A few years ago, carbon capture and storage (CCS) technology was seen as the best way to clean up coal and cut carbon emissions. And Europe was seen as the expected leader in the field. But instead, reports the science journal Nature, Europe has fallen behind North America in the race to create systems that separate carbon dioxide from exhaust gases.

And what’s worse, Europe is increasingly turning to coal, the most polluting of all sources of electricity. In some European countries, reports The Economist, the amount of coal-generated electricity is rising by up to 50% a year, at annualized rates. Ironically, some experts say CCS is the only way to eliminate coal emissions.

What’s going on Europe? The continent associated with being greener than green, at least during climate change talks, is suddenly looking, well, a little dirty. Here’s what’s happened.

Four years ago, the International Energy Agency (IEA), an independent organization that promotes reliable and affordable clean energy, called for 100 CCS projects by 2020. CCS technologies capture CO2 from fuel combustion or industrial processes, transfer it via ships or pipelines, and store it underground. The IEA says CCS is a “vital” and “least-cost” way to meet a fifth of the emission reduction target for 2050 set by the Intergovernmental Panel on Climate Change. Yet to date, there are no large-scale projects operating anywhere, and a European Commission fund to finance CCS announced before Christmas it would give €1.2 billion ($1.6 billion) to renewable-energy projects instead.

Part of the problem is money. Outfitting power plants with CCS jacks up the price of electricity by as much as 100%, while full subsidies, granted to more popular projects in Europe such as wind-farms, are not offered to CCS projects. While grants are available, utility companies with CCS technologies are supposed to also raise money by selling carbon credits through emissions trading programs. But last year, the recession curbed industrial emissions and the carbon-credit market collapsed, slashing that source of funds.

Nature reports that even so, 10 CCS projects were identified last summer, but required co-funding, which six European countries had promised. Five of those six—Italy, the Netherlands, Poland, Romania and the UK—backed out, while a project to outfit a steel plant in France with CCS technology flopped after the plant’s owner, ArcelorMittal, pulled out. Meanwhile, in the US and Canada at least two large CCS projects are underway and are due to start operating in 2014.

Here’s the second, and more alarming twist to Europe’s not-so-green story: the rebirth of coal in Europe. According to The Economist, American utilities have moved to shale gas, leaving American coal miners in search of new customers. With both US and Chinese demand dropping off, coal prices have fallen. Although coal is still not exactly cheap, it is when compared to gas in Europe.

There’s little sign that European demand for coal will wane soon. Partly it’s because coal is cheaper and more profitable than gas, but it’s also, ironically, thanks to the rise of renewable energies such as solar and wind that get priority on electricity grids. Renewables have been grabbing market share and undermining utility company profits. Last November, Moody’s warned that the “rapid increase in renewable energy capacity in many European markets could seriously damage the financial prospects of coal and gas-fueled power plants in the near to medium term.”

And so, to cut costs utilities are replacing gas with coal. And at a worrying rate: In the first half of last year, European purchases of American coal jumped by a third. So much for Europe’s green reputation.

Originally published at Quartz, a new kind of business publication.

Europe’s Climate Fail

Jan 15, 2013