P.P.C.’s S.A. Activities (Athens: PPC, 2007), also available at www.dei.gr.

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employment, and income in the short and medium term. Nevertheless, other sectors can cause larger multiplier impacts in a long-term period, given changes in and/or diversification in the regional productive infrastructure. An expansion of the sectors of commerce, construction, mining, and energy would not contribute to this goal. From a longer-term perspective, based on their high rankings as a type I multiplier, the leading economic sectors for the region (table 5) could be in the food-beverages-tobacco sector and the textile materials production (including fur tanning, an activity concentrated in the Kastoria prefecture). The future expansion of the food-beverages-tobacco sector can have the most significant direct and indirect multiplier effects to regional output, employment, and income, relative to all of the other economic activities of the region. The significant size of the agriculture-livestock-hunting-forestry sector in the region similarly would have beneficial effects. In particular, the employment and income multipliers reveal that the food-beverages-tobacco sector is the most suitable for the creation of new jobs and the growth of regional income over time. However, the elasticities show that this sector’s multiplier ability, for the moment, is restrained due to its relatively limited size (1.73 percent of the regional employment). Regarding the textile sector, although its size is already important (8.41 percent of the regional employment), its further growth is desirable due to its high multiplier potential that could spread throughout the regional economy, not only at the present but also in the future, as can be seen by its highly ranked elasticities and type I multipliers in table 5. Hotels and restaurants constitute another sector that is capable of spreading important economic growth effects to the wider regional output, employment, and income both in the short- and long-term time frames due to its relatively solid number of jobs (providing 4.73 percent of regional employment) and its multiplier capacity. Although not the top priority for regional planners, the further development of this sector would be desirable. This sector has the advantage of very few negative environmental externalities relative to some other sectors. The sectors of financial services and basic metal and fabricated metal products represent such small portions of the total employment (1.24 percent and 0.86 percent of the regional employment, respectively) that they cannot create noticeable multiplier impacts in the existing economic structure of the region, but they deserve further attention as their multipliers show they can have a more dynamic role in future growth.

Conclusions The economic activities of lignite mining and power generation are responsible for the developmental duality between the eastern and western parts of the

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THE JOURNAL OF ENERGY AND DEVELOPMENT Table 5
THE KEY SECTORS OF WESTERN MACEDONIA REGION Sectors Food/ Beverages/ Tobacco 1.71414 (01) 1.90534 (02) 4.67035 (01) 5.13032 (01) 2.93126 (01) 3.31953 (01) 0.05669 (08) 0.05636 (08) 0.04026 (10) 0.03816 (10) 0.03984 (10) 0.03803 (10) Hotels and Restaurants 1.30635 (09) 1.42234 (10) 1.42350 (05) 1.56097 (11) 1.31201 (13) 1.42307 (12) 0.06888 (06) 0.07467 (05) 0.06418 (06) 0.06772 (06) 0.06351 (06) 0.06748 (06) Financial Services 1.44442 2.41132 1.46280 2.44133 1.62186 2.88459 0.01183 0.00516 0.00997 0.00276 0.00987 0.00275 (04) (01) (04) (03) (03) (02) (16) (19) (16) (20) (16) (20) Basic Metals/ Fabricated Materials 1.34308 (06) 1.68447 (03) 1.39516 (06) 1.78987 (05) 1.60827 (04) 2.15028 (03) 0.00543 (20) 0.00308 (21) 0.00492 (20) 0.00236 (21) 0.00487 (20) 0.00235 (21)
a

Indices

b

Textiles 1.45624 (03) 1.47872 (08) 1.75288 (03) 1.77700 (06) 1.71004 (02) 1.74222 (07) 0.14360 (01) 0.14581 (01) 0.12002 (02) 0.12720 (02) 0.11877 (02) 0.12677 (02)

OM by SLQ OM by CILQ EM by SLQ EM by CILQ IM by SLQ IM by CILQ OE by SLQ OE by CILQ EE by SLQ EE by CILQ IE by SLQ IE by CILQ

Indices

b

Construction 1.28186 1.32933 1.25840 1.30097 1.21185 1.25022 0.13064 0.13554 0.12405 0.13147 0.12275 0.13101 (12) (15) (13) (16) (19) (21) (02) (02) (01) (01) (01) (01)

Energy/ Minerals Mining 1.27049 1.28778 1.23948 1.25781 1.26220 1.27857 0.08471 0.08586 0.08115 0.08600 0.08030 0.08571 (14) (21) (15) (20) (16) (18) (04) (04) (04) (04) (04) (04)

Energy Production 1.35699 (05) 1.36863 (12) 1.32446 (10) 1.34125 (14) 1.19822 (21) 1.20669 (24) 0.11531 (03) 0.11630 (03) 0.10343 (03) 0.10962 (03) 0.10235 (03) 0.10924 (03)

Commerce 1.24027 (15) 1.39333 (11) 1.13331 (26) 1.21300 (23) 1.22096 (17) 1.35468 (15) 0.06179 (07) 0.06396 (07) 0.06064 (07) 0.05921 (07) 0.06000 (07) 0.05901 (07)

OM by SLQ OM by CILQ EM by SLQ EM by CILQ IM by SLQ IM by CILQ OE by SLQ OE by CILQ EE by SLQ EE by CILQ IE by SLQ IE by CILQ
a

The numbers in parenthesis represent the sectoral rankings by each index and secondary simulation method. b The indices of OM, EM, and IM indicate the type I multipliers of output, employment, and income, respectively, calculated by the simple location quotient (SLQ) and cross-industry location quotient (CILQ). The indices OE, EE, and IE refer to output, employment, and income elasticities, respectively.

Western Macedonia region, the distortion in productive economic structures mainly in the eastern portion of the region, and the degradation to the quality of living standards due to the negative environmental impacts associated with the lignite industry. The reduction in staffing levels at many mines throughout the

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region because of improved labor productivity and the use of more capital investment has intensified the unemployment problem facing the area.35 However, regional development planning, particularly for the Kozani and Florina prefectures, can look at diversifying the economic base away from lignite mining, which is already suffering from a dwindling employment base, to support the enlargement of other economic activities that have larger economic multipliers and the potential to provide more growth, jobs, and income. This is critical considering that this region has Greece’s highest unemployment rate. In view of the turn toward renewable resources and natural gas, of the planned development of lignite reserves in other regions of Greece, and of the future depletion of the major exploitable mines of Western Macedonia, the region will face even more problems with its productive infrastructure, output, income, and employment. While the mining and energy sectors have created short- and medium-term benefits in the eastern part of the region (Kozani and Florina prefectures), they have not been without accompanying costs to the community at large. The environmental impacts and the distortions in its productivity patterns will only add to Western Macedonia’s economic problems with further increases in unemployment rates and reductions in income highly possible. Conversely, the productive infrastructure of the western part of the region (Grevena and Kastoria prefectures) is based on the sectors with the higher type I multipliers. This part of the region is planning its economic development in a long-term framework and in a more sustainable manner by transferring benefits from the present to the future. This policy moves within a trend in the EU toward greater use of renewable fuels and natural gas, along with strict greenhouse gas emissions goals; such a planning approach could make economic dependence on lignite mining and its use as a source of power generation highly problematic. This, in turn, undermines the economic security and livelihoods of the people in the areas dependent on the production of lignite. However, there are viable options to begin to diversity the bases of these economies while improving the overall environmental and health standards, as has been highlighted in this study. This will require a farsighted approach to fostering the economic development of different sectors and industries, such as food-beverages-tobacco, textiles, and hotels and restaurants. The public policy and decision makers at the national, regional, and local levels should adopt a different development policy, particularly for the Kozani and Florina prefectures, which must take into consideration a more sustainable and long-term view on how best to diversify the areas’ economic activities while improving the standard of living for their inhabitants in the coming post-lignite era.
NOTES A. Mizan, ‘‘Investments for Modernization and Expansion of the P.P.C.’s S.A. Power Generation Capacity,’’ paper delivered to the conference of the Athens Chamber of Commerce and Industry: Energy-Photovoltaic Parks, Athens, Greece, April 18, 2007 (in Greek).
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2 Public Power Corporation S.A. (PPC), First Public Report for the P.P.C.’s S.A. Activities (Athens: PPC, 2007), also available at www.dei.gr, and Regulation Authority for Energy (RAE), Report for R.A.E.’s Activities: April 2004 – December 2006 (Athens: RAE, 2007), also available at www.rae.gr. 3

Ibid.

L. Sichletidis, I. Tsiotsios, A. Gavriilidis, D. Chloros, D. Gioulekas, I. Kottakis, and A. Pataka, ‘‘The Effects of Environmental Pollution on the Respiratory System of Children in Western Macedonia, Greece,’’ Journal of Investigational Allergology and Clinical Immunology, vol.15, no. 2 (2005), pp. 117-23. Kern O. Kymn, ‘‘Interindustry Energy Demand and Aggregation of Input–Output Tables,’’ The Review of Economics and Statistics, August 1977, pp. 371–74; Brian W. Gould, ‘‘The Impacts of Structural Change within an Economy on Resource Use: An Input–Output Analysis,’’ Applied Economics, May 1986, pp. 457–78; Bruce Hannon, ‘‘Input–Output Economics and Ecology,’’ Structural Change and Economic Dynamics, August 1995, pp. 331–33; and Manfred Lenzen, ‘‘Environmentally Important Paths, Linkages and Key Sectors in the Australian Economy,’’ Structural Change and Economic Dynamics, March 2003, pp. 1–34. National Statistical Service of Greece (NSSG), Statistical Classification of Economic Activities-2003 (Athens: NSSG, 2003), also available at www.statistics.gr, and National Accounts of Greece 1999 (Athens: NSSG, 2006), also available at www.statistics.gr/main.eng.asp.
7 R. C. Jensen, T. D. Mandeville, and N. D. Karunaratne, Regional Economic Planning: Generation of Regional Input–Output Analysis (London: Croom Helm Ltd., 1979), p. 251, and Ronald E. Miller and Peter D. Blair, Input–Output Analysis: Foundations and Extensions (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1985), p. 464. For elasticities, refer to Claudia Ciobanu, Konstadinos Mattas, and Dimitris Psaltopoulos, ‘‘Structural Changes in Less Development Areas: An Input–Output Framework,’’ Regional Studies, January 2004, pp. 603–14. 8 Konstantinos Kavouridis, ‘‘Lignite Industry in Greece within a Worldwide Context: Mining, Energy Supply and Environment,’’ Energy Policy, April 2008, pp. 1257–272. 6 5

4

Ibid.; K. Th. Papavasiliou, ‘‘Some Thoughts for the Present Situation and the Existing Prospects as Concerns the Country’s Lignite,’’ paper delivered to the conference of the Greek Technical Chamber: Lignite and Natural Gas in the Electricity Production of the Country, Athens, Greece, June 9-10, 2005 (in Greek); Public Power Corporation S.A. (PPC), Deposits and Quality/Statistical Data (Athens: PPC, 2008), also available at www.dei.gr; and A. Mizan, op. cit. Konstantinos Kavouridis, op. cit.; K. Th. Papavasiliou, op. cit.; and Public Power Corporation S.A., Deposits and Quality/Statistical Data.
11 10

9

Konstantinos Kavouridis, op. cit. and A. Mizan, op. cit.

Ibid., and Regulation Authority for Energy, Report for R.A.E.’s Activities: April 2004 – December 2006, also available at www.rae.gr; and A. Mizan, op. cit Public Power Corporation S.A. (PPC), First Public Report for the P.P.C.’s S.A. Activities, also available at www.dei.gr, and Regulation Authority for Energy, Report for R.A.E.’s Activities: April 2004 – December 2006, also available at www.rae.gr.
13

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14 Konstantinos Kavouridis, op. cit., and Public Power Corporation S.A. (PPC), Deposits and Quality/Statistical Data, also available at www.dei.gr. 15 Public Power Corporation S.A., Deposits and Quality/Statistical Data, also available at www. dei.gr. Lignite is a coal in which the fossilization of organic material has advanced beyond peat but not to the extent of sub-bituminous coal. It contains about 30 percent to 40 percent water; its heat value is around 13,900 to 19,290 kilojoules per kilogram (6,000 to 8,300 British thermal units per pound). 16

Ibid.

17 National Statistical Service of Greece (NSSG), Gross Value Added per Region, Prefecture and Sector of Economic Activity: 1995-2003 (Athens: NSSG, 2006), also available at www.statistics.gr/ main_eng.asp.

National Statistical Service of Greece (NSSG), Analytical Statistical Data for the Population and the Employment of Greece: 1998-2005 (Athens: NSSG, 2006), Employment per Region and Sectoral Economic Activity: 1998-2003 (Athens: NSSG, 2006), and Statistical Yearbook of Greece 2006 (Athens: NSSG, 2007). All are available also at www.statistics.gr/main_eng.asp.
19

18

Ibid.

National Statistical Service of Greece, Gross Value Added per Region, Prefecture and Sector of Economic Activity: 1995-2003 (Athens: NSSG, 2006), also available at www.statistics.gr/main_eng.asp.
21 European Environment Agency (EEA), Greenhouse Gas Emission Trends and Projections in Europe 2007-EU within Reach of Kyoto Targets (Copenhagen, Denmark: Office for Official Publications of the European Communities, 2007), p. 103.

20

National Statistical Service of Greece, Analytical Statistical Data for the Population and the Employment of Greece: 1998-2005, Employment per Region and Sectoral Economic Activity: 1998-2003, and Statistical Yearbook of Greece 2006. All are available also at www.statistics.gr/ main_eng.asp.
23 National Statistical Service of Greece, Analytical Statistical Data for the Population and the Employment of Greece: 1998-2005 and Employment per Region and Sectoral Economic Activity: 1998-2003. Both also are available at www.statistics.gr/main_eng.asp.

22

Commission of the European Communities (COM), An Energy Policy for Europe: COM (2007)1 Final (Brussels, Belgium: COM, 2007), p. 27; European Parliament and Council, ‘‘Directive 2003/87/EC: Establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community and Amending Council Directive 96/91/EC,’’ Official Journal of the European Union, October 2003 (L275), pp. 32-46; and European Parliament and Council, ‘‘Directive 2004/101/EC, Amending Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community, in Respect of the Kyoto Protocol’s Project Mechanism,’’ Official Journal of the European Union, October 2004 (L338), pp. 18-23. Commission of the European Communities (COM), A European Strategic Energy Technology Plan (SET-Plan): Towards a Low Carbon Future: COM(2007)723 Final (Brussels, Belgium: COM, 2007), p. 14.
25

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26 K. Kavouridis and N. Koukouzas, ‘‘Coal and Sustainable Energy Supply Challenges and Barriers,’’ Energy Policy, February 2008, pp. 693–703; Konstantinos Kavouridis, op. cit.; and European Parliament and Council, ‘‘Directive 2001/283/EC on the Promotion of Electricity Produced from Renewable Energy in the Internal Electricity Market,’’ Official Journal of the European Union. 27

K. Kavouridis and N. Koukouzas, op. cit.

Commission of the European Communities (COM), Amending Directive 2003/87/EC so as to Improve and Extend the Greenhouse Gas Emission Allowance Trading System of the Community: COM (2008)16 Final (Brussels, Belgium: COM, 2008), p. 51; European Environment Agency, Greenhouse Gas Emission Trends and Projections in Europe 2007-EU Within Reach of Kyoto Targets, p. 103; and European Parliament and Council, ‘‘Directive 2003/87/EC: Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community and Amending Council Directive 96/91/EC’’ and ‘‘Directive 2004/101/EC, Amending Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community, in Respect of the Kyoto Protocol’s Project Mechanism.’’ European Environment Agency (EEA), The European Pollutant Emission Register (Copenhagen, Denmark: Office for Official Publications of the European Communities, 2007), also available at www.eper.sec.eu.int, and Public Power Corporation S.A., Deposits and Quality/Statistical Data, also available at www.dei.gr. Public Power Corporation, First Public Report for the P.P.C.’s S.A. Activities, also available at www.dei.gr.
31 30 29

28

A. Mizan, op. cit., and Konstantinos Kavouridis, op. cit.

European Environment Agency (EEA), Greenhouse Gas Emission Trends and Projections in Europe 2007-Country Profile: Greece: Report No5/2007 (Copenhagen, Denmark: Office for Official Publications of the European Communities, 2007), p. 30. World Wildlife Fund (WWF), Report: ‘‘Dirty Thirty’’ (Athens: WWF Hellas, 2005), also available at www.wwf.gr (in Greek). L. Sichletidis, I. Tsiotsios, A. Gavriilidis, D. Chloros, D. Gioulekas, I. Kottakis, and A. Pataka, op. cit.
35 34 33

32

Konstantinos Kavouridis, op. cit.