This article is part of our special report Energy poverty.
Citizens across Europe are currently struggling with the challenge of skyrocketing energy prices. Over the last year, the prices of coal have risen nearly three times, the prices of natural gas in European markets have risen even ten times in this period.
Adam Guibourgé-Czetwertyński is the Undersecretary of State at the Polish Ministry of Climate and Environment.
Surging energy prices translate into higher costs for consumers, either directly in energy bills or indirectly – through rapidly growing prices of other goods and services. Various Member States, including Poland, are introducing immediate measures to provide relief for their citizens and businesses. But urgent action at the EU level is also necessary. Following the discussion at the October European Council, the Commission is tasked with analysing the causes behind the energy price spikes, including potential manipulations on the gas and ETS markets.
On the EU gas market, the issue is pretty clear: the dominant supplier is not responding to market signals and is abusing its market position. In order to ensure security of supply, protect its citizens and businesses, the EU needs to act firmly against these practices, in particular through bringing actions under EU competition law. Equally importantly, the EU acquis must be fully enforced with regards to import infrastructure.
The rising cost of ETS allowances is an issue that often seems to be overlooked in Brussels. It is the crucial one for Poland and other CEE countries, as it has a significant impact not only on electricity but also on heating prices.
In Poland, about 5.8 million households, i.e. about 15 million people, make use of district heating systems. This accounts for about 40% of all households across the country. The district heating sector has been recently under strong pressure of cost drivers. Moreover, the district heating sector is particularly vulnerable to rises in the prices of emissions trading allowances. Given that coal is a key fuel in the district heating sector, the cost of emissions trading allowances, similarly to the prices of fuels, will result directly in the rise in the prices of heat for customers.
The problem is serious, especially for the most vulnerable households in countries like Poland, where winters tend to be long and cold. This social aspect is one of the reasons why we need effective safeguards against speculation and excessive increases in the price of ETS allowances. The role of ETS is to promote cost-effective emission reductions, not to drive businesses into bankruptcy or citizens into poverty in the meantime.
Poland’s energy system is undergoing a far-reaching transition. We are heavily investing in energy efficiency and in renewable energy sources. But wind and solar depend on weather conditions, so they need backup. Energy storage solutions can help to integrate renewables, but the high costs of batteries and limited availability of critical minerals are important barriers in their development.
In Member States still dependent on most emissive fuels like coal or oil, natural gas will be the optimal transitional solution for the years to come. It enables rapid reduction of CO2 emissions, eliminates air pollution and helps to stabilize electricity grids, allowing fora growing share of renewable power. When it comes to large-scale district heating, a switch from coal to gas is currently the only viable way to reduce emissions and keep homes warm at the same time.
We need a positive investment climate for all low-emission and transition technologies. This is why it is so important that the Commission urgently adopts the complementary delegated act, allowing for the inclusion of nuclear energy and gas in the EU Taxonomy.
COP26 in Glasgow sends a clear message: the worldwide emissions gap needs to be significantly reduced. The “Fit for 55” package, tabled by the Commission this summer and currently under discussion in the Council and Parliament, will be key in delivering emission reductions in the EU. But we need to look carefully at each measure from the “Fit for 55” proposal and ask ourselves a few simple, but important questions. Is it likely to increase energy poverty? Could it put an excessive burden on our businesses or citizens? Will it really be helpful in cutting our emissions and carrying out a successful and just transition?
If the risk for consumers is high and the emission reduction potential is low, then perhaps we should be looking for alternative solutions. For example, rather than extending ETS to buildings and transport maybe we should focus on improving EU-wide standards? Perhaps Member States should retain flexibility in energy taxation if it allows them to reduce energy bills and prevent further energy poverty?
Our climate and energy policy needs to be ambitious but also socially acceptable. Putting too much pressure on households and individual consumers may lead to social rejection of the EU’s climate goals and undermine the whole transition effort. In response to the current energy price crisis, Poland is working on introducing a compensation mechanism dedicated to vulnerable households. But we need European solutions as well. If we want the EU climate policy to be truly successful, we must ensure that no one is left behind.