European values and the drive for climate neutrality

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Henryk Baranowski is President of the Management Board of Polish Energy Group (PGE) and CEO of the Polish Electricity Association (PKEE). [PKEE]

On July 10th in Brussels, the Polish Electricity Association will host the second edition of ‘Summer Day’. The 2019 theme will be Baltic Offshore: Regional answer to the EU energy transition.

Henryk Baranowski is President of the Management Board of Polish Energy Group (PGE) and CEO of the Polish Electricity Association (PKEE).

While Europe’s energy transition puts into practice the values of sustainable development and stewardship of natural resources, it must also uphold two other key European values: fairness and solidarity. As European Union leaders pointed out in their new Strategic Agenda (2019-2024), the EU can and must lead the transformation, yet in a way that takes account of national circumstances and is socially just. We need to ensure that no one is left behind.

The EU focus on environment and climate needs to be related to economic development embedded in modern and clean industry, investments in research and development and collaboration of science, academia and business. Nevertheless, at the same time there is the requirement to support countries in a difficult and demanding process of transition. This is the spirit of ‘just transition’.

The goal of climate neutrality by 2050 is noble, achievable and urgent. But as we press forward down the path to decarbonisation, it’s easy to forget that different countries are starting from different points. And failure to recognise this can lead us to impose unfair burdens on poorer Europeans. Just as the benefits of a low-carbon economy will accrue to all EU citizens, so the burden of this transition must be weighed up and distributed on a continental scale, not a national one. The discussion on just transition should therefore be part of all climate discussions and not perceived as an alternative to it. If the transition is unmanaged, unjust and the inconvenient concerns are brushed aside, social resistance and unrest is the kind of the blow-back leaders will have to deal with.

Consumers and companies in Member States with per capita GDP below the EU average can’t afford to bear the entire burden of their energy transition in the form of higher electricity prices – especially in regions where energy poverty remains a persistent problem. That means the EU must provide significant financial support for the investments necessary for the transition and to decrease the burden vulnerable populations and regions are facing.

For reasons of history and geography, Poland, Germany and other Central European countries are more dependent on coal for power generation than our Western fellow members – even after a quarter-century of efforts to reduce this dependency. Poland entered the transition with an energy mix almost entirely reliant on one fuel: coal. But other energy sources are now being developed as Poland’s economy grows. The country has cut particulate emissions by 75% in over that period, but our dire starting position after the 1989 fall of the Berlin Wall, and the numerous other challenges of the transition to democracy and a market economy, mean that we still have a lot of catching up to do.

This is why Poland has called for a dedicated Just Energy Transition Fund for coal-dependent regions throughout the Union, and greater funding for infrastructure projects, as part of the 2021-2027 Multiannual Financial Framework. Greater resources for the power sector from the Cohesion and Regional Development funds could also help ease the transition. Europe also needs a range of social policy measures, such as reskilling so that workers are able to access the new opportunities provided by the transition.

For our part, we’re working hard to catch up. The latest national energy and climate strategy calls for reducing 2030 emissions by 30% from 1990 levels. Further in line with the draft “Energy Policy of Poland until 2040”, the power sector is changing and envisages offshore wind generation capacity of 5 GW by 2030 and 10 GW by 2040 and almost 2 GW of solar power generation by 2030. Our country’s first nuclear power plant is planned to come online in 2033. Gas fired power plants and biomass projects are also well under way. Growing electricity demand will increasingly be met with sources other than conventional coal-fired power. The share of renewable energy in the Polish mix is increasing. It is driven not just by our pursuit of targets to reduce carbon emissions, but also because a significant share of existing power units are approaching the end of their lifespans. It also results from the need to diversify the energy mix and from technological developments. Poland wants to make sure that in the future is using proven new energy sources and modern solutions. That’s why there are high expectations for a technology breakthrough that will allow for energy storage, the stability of supply and grid management in the emerging era of distributed energy systems. Poland’s actions in recent decades, and our plans for the coming years, demonstrate that we share those European values of sustainability and stewardship.

Still, the cost of upholding those values is considerable. Around 2% of the EU’s GDP is invested annually in the continent’s energy system and related infrastructure today. This will have to rise to 2.8%, or around EUR 520-575 billion annually (excluding investments related to the vehicle stock). In Poland alone, the cost of full carbon neutrality is estimated at EUR 147 billion, excluding the costs of stranded assets and EUR 68 billion-85 billion of CO2 costs in 2020-2045.

The issue of security of supply is also key. Poland is understandably concerned about the reliability of gas supplies from Russia, and faced with the reality of this threat, successive Polish governments have decided that retaining coal-fired generation capacity is the surest way to ensure stability. That helps to explain why Poland is in its current position as it begins the shift to renewables, and that reality must be taken into account when considering the financial impact of the change.

In drafting policies for a fair transition to a low-carbon economy, we must also take care that we don’t simply shift emissions to poorer countries outside the European Union. We must consider measures such as a tax on “imported emissions” to ensure that energy-intensive industries throughout the EU are protected from unfair competition and a rush to relocate to countries with lower standards. The transition to a low-carbon economy must be geared to improve the competitiveness of the continent’s weaker economies, not to destroy it. This should be considered in the light of ETS reform when re-examining current market tools.

Members of the incoming European Parliament and European Commission have a historic opportunity to ensure fairness and solidarity in the transition to a low-carbon economy. The stakes are high. Failure to spread the cost of the transition in an equitable way could exacerbate energy poverty or doom the European economy to decades of lower competitiveness.

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