How not to lose the process of transformation towards a Green Deal in Poland

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

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[PKEE]

Contrary to established stereotypes, fundamental changes are undergoing in Poland to achieve climate neutrality in 2050. However, this will require difficult and costly changes, primarily in electricity generation, which will allow for the construction of the foundations of a zero-emission power system.  However, only with appropriate support from EU funds, Poland has a chance to avoid the loser scenario in the transformation process.

Tomasz Dąbrowski is the Director of PKEE and former Undersecretary of State in the Ministry of Energy (2018-2020).

The approach of the Polish government to climate policy has evolved in recent years from a complete denial of the need to conduct an EU climate policy to looking for the optimal way to adapt the country’s economy to new climate goals. The approach of energy companies has also changed from complaining about climate policy to adopting company strategies whose main goal is climate neutrality.

At the beginning of this year, the Polish government has adopted the new Polish Energy Policy until 2040. Thus, the path of transformation of the energy sector in Poland has been set. The overall transformation process of one of the largest sectors of the Polish economy, which uses hard coal and lignite in over 70% – has been based on three pillars: just transition, zero-emission energy system and good air quality.

The energy transition will be based on three pillars:

Source: Ministry of Climate and Environment, Polish Energy Policy until 2040, https://www.gov.pl/web/klimat/polityka-energetyczna-polski.

One of the major challenges on the way to achieving the objectives of the Energy Policy is how to reconcile the process of comprehensive transformation and adaptation to the ambitious climate policy of the EU (phase-out of coal and energy carriers) with the need to ensure energy supplies to consumers at affordable prices; how to reconcile the need to incur enormous investment outlays on new technologies with the need to maintain the competitiveness of the economy.

The transition towards climate neutrality is necessary and will undoubtedly bring many benefits. However, each transformation process has its ‘winners’ and ‘losers’ – the ‘winners’ benefit from the changes introduced, and the ‘losers’ bear the costs of these changes. What is needed for Poland, as an EU Member State, to not be a “loser” in the transformation process, but at least to break even?

 Just transition

The major changes require bold and wise decisions, a good plan, efficient management of the process and, above all, a lot of money. It is easy to make decisions that are spectacular but cost little both financially and socially. In other words, it is easy to declare support for increased CO2 emission reduction targets by governments of countries that use little or no coal, and it is more difficult to do when more than three-quarters of the country’s energy mix is coal-based.

A government can use many tools to create appropriate incentives and achieve the assumed goals. However, most of them mean various administrative bans or at least partially financing the costs of adjustment. And here we probably come to the crux. It is difficult to finance the entire transformation as the list of activities requiring financing is too long to be done only with domestic funds. Currently, the Polish government allocates over PLN 100 billion (EUR 25 billion) to transformation. Therefore, external funds, in this case, EU funds, are essential, because even with those funds we have identified a financial gap.

Expenditure that should be financed with EU funds ranges from financing the creation of new jobs in green sectors, combating energy poverty and investments in new low-emission generation. Some of them may be financed from the Just Transition Fund. However, it will not cover all necessary transformation needs, but only a small fraction of it, cause this tool is not primarily dedicated to the energy sector.

The scale of the energy transition process in Poland is one of the reasons why negotiations with trade unions in the mining sector in Poland took many months. The result is a social agreement that includes the phase-out of coal mines by 2049, state aid for the coal sector and social protection for miners. Ensuring appropriate financial resources will be a prerequisite for obtaining approval of the entire process and will ensure social peace in the sector directly employing over 100,000 people, a number comparable to the number of Polish armed forces.

Zero-emission energy system

So far, the power system in Poland has been based on large lignite or hard coal-fired power plants providing approx. 30 GW of generation capacity necessary to meet domestic demand. The system operated stably, and the availability of fuel from Polish mines was the best guarantee of energy security for domestic electricity consumers.

Under the Energy Policy, the current energy mix will be transformed to significantly reduce its emissivity. The share of generation capacities using renewable energy will be increased, from the current level close to 6.8 GW installed capacity in onshore wind farms and approx. 5 GW in photovoltaics.

In the years 2025-35, offshore wind energy will provide around 5.9-10 GW. Further decarbonisation of the energy mix will be achieved through the implementation of the Polish Nuclear Power Program, which includes between 6 and 9 GW of new capacity in nuclear technologies by 2050. Another issue is the development of gas-fired power plants, to ensure adequate backup power. All these investments are to make possible abandonment of coal-based electricity generation. However, it will be necessary to have an appropriate RES support system, favourable rules for granting state aid and fair regulations on sustainable financing.

Good air quality

Unsatisfactory air quality in Poland is probably the most noticeable and, at the same time, the severe consequence of using fossil fuels in small inefficient domestic sources. Worth mentioning, exceeding the air quality standards do not result from burning coal for electricity generation, but is primarily related to its use in the municipal sector for heating purposes.

To change this state of affairs, the Polish government allocated huge funds to the Clean Air program. Under this program, it is possible to apply for co-financing the replacement of old and ineffective heat sources based on solid fuel with modern heat sources which meet the highest standards, as well as for the necessary thermal modernization of buildings.

The Polish energy sector also contributes to the improvement of air quality by producing clean district heat in CHP plants from various fuels, including natural gas which share is gradually increasing.

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