Mexican standoff over Polish regions’ coal dependency

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Coal mine in Silesian region of Poland [Polish Ministry of Foreign Affairs/Flickr]

Serious discussion over regeneration for Polish coal-producing regions is needed to prevent a political crisis over the shift to a low-carbon economy, writes Anna Dubowik.

Anna Dubowik is head of Change Partnership Poland.

Coal mining in Poland is running out of time and political space. Unless there is a serious discussion about future regional regeneration which leads to a credible and deliverable plan the current tension could spill over into significant and potentially unending turmoil and stalemate.

The crux of the matter rests on the inability of the Polish government and mining trade unions to jointly develop a sustainable, profitable and competitive business model for coal production in Poland which complies with European rules on state intervention, subsidy, competitive markets and climate change.

Mining trade unions started protests yesterday in front of the mine Brzeszcze after the government failed to fulfil the agreement from January 2015 on restructuring of Kompania Weglowa, the largest coal producer in Europe. This failure puts 40 thousand jobs at stake. The government is desperately trying to develop solutions to create a new financially viable entity, Nowa Kompania Weglowa (NKW). On 30 September the Treasury announced a plan for takeover of 100% of state owned shares and 11 Kompania Weglowa mines by the financial company Silesia.

The next step would be for the state-owned energy groups, PGE, Energa and oil and gas producer PGNIG to join the financial company Silesia in a move to create an energy-fuels producing group. Meanwhile, on 1 October the state-controlled supervisory board of power group Tauron replaced the management board after the group failed to agree on a purchase of the bankrupt Brzeszcze mine – the initial offer was “one symbolic zloty”, close to its market value.

Dominik Kolorz, head of the Solidarnosc trade union of the region of Silesia questioned the validity of the latest investment plan for NKW under the EU rules on state aid.  The unions demand a consolidation of coal producing groups, merger of energy groups and mining companies and renegotiation of the EU decision on state aid in a way that aid for closure costs is allowed till 2028.

Kolorz insists on the need to prevent further tightening of climate regulation on the EU level and maximum use of EU funds for clean coal technologies. However, trust is at a low ebb as past attempts to improve production efficiency and technological upgrades have been thwarted. 

EU state aid rules

Prime Minister Kopacz insists that the takeover of the mines of Kompania Weglowa by the Silesia financial company will be in line with the EU state aid rules, as opposed to the earlier plans of direct investment into NKW by state-managed energy groups. She promised to keep defending Polish coal in Brussels as the key guarantee of the country’s energy security, the way she did at the October 2014 European Council meeting which agreed on continued free allocation of EU Emissions Trading System allowances to Poland and other poorer EU countries after 2020.

The lack of credible solutions erodes trust. This is further compounded by European laws. Competition Commissioner Margrethe Vestager, who is responsible for state aid, has indicated flexibility for credible solutions as recent as February 2015 when approving state aid for the closure or uncompetitive mines in the Czech Republic.

In this instance she stated that, “Uncompetitive coal mines cannot be kept in the market indefinitely on state support – but the Commission and Member States can find solutions to help coal miners through this difficult transition”. The Polish government and trade unions have yet to identify a solution that does not require substantial amounts of state aid. The Warsaw Institute for Economic Studies estimates that at least half of the coal mining workforce needs to be removed in order for the sector to have any chance of becoming profitable.

This Mexican stand-off needs to be broken. The best option is for the EU to provide a dedicated forum to create a solutions-orientated debate as well as using European sources to proactively and jointly manage the transition in Poland towards a competitive, low-carbon business model.

The European Trade Union Congress (ETUC) recently called for a ‘just transition’ to be institutionalised. Its first task should be to help find a solution to the crisis in Poland by looking at regional redevelopment which creates viable local enterprises and different employment opportunities. The success of this rests on keeping dialogue ongoing and ensuring that all stages of the transition are managed in a fair and just manner. Before this can be achieved, all parties need to recognise unique regional, national and global trends for unabated fossil fuels. Failure to do so will only prolong the crisis.

>>Read: Unions call for cash for carbon dependent regions

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