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* Coal tops the list for deaths in energy sector
* Coal also a major polluter
* Investors demand higher standards
* European utilities form ethical coal group
By Henning Gloystein, Alexander Winning and Nina Chestney
LONDON, April 25 (Reuters) - European utility companies areunder pressure from shareholders to source their coal in a moreethical and environmentally friendly way to cut pollution andsave thousands of miners who risk their lives each year.
Coal mining is responsible for more fatalities than theproduction of any other energy source due to poor workingconditions in export countries such as China, South Africa,Indonesia and Colombia. It is also a major world polluter.
But it accounts for around 40 percent of Europe's powergeneration because a glut of supply has made it cheaper thanother fossil fuels such as natural gas.
Under scrutiny from major shareholders including Norway'ssovereign wealth fund, some energy companies have already takenaction, clubbing together to form the Bettercoal group toimprove their ethical, social and environmental standards.
"There is increasing awareness of coal's destruction... andalso understanding that alternatives are possible," said AilunYang, Senior Associate at the U.S. World Resources Institute.
Over 30,000 people have died in accidents related to coalmining since 1970, compared with 20,000 in the oil sector andaround 1,500 in natural gas, according to estimates from thePaul Scherrer Institute (PSI), a Swiss natural and engineeringsciences institute.
Other estimates are much higher with Hazardex, a specialistin safety information, saying that China's death toll alone isover 1,000 a year. Indonesia and South Africa also suffer fromfrequent deaths in coal mines, and there have also been recentones in Australia and New Zealand.
Meanwhile, the World Health Organization said last monththat air pollution, partly caused by burning coal, killed 7million people worldwide in 2012, making it the world's singlebiggest environmental health risk.
While the WHO recommended "the movement away from dirtierfuels, such as coal", the use of filters and higher quality coalinstead of cheaper supplies with high sulphur and ash contentscan reduce air pollution.
Coal mines can also improve their environmental footprint bytrying to use less fresh water and taking steps, such asautomated ship loading conveyor belts and closed train cargocoaches, to reduce coal spillage into the ground and water.
BETTERCOAL
The push for higher coal mining standards follows thesuccess of the fair trade standards for agricultural productssuch as coffee and chocolate and the campaign against the saleof diamonds mined in conflict areas.
Industry experts say that while consumers have lessinfluence on the energy sector than they do on products such ascoffee, the fall in coal prices provides an opportunity for theutilities to push through a change in practices.
"Utilities and investors are in a good position to demandchange as there is a global coal oversupply, giving buyersmultiple choices to source their coal from," said one miningadviser who did not want to be named.
"This puts pressure on miners to become more attractive forutilities and investors."
The Bettercoal group is made up of utilities which accountfor more than half of Europe's thermal coal imports. Its membersare DONG Energy, EDF, GDF Suez,E.ON, RWE, Fortum, Gas NaturalFenosa, and Enel.
The group was set up in 2012 and this month startedassessing mining companies for their ethical standards. Thegroup says the results will influence which miners they buytheir coal from.
"Bettercoal can be an agent for change, not only bringingimprovements at the mines, but also enabling members to makedecisions with regard to their coal suppliers," said MartinChristie, executive director of Bettercoal.
The group said it would judge mines on criteria includingbusiness ethics, health and safety, and environmental standards.
Other utilities are also taking action. German Steag, with10 gigawatt of global installed coal generation, said it was intalks with miners about social and environmental topics.
"We regard it as an obligation to take a look on-site intothe validity of allegations by third parties and to criticallyscrutinise our suppliers," said Steag board member WolfgangCieslik, adding that the company had inspected Colombia's ElCerrejon, one of the world's biggest open cast coal mines,jointly owned by BHP Billiton , Anglo American, and Glencore Xstrata.
LETTER TO THE POPE
Environmentalists, religious groups, academics, politiciansand scientists say the utilities and the banks which fund thecoal mining still have not done enough.
Late last year the United Nations' climate chief urged aradical clean-up of the coal industry, while religious groups inAustralia and North America wrote to the Pope in February,urging him to encourage banks to move their money out of coal.
Some of these campaigns have yielded results. Several largefinancial institutions have said they will curb funding for coalprojects, including the World Bank and the European Bank forReconstruction and Development.
Norway's $817 billion sovereign wealth fund, the world'slargest, invests in both utilities and mining companies. It hashalved its exposure to coal producers, and Chief Executive YngveSlyngstad told Reuters in March it would review investments inthe mining sector this year on ethical grounds.
The fund has investments in mining majors such as BHPBilliton, Vale, Glencore Xstrata, and Anglo American,but has dropped Rio Tinto on ethical grounds.It is also invested in some 160 companies that use coal togenerate power, such as French utility GdF Suez, andanother 190 companies that use coal to produce steel.
"There is environmental damage by definition," Slyngstadsaid. "It does not mean that we are selling out of the sector.We are concentrating our investments on the companies that wethink are continuing this activity in a more sustainable way."
COAL LOADING
Coal's share of energy generation is still increasing andglobal carbon dioxide emissions hit a record high last year.
Driven by rising use in China, India and other emergingeconomies, coal could even surpass oil as the main fuel for theglobal economy by 2020, energy consultancy Wood Mackenzie said.
This highlights the need to take urgent action to improveenvironmental standards, experts say.
In the West, a revolution in shale gas technology in theUnited States has triggered a switch from coal to cleanernatural gas, but it has also resulted in cheap coal exports toEurope where its share of the power generation mix has risen.
In Asia, China approved the construction of more than 100million tonnes of new coal production in 2013, six times morethan a year earlier, despite plans to tackle air pollutionchoking its major cities.
Chinese efforts to reduce its pollution from coal, rangefrom pushing its natural gas, renewable and nuclear powergeneration sectors as well as introducing particle filters andreducing the amount of high sulphur and low quality coal imports especially from Indonesia. (Additional reporting by Vera Eckert in Frankfurt and GwladysFouche in Oslo; editing by Anna Willard)
