The true cost of coal in Poland

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

Poland needs to move away from coal towards clean, modern energy investments [Greenpeace Switzerland/Flickr]

Poland appears to be the only country that wants the UN Climate Change Conference aimed at putting a legally binding cap on global warming to end in failure, writes Anna Dubowik.

Anna Dubowik is head of Poland at the Change Partnership. 

2015 will be a pivotal year in the history of humanity’s fight against climate change. The biggest polluting countries will present national greenhouse gas emission reductions as part of a new and inclusive international architecture to combat climate change. On the face of it, Poland seems to be the only country wanting these negotiations to end in failure in order maintain and possibly intensify its dependence on coal.

There are many factors behind this of, which the threat of rampaging trade unions is the most menacing, especially to local and national politicians. Polish trade unions have threatened “smoke in the streets” if the government unable to bail out Europe’s largest coal producer and loss-leading company by the end of September.

The problem is that Polish coal is party effected more by international competition and inefficient production rates than international climate change policy. But this seems to have little sway against organised unions who will play a key role in the national elections which are to be held in October. The new government will have to give the coal miners what they want, or at least allude to it.

The current government has been unable to convince the partly state-owned energy utilities to invest in this new bail out package which involves taking ownership of the coal mining company. This is because these energy utilities are partly private companies which need to demonstrate profitable and sustainable investment to their shareholders. The first half of 2015, the coal mining company posted a net loss of 1.445 billion zloty, according to the Polish Industrial Development Agency. This was almost double of the losses from mid-2014.

The Warsaw Institute of Economic Studies (WISE) recently outlined, in its report entitled ‘Hidden bill for coal’, subsidies for coal mining amounted to ?69 billion zloty in the period of 1990-2012, one third of which were debt remittances. This does not include the subsidies to mining pensions and social security payments which in the same period amounted to 67 billion zloty.  This was nearly a quarter of the Poland’s GDP in 2014.

There are three dynamics the Polish government will have to contend with, whatever political party they come from. The first relates to strict European rules on state aid. The conflict with Brussels is inevitable. Unless there is considerable restructuring of mining in Poland, the kind of which has been delayed for the last 20 years, the outcome is inevitable too.

The second challenge is the need to replace ageing energy infrastructure. Here the choice is between infrastructure that will lock Poland into the past and reliance on coal or a modern, flexible grid able to give Polish citizens the kinds of energy services that others benefit from in the developed European counties. If the wrong infrastructure is built, it could generate substantial stranded assets and have a significant impact on economic prosperity.

The third challenge could be the most important in that it centres on the strategic use of significant one-off EU funds created especially for Poland other poorer EU countries to catch up with richer EU countries.

Poland will receive about 40% of ETS allowances from the new Modernisation Fund. This amounts to about 120 million EU Emissions Trading System (EU ETS) allowances worth €2.4 billion at an ETS price of €20, which is to be used to support deployment of renewable energe, energy efficiency and flexible grids. These funds together with EU ETS financing referred to as ‘Article 10c’ gives Poland a unique chance to invest in genuine diversification and have a clear pathway of booming a forward-looking, modern, efficient, flexible and secure economy. 

It is the job of European policymakers to help Poland realise its true potential. This will require long term planning and strategic vision. Essential ingredients for the new government. Revising the recent Silesa regeneration plan into a real package of credible, modern and clean investments is the first step to avoiding ‘smoke in the streets’ today and tomorrow.

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