“A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy by 2050 – A Clean Planet for all” presented by the European Commission has initiated a broad debate about defining the way Europe should be developing in the 2050 horizon. The Polish Electricity Association (PKEE) fully agrees with the idea of an EU policy assuming innovative and low-emission economy developed in line with the principles of sustainable development.
The representatives of the Polish power sector are actively working to challenge the effects of climate change. Over the last ten years, Poland has increased fourfold its electricity production from renewable sources (RES), reduced the share of coal-based fuels in its energy mix - from 95 percent to 77 percent, while at the same time reducing the greenhouse gas emissions level by nearly 30 percent with respect to obligations resulting from the Kyoto Protocol. This, among others, has contributed to the improvement of Poland’s emissions to the gross domestic product (GDP) ratio. Additionally, the substantial reduction of emissions achieved in Poland in other sectors, numerous ecological and environmental initiatives as well as other forms of activity such as the adoption of the Katowice Rulebook at the COP24 in December 2018, implementing the Paris Agreement – underline the huge commitment of our country to the promotion of pro-climate initiatives.
The postulate to develop a costs and benefits mechanism
According to the estimates by the European Commission, implementing the strategy will require an increase in spending to 2.8% of the European Union’s GDP, translating to EUR 520 to 575 billion a year in total for the entire Union’s economy. However, it is worth stressing that in its strategy published in November the European Commission did not present the costs to the individual Member States. In the opinion of the Polish Electricity Association, credible analysis of the proposed scenarios will be possible after the Commission presents the financial burdens expressed on the national levels, and not only on the pan-EU level. For the Polish power sector alone, the estimated financial investments will amount to EUR 215 billion over 2020-2045, including EUR 68 billion related to the cost of purchasing the CO2 emission allowances. At the same time, it needs to be pointed out that the above amounts do not include the expenditures relating to the extension of the transmission and distribution networks. We see a real necessity to develop a mechanism for sharing the costs and benefits related to the implementation of the vision of the EU low-emission economy. We point out the urgent need to develop a detailed map of burden sharing and elaboration of concrete dedicated solutions. The postulated mechanism could involve, among others, a new European Union’s budget envelope and significantly increased - proportionally to the new reduction ambitions – Modernisation Fund, Innovation Fund and the solidarity pool in the EU Emissions Trading System (EU ETS).
The issue of setting up a global CO2 reduction scheme
We also point out that the changes leading to the climate neutrality should be progressing in an evolutionary manner so as to guarantee stable conditions for the transformation of the European economy and not to interfere with the conditions required for its growth. This need stems mainly from the different starting points of the individual Member States on the way to achieving the emissions reduction target. The individual EU Member States will not be able to achieve climate neutrality all at the same time. Therefore, the European Union's pursuit of net-zero economy will require negative emissions in some Member States to be achieved. In this context, it is worth stressing that the strategy does not sufficiently address the issue of the implementation of new technology solutions as well as innovations concerning carbon capture.
In the electricity sector, the ever-increasing challenge will be the growing trade with third countries where the producers are not incurring the costs of the climate policy and of the RES support schemes. Thus, they are not subject to the Winter Package regulations. The Commission in its strategy does not also consider the fact that the costs of emissions originating in the countries not subject to the ETS should be taken into account in case of goods and services imported to the territory of the European Union. The Polish Electricity Association considers as justified the implementation of the carbon border tax. The PKEE is also convinced that only the global tackling of the carbon leakage problem can result in the actual benefit of lowering the level of harmful emissions on the global scale.
The different starting points and just energy transition
On principles similar to those of the EU ETS, relevant regulations could counter the establishment of preferential conditions to the economies of the countries that do not undertake tangible and effective emission reduction efforts. Due to the small share of the European Union in the global carbon dioxide emissions, of around 10 percent, unilateral EU’s action in this area, unfortunately, cannot lead to a noticeable improvement on a global scale.
The relevant conclusions should be made only after conducting a thorough assessment of economic (including financial) and social impact (not only on the general pan-EU level but also with reference to the specifics of the individual Member States and the diversity of the European regions). Moreover, of key importance are the results of the discussions under the Coal Regions in Transition Platform and defining the funding adequate to the needs. This will be possible not earlier than after the first evaluation of the assumptions of the provisions of the Winter Package. The evaluation has to reflect the total cost of implementing the new targets at the level of the Member States.
Due to their different starting points and energy mixes, the burdens resulting from the economic transition will be unevenly distributed across the individual Member States, indicating the need to develop a just mechanism of distribution of the burdens and benefits between the EU Member States. In this context, the Polish power sector – due to reasons beyond its control - will be exceptionally threatened with a loss of competitiveness resulting from the necessity to incur a further necessary significant cost of investments in the new generation capacities and operating costs – related to the purchases of emissions allowances.
Poland’s power sector is part of the European and global changes setting the new direction of growth for the entire sector. A low-emission economy is our common objective, we just have to make sure that efforts to achieve it have a real, effective and at the same time a safe impact on the Member States and energy consumers.