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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.
267
268 THE JOURNAL OF ENERGY AND DEVELOPMENT

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 lignite-
fired 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 in-
creasing 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 ca-
pacity 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 lig-
nite-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 eco-
nomic 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 input-
output 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
LIGNITE MINING AND ELECTRICITY: GREECE 269

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 con-
ditions 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 Au-
thority 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 ana-
lyzed 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 re-
gional matrix.6 The secondary simulation of direct and total requirements ma-
trices 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 multipli-
cative effects on output, employment, and income and with fewer environ-
mental 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
270 THE JOURNAL OF ENERGY AND DEVELOPMENT

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 gen-
eration; 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 Florina-
Amintaio-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 Ptol-
emaida 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 mil-
lion 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
LIGNITE MINING AND ELECTRICITY: GREECE 271

Effects from the Extraction of Lignite

Financial Effects: Table 1 shows that since 1997 the sector of energy and non-
energy 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 con-
sistently 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 av-
erage 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
a
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
Gross National Regional GDP of Gross National Regional GDP of
Year Sectoral Output Gross Output Greece Sectoral Output Gross Output Greece

1995 31.47 7.35 0.20 22.76 19.54 0.54


1996 31.51 7.62 0.21 21.91 17.15 0.47
1997 34.67 7.51 0.22 19.10 13.35 0.38
1998 39.40 8.41 0.24 19.22 13.77 0.40
1999 38.07 7.02 0.20 19.25 13.76 0.39
2000 37.70 8.68 0.24 18.66 11.94 0.33
2001 37.69 8.73 0.23 18.09 11.95 0.32
2002 38.75 9.60 0.26 17.51 11.35 0.31
2003 39.09 8.93 0.24 17.18 11.49 0.31
Average 36.48 8.21 0.23 19.30 13.81 0.38
a
The energy sector refers to lignite-fired power generation.
Source: Authors’ calculations.
272 THE JOURNAL OF ENERGY AND DEVELOPMENT

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 labor-
intensive 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 ini-
tiatives 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 un-
employment 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 non-
energy 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 sur-
rounding 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 273

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 2003

Energy and Non-Energy Minerals Mining Sector


Kozani 93.35 93.34 86.34 86.91 77.42 73.66 75.92 74.71 74.43
Florina 5.60 5.60 13.17 12.65 21.97 25.14 22.93 23.26 24.41
Grevena 0.92 0.93 0.06 0.05 0.04 0.04 0.03 0.01 0.01
Kastoria 0.13 0.13 0.43 0.39 0.57 1.17 1.10 1.14 1.14
a
Energy Production Sector
Kozani 97.49 97.39 96.42 96.27 96.31 96.07 95.89 95.81 95.72
Florina 1.23 1.28 1.75 1.97 1.93 2.16 2.23 2.23 2.24
Grevena 0.57 0.59 0.84 0.80 0.81 0.84 0.91 0.96 1.03
Kastoria 0.71 0.73 0.98 0.96 0.96 0.94 0.98 1.00 1.01
a
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


Energy/ Non- Energy/ Non-
Energy Total Energy Total
Mineral Energy Contribution Mineral Energy Contribution
Mining Production by Both Mining Production by Both
a a
Year Sector Sector Sectors Sector Sector Sectors

1995 10.99 30.54 41.53 3.04 1.78 4.82


1996 11.57 27.16 38.73 3.10 1.59 4.70
1997 11.16 22.16 33.32 6.45 1.52 7.97
1998 12.50 22.67 35.16 6.89 1.75 8.65
1999 9.43 23.01 32.45 9.62 1.66 11.27
2000 11.26 20.21 31.47 13.10 1.55 14.65
2001 11.74 20.29 32.02 11.85 1.57 13.42
2002 12.75 19.34 32.09 12.87 1.46 14.33
2003 11.88 19.65 31.54 12.60 1.49 14.09
Average 11.46 22.78 34.25 8.84 1.60 10.43
a
Energy production sector refers to lignite-fired power production.
Source: Authors’ calculations.
274 THE JOURNAL OF ENERGY AND DEVELOPMENT

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 pre-
fecture 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 pre-
fecture 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 Kas-
toria, 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 environ-
mental 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 tar-
geted 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
LIGNITE MINING AND ELECTRICITY: GREECE 275

gradually withdraw themselves from the newly liberalized and more competi-
tive 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, in-
cluding 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 ac-
tivities 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, con-
struction, 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, re-
spectively). According to their ranking based on elasticities, these sectors are ap-
propriate for the dispersion of their multiplier effects on the regional output,
276 THE JOURNAL OF ENERGY AND DEVELOPMENT

Table 4
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 Power (MW) 2002 2004

Saint Dimitrios 1,595


Carbon monoxide (CO) 5.1 (M) 5.5 (M)
Carbon dioxide (CO2) 13,900 (C) 13,500 (C)
Nitrogen oxides (NOx) 19.8 (M) 21.6 (M)
Sulfur oxides (SOx) 23.6 (M) 7.0 (M)
Kardia 1,250
CO 2.2 (M) 2.3 (M)
CO2 10,200 (C) 11,000 (C)
NOx 15.8 (M) 19.9 (M)
SOx 17.2 (M) 11.7(M)
Ptolemaida 620
CO 1.7 (M) 2.8 (M)
CO2 5,510 (C) 5,140 (C)
NOx 7.2 (M) 7.6 (M)
SOx 9.3 (M) 14.0 (M)
b
Amyntaio 600
CO 3.3 (M) 5.1 (M)
CO2 5,480 (C) 4,670 C)
NOx 6.0 (M) 7.5 (M)
SOx 24.2 (M) 35.8 (M)
b
Melitis 330
CO N.A. N.A.
CO2 N.A. 2,630 (C)
NOx N.A. 2.0 (M)
SOx N.A. 3.0 (M)
LCWM/LIPTOL 43
CO N.A. N.A.
CO2 N.A. 358 (C)
NOx N.A. 0.8 (E)
SOx N.A. 1.2 (E)
c
Total 4,438
CO >12.3 (M) >15.7 (M)
CO2 >35,090 (C) 37,298 (C)
NOx >48.8 (M) 59.4(M+E)
SOx >74.3(M+E) 72.7 (M+E)
a
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.
LIGNITE MINING AND ELECTRICITY: GREECE 277

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 rela-
tively 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 mul-
tiplier 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 no-
ticeable 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
278 THE JOURNAL OF ENERGY AND DEVELOPMENT

Table 5
a
THE KEY SECTORS OF WESTERN MACEDONIA REGION

Sectors
Food/ Basic Metals/
Beverages/ Hotels and Financial Fabricated
b
Indices Tobacco Textiles Restaurants Services Materials

OM by SLQ 1.71414 (01) 1.45624 (03) 1.30635 (09) 1.44442 (04) 1.34308 (06)
OM by CILQ 1.90534 (02) 1.47872 (08) 1.42234 (10) 2.41132 (01) 1.68447 (03)
EM by SLQ 4.67035 (01) 1.75288 (03) 1.42350 (05) 1.46280 (04) 1.39516 (06)
EM by CILQ 5.13032 (01) 1.77700 (06) 1.56097 (11) 2.44133 (03) 1.78987 (05)
IM by SLQ 2.93126 (01) 1.71004 (02) 1.31201 (13) 1.62186 (03) 1.60827 (04)
IM by CILQ 3.31953 (01) 1.74222 (07) 1.42307 (12) 2.88459 (02) 2.15028 (03)
OE by SLQ 0.05669 (08) 0.14360 (01) 0.06888 (06) 0.01183 (16) 0.00543 (20)
OE by CILQ 0.05636 (08) 0.14581 (01) 0.07467 (05) 0.00516 (19) 0.00308 (21)
EE by SLQ 0.04026 (10) 0.12002 (02) 0.06418 (06) 0.00997 (16) 0.00492 (20)
EE by CILQ 0.03816 (10) 0.12720 (02) 0.06772 (06) 0.00276 (20) 0.00236 (21)
IE by SLQ 0.03984 (10) 0.11877 (02) 0.06351 (06) 0.00987 (16) 0.00487 (20)
IE by CILQ 0.03803 (10) 0.12677 (02) 0.06748 (06) 0.00275 (20) 0.00235 (21)

Energy/ Energy
b
Indices Construction Minerals Mining Production Commerce

OM by SLQ 1.28186 (12) 1.27049 (14) 1.35699 (05) 1.24027 (15)


OM by CILQ 1.32933 (15) 1.28778 (21) 1.36863 (12) 1.39333 (11)
EM by SLQ 1.25840 (13) 1.23948 (15) 1.32446 (10) 1.13331 (26)
EM by CILQ 1.30097 (16) 1.25781 (20) 1.34125 (14) 1.21300 (23)
IM by SLQ 1.21185 (19) 1.26220 (16) 1.19822 (21) 1.22096 (17)
IM by CILQ 1.25022 (21) 1.27857 (18) 1.20669 (24) 1.35468 (15)
OE by SLQ 0.13064 (02) 0.08471 (04) 0.11531 (03) 0.06179 (07)
OE by CILQ 0.13554 (02) 0.08586 (04) 0.11630 (03) 0.06396 (07)
EE by SLQ 0.12405 (01) 0.08115 (04) 0.10343 (03) 0.06064 (07)
EE by CILQ 0.13147 (01) 0.08600 (04) 0.10962 (03) 0.05921 (07)
IE by SLQ 0.12275 (01) 0.08030 (04) 0.10235 (03) 0.06000 (07)
IE by CILQ 0.13101 (01) 0.08571 (04) 0.10924 (03) 0.05901 (07)
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
LIGNITE MINING AND ELECTRICITY: GREECE 279

region because of improved labor productivity and the use of more capital in-
vestment has intensified the unemployment problem facing the area.35 However,
regional development planning, particularly for the Kozani and Florina pre-
fectures, 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 con-
sidering 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 eco-
nomic problems with further increases in unemployment rates and reductions in in-
come 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
1
A. Mizan, ‘‘Investments for Modernization and Expansion of the P.P.C.’s S.A. Power Gen-
eration Capacity,’’ paper delivered to the conference of the Athens Chamber of Commerce and
Industry: Energy-Photovoltaic Parks, Athens, Greece, April 18, 2007 (in Greek).
280 THE JOURNAL OF ENERGY AND DEVELOPMENT
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.
4
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.
5
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.
6
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: Gen-
eration 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.
9
Ibid.; K. Th. Papavasiliou, ‘‘Some Thoughts for the Present Situation and the Existing Pros-
pects 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.
10
Konstantinos Kavouridis, op. cit.; K. Th. Papavasiliou, op. cit.; and Public Power Corporation
S.A., Deposits and Quality/Statistical Data.
11
Konstantinos Kavouridis, op. cit. and A. Mizan, op. cit.
12
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
13
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.
LIGNITE MINING AND ELECTRICITY: GREECE 281
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.
18
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
Ibid.
20
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.
22
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.
24
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 Green-
house Gas Emission Allowance Trading within the Community, in Respect of the Kyoto Pro-
tocol’s Project Mechanism,’’ Official Journal of the European Union, October 2004 (L338), pp.
18-23.
25
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.
282 THE JOURNAL OF ENERGY AND DEVELOPMENT
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 Pro-
duced from Renewable Energy in the Internal Electricity Market,’’ Official Journal of the European
Union.

27
K. Kavouridis and N. Koukouzas, op. cit.

28
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.’’

29
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.

30
Public Power Corporation, First Public Report for the P.P.C.’s S.A. Activities, also available at
www.dei.gr.

31
A. Mizan, op. cit., and Konstantinos Kavouridis, op. cit.

32
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.

33
World Wildlife Fund (WWF), Report: ‘‘Dirty Thirty’’ (Athens: WWF Hellas, 2005), also
available at www.wwf.gr (in Greek).

34
L. Sichletidis, I. Tsiotsios, A. Gavriilidis, D. Chloros, D. Gioulekas, I. Kottakis, and A. Pataka,
op. cit.

35
Konstantinos Kavouridis, op. cit.