The EU bogeyman
Looming large over – and within – Polish politics is the EU and its climate and energy policies. The politics of sovereignty is tightly bound in Poland’s wider relations with the EU institutions, which have been difficult since 2015, when Law and Justice came to power. On the one hand, Poland, as noted, met the climate targets set by the EU for 2020. On the other hand, the country’s lack of coherent strategy for the energy transition undermines its ability to shape European policy.
For the EU, energy and climate are among its most important areas of policy. Its strategic goal is to reach climate neutrality by 2050, the achievement of which will require a radical acceleration of the energy transformation process in all EU member states. And in 2019 it made a major breakthrough with the announcement of the European Green Deal, the implementation of which is to be supported by a comprehensive set of EU laws successively adopted as part of the Fit for 55 package. More recently, the pace and depth of the energy transformation have been influenced by EU initiatives launched following Russia’s war on Ukraine. In this context, the REPowerEU programme and the Strategy for an EU External Energy Engagement are of key importance, as they aim to achieve complete independence from energy supplies from Russia. REPowerEU is a particularly crucial EU plan aimed at both diversifying the sources of energy raw materials supply, as well as saving energy consumption in the EU and increasing the share of renewable energy.
In relation to Poland, the European Commission is trying to act in two ways. On the one hand, Brussels recognises positive actions taken in Poland to support the energy transition and strengthen energy security: It has praised the country for its development of renewable energy sources and diversification of sources of raw materials supplies. On the other hand, the EU expects Poland to go faster, including by implementing legislative changes resulting from Fit for 55. For example, the commission has, as noted, requested the liberalisation of Polish law on renewable energy sources to encourage onshore wind energy projects.
However, the key problem in Poland’s relations with the EU after 2015 is not so much the tensions around the EU’s energy and climate policy, but the overall approach of the current ruling elite towards the EU. Although officially Poland’s right-wing government supports the process of European integration, in practice it hinders EU activities in many areas under the pretext of protecting sovereignty. One of the key disputes between Warsaw and Brussels centres on reforms to the judiciary introduced in Poland, which were the subject of infringement procedures conducted by the European Commission, and then judgments of the European Court of Justice unfavourable for the Polish government. Tensions between Brussels and the EU in matters relating to the rule of law affect the dynamics of relations in other areas, and the confrontational attitude of the Polish government towards Brussels consistently weakens Poland’s position in the EU, including in negotiation processes regarding EU energy and climate policy. It also has an effect on the hard cash available to Warsaw. These unresolved legal disputes have resulted in the blocking of the National Recovery Plan, from which Poland could obtain €32 billion.
The Polish ruling camp’s lack of a clear vision and commitment on the energy transformation combines with this obstructiveness to mean Poland fails to punch its weight when it comes to the policy the EU agrees on. For example, legislative proposals put forward under Fit for 55 should be an opportunity for member states to work together to influence European energy and climate policy, both in its internal and external dimension. The final shape of laws in the EU emerge during negotiations in the Council and the European Parliament, and member states use this process as an opportunity to build intra-EU coalitions for specific solutions. Through diplomatic activity, they can strengthen their position within the EU.
Poland possesses some sound arguments that it could deploy to mitigate the costs of the transformation, particularly on issues related to the ETS reform or the carbon border adjustment mechanism (CBAM), which are still live matters. Yet the Polish government has so far been unable to develop a constructive stance towards negotiating Fit for 55 regulations. Instead of attempting to build coalitions (Poland was counting on the support of central European countries, among others) in favour of transformation-orientated solutions, as has often been the case, the government chose the path of negation and confrontation. This was illustrated by its vetoing of several pieces of legislation (such as Poland’s April 2023 vote in the council against the CBAM regulation and the regulation introducing changes to the ETS, and the March 2023 vote against the regulation on the ban on internal combustion cars). Poland is also challenging some Fit for 55 regulations at the European Court of Justice. These have proved to be futile displays of resistance.
There are signs of hope, however. Politicians from both the ruling camp and the opposition sitting in the European Parliament have worked together to negotiate regulations that take account of some Polish needs in the transition, such as on the final shape of the so-called methane regulation. This suggests there could be ways for political leaders to find consensus for a cross-party energy transformation strategy in Poland.
Were it to repair its relations with the EU, agree a coherent domestic policy approach to energy, and elevate this to the level of a national mission, Poland could be one of the biggest beneficiaries of European funds earmarked for this purpose. Used well, the money can help companies adapt, Polish households become resilient to energy price shocks, and the government mitigates social impacts. Resolving legal disputes between Warsaw and Brussels would create opportunities to obtain EU financial support in the field of energy transition – and see Poland step up on delivering the energy transition Europe-wide.
Poland and the emissions trading scheme
One of the most important issues in the implementation of Fit for 55 in Poland is the reform of the ETS. Under the scheme, each participating member state receives a package of emission allowances, which it can sell to companies and institutions that emit carbon dioxide, such as during the production of energy for their needs.
Poland has long called for reform of the system, mainly due to the high price of allowances, which at the beginning of 2023 broke through the historical barrier of €100 per tonne. Because the volume of emissions in Poland is higher than the allocated amount provided by allowances, the Polish government is forced to purchase allowances from third countries (in 2022, their cost was approximately PLN 33 billion, or around €7.1 billion). In the case of Poland, the ETS gap is one of the largest in Europe, if not the largest. However, both Warsaw and Polish energy companies criticised the reform proposals eventually presented by the European Commission. Poland also opposed the systematic abolition of free emission allowances (currently, each country has a pool of free allowances). According to the commission’s proposals, free allowances were to be gradually abolished, starting from 2026, and completely removed in 2034. The Polish authorities thus sought to avoid drastic cost increases that would have particularly impacted Poland, such as on domestic heating where a large proportion is still generated by coal. However, the proposals were eventually adopted in April 2023. If Poland does not speed up efforts to decarbonise heating and transport, these changes will have serious financial consequences for these sectors and thus for the entire economy. The effects of the reform are to be mitigated by the possibility of obtaining support from the specially created Social Climate Fund. Theoretically, it could be its largest beneficiary, but access to these funds is conditional on Poland’s preparation of a Social Climate Plan, for which each member state has two years.
How to achieve energy independence for Poland
Poland retains great potential to deliver decarbonisation at home, strengthening its own economy, improving its standing within the EU, and enacting the sovereignty that the Polish government claims to cherish. Regardless of the political make-up of future governments, however, the country can achieve all these goals by pursuing a number of crucial actions. The EU can also play its part to support Poland in its energy transition.
Recommendations for Poland: Establishing the mission
Agree a strategy or law to set Poland’s clean energy ambition
The most important task for the Polish authorities, regardless of the outcome of the parliamentary election in October 2023, should be to build a cross-party consensus for the energy transition in Poland. This should become a strategic goal in both domestic and foreign policy – on a par with the consensus reached by political elites to drive Poland’s accession to the EU and NATO. Setting this as a strategic goal would signal the seriousness of the challenge, one where political elites cannot duck the need to find compromise and agreement.
Such a consensus could take the shape of a political strategic document, or a law adopted by parliament. Building this sort of broad political consensus would increase the chances of delivering a successful energy transition strategy over the next three decades. The very process of negotiating such an agreement could also contribute to a certain easing of the existing intra-ruling camp dispute. The government should ensure that the process of working out such an agreement also involves companies operating in the most important economic sectors, along with trade unions, to convince them that the long-term economic transformation can improve Poland’s competitiveness in the world and bring significant economic benefits. Those devising such an agreement can draw on the interest of some miners’ trade unions in an arrangement that would enable employment in the wind sector in the event of a mine closure.
Resolve legal disputes with the EU and unlock funds for the energy transition
To mobilise the EU funding available to Poland, the government should bring about the earliest possible resolution of legal disputes with the EU institutions. This applies to funds from the National Recovery Plan, a significant part of which is to be allocated to energy transition projects. The government should also make use of other special instruments created within the EU framework to support the energy transition in the member states, such as the Social Climate Fund. This is intended to finance measures and investments supporting households, micro-enterprises, and transport users. Resolving legal disputes with Brussels would not only release EU funds intended for Poland to support the green transition, but would also allow Poland to start rebuilding its political position in the EU. This is necessary for Warsaw if it wants to strengthen its negotiating positions to influence other EU policies, but also in the context of shaping decisions made by the EU within the framework of the common foreign and security policy.
Improve the regulatory framework
To deliver the energy transition, the government needs to introduce more ambitious regulatory changes to develop the renewable energy sector. In this regard, it should further liberalise regulations on onshore wind projects and amend regulations for photovoltaics to increase prosumer benefits. In light of the ever more ambitious goals set for renewables in the energy mix at the community level, the Polish government should propose legislative changes that will make the implementation of solar projects more attractive to prosumers.
The authorities should also continue the My Electricity and Clean Air programmes but work to make them more accessible to the public by further liberalising the application criteria for these programmes.
Adopt a clear and more ambitious timeline to phase out coal
Decarbonising Poland’s energy mix will require the systematic reduction of the use of coal, above all by increasing the share of renewable energy. This should also be complemented by nuclear energy, from both large nuclear power plants and small modular reactors. Poland should additionally increase the production and use of biomethane and green hydrogen, especially in transport and heating, to support its pursuit of EU renewable energy targets. That being said, given Poland’s heavy dependence on coal-fired power plants (including in the socially sensitive heating sector), the best solution in the medium term would be to replace decommissioned coal power plants with gas-fired generation capacity. Increasing the role of gas as an intermediate fuel in some parts of the economy can take place not only thanks to infrastructure already completed such as the gas port in Świnoujście, but also by planned investments such as the construction of an LNG terminal in Gdańsk. At the same time, the authorities and energy companies should refrain from investing in building new coal blocks or modernising existing units.
Expand the electricity grid
In addition to investments related to reshaping the energy mix, one of the most urgent tasks for the government and state-controlled energy companies is to accelerate measures to expand the electricity grid. This is because the expansion of the grid would enable more electricity produced from renewable energy to be used. The authorities should also initiate and support actions aimed at expanding energy storage potential in Poland, taking advantage of the technologies available in Poland and the interest of energy companies. Investments in the expansion of the grid and energy storage would increase the chance of creating a more distributed energy system, which would not only be less carbon-intensive, but would also reduce dependence on fossil fuel imports.
Accelerate the process of energy efficiency improvements
Poland must increase its efforts to improve energy efficiency, especially in the context of regulatory changes taking place in the EU. Poland will also need to do this in order to gain access to EU support. The energy efficiency directive adopted in July this year introduces changes that condition access to EU funding on undertaking infrastructure modernisation.
To this end, Poland should continue programmes such as Clean Air, but expand their availability and increase investment in the mass thermo-modernisation of buildings. The government should also devise an energy integration strategy, which would plan for the energy system ‘as a whole’ – across multiple energy carriers, forms of infrastructure, and sectors. This would primarily be a strategy of electrification of heating and transport, but would also promote clean fuels such as green hydrogen or biogas.
The authorities should also aim to influence social habits. For example, the government should organise new media campaigns to promote energy-saving behaviour, building on, for example, recent efforts such as the “We save energy” campaign run by the Ministry of Climate and Environment in 2021 and continued in 2022 in response to the energy crisis.
Spend ETS funds appropriately
The Polish government should radically change its approach to spending funds obtained from the sale of carbon emission allowances. It should allocate 100 per cent of funds obtained from the ETS to the needs of the energy transition. Currently, the funds are mostly allocated for purposes not directly related to the energy transition such as subsidising tax breaks and modernising rail infrastructure.
Recommendations for the EU: Turbocharging the mission
Reach a compromise on a fair pace of transition
When drawing up new legislation, the EU and its member states should consider the specificities of individual countries and the objective conditions regarding the pace and depth of the energy transition. In the case of Poland, a fair pace of energy transformation should take account of the significant role of coal in the economy and in the electricity and heating sectors compared to other EU countries. A reasonable compromise could be for the EU to request from Poland a clear energy transformation strategy and a more ambitious plan to phase out coal than currently exists. In exchange, it would show willingness to make certain concessions regarding the operation of Polish coal-fired power plants over the next decade. A good compromise could be the consent of EU member states voting in the Council of the EU to extend the possibility of subsidising coal-fired power plants until 2028. Poland is strongly advocating for this and, since the legislative process related to electricity market design is ongoing, it will still be possible to reach an agreement.
Apply the principle of conditionality when allocating funds for the energy transition
Even with increased flexibility, the EU should not abandon the principle of conditionality in making the disbursement of energy transition funds dependent on compliance with the rule of law in Poland. EU institutions, in particular the European Commission, should closely monitor how funds are spent.
Engage more closely in promoting the energy transition in Poland
The European Commission should also become more involved in the promotion of Fit for 55 in Poland, taking advantage of the favourable attitude of most Poles towards decarbonisation. An important element of such a campaign could be to set the goal of achieving energy sovereignty, drawing inspiration from Poland’s already impressive feat of becoming independent of Russian gas. The campaign should also emphasise the positive impact of the energy transformation on electricity prices and the competitiveness of the Polish economy in the long term. It needs to do this to neutralise the negative message about EU energy and climate policy that sometimes comes from Poland’s ruling elite. In particular, the EU should become more involved in promotional activities, such as by carrying out information campaigns in the media available in Poland, including internet portals, radio, and television. This is particularly important in the face of recent information campaigns promoted or supported by the government that have presented EU activities in the field of energy and climate policy as posing threats to the Polish economy and society.
Conclusion
The energy transition is “a marathon, not a sprint”. Poland should treat the current energy crisis faced by it and other EU countries not as an excuse to abandon or slow the energy transition, but as an opportunity to accelerate it. There is no time to lose, because the implementation of systemic changes will not only help achieve climate goals, it will also prevent more serious energy and economic crises in the future. Equally importantly, by boldly undertaking the task of implementing the energy transformation, Poland has a chance not only to improve its economic competitiveness in the EU, but also to strengthen its political position. Ambitious Polish policy and delivery would help strengthen the EU in the face of current geopolitical challenges, especially in the context of Russia’s invasion of Ukraine and intensifying economic competition between the US and China. Poland should also muster the ambition to contribute to improving the competitiveness of the EU economy, and thus enhancing the economic power of the entire EU.
About the author
Szymon Kardaś is a senior policy fellow on energy within the European Power programme, based in the European Council on Foreign Relations’ Warsaw office. His analysis focuses on the geopolitics of Europe’s new energy environment.
Acknowledgments
The author wishes to express his gratitude to the many people who made this text possible. Thanks are due to both national experts working in the private sector and those in state institutions for their valuable comments and opinions on Polish energy policy. The author would also like to thank his colleagues at ECFR, especially Piotr Buras, Mats Engström, and Susi Dennison, for their extremely valuable suggestions on this text. Special thanks are due to Adam Harrison for his extremely insightful reading, excellent editorial work, and invaluable comments, questions, and suggestions.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.
Source link : https://ecfr.eu/publication/from-coal-to-consensus-polands-energy-transition-and-its-european-future/
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Publish date : 2023-09-27 07:00:00
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