COP24 – Poland’s Credibility Test

27.11.2018 | By Wojciech Jakóbik

The Katowice climate summit is an opportunity to present a new face of the Polish energy industry. Polish Energy Policy 2040 which has been released a few days ago is to be used for this purpose. This is only a draft amendment to the Strategy which has been now sent for public consultations and is expected to be adopted by the government next year. The summit will be a test of the credibility of the Polish government’s declarations. But the uncertainties of the energy Strategy may give rise to allegations that Poles, trying to protect their status quo in the energy industry, undertake facade actions for image purposes only.

Poland will be a host of the climate summit for the fourth time in history. COP24 in Katowice is the 24th meeting of the parties to the United Nations Framework Convention on Climate Change (UNFCCC). The Convention imposes on its parties an obligation to reduce greenhouse gas emissions. The Kyoto Protocol, which supplemented it, regulated emission limits for the signatory countries between 2005 and 2012 but expired at the end of 2012. The document required the reduction of emissions in industrialised countries, but it was not fully implemented. Some of the country signatories of the protocol did not ratify it at all (USA). Others, like Canada, withdrew from it in fear of sanctions. Poland has fulfilled the Kyoto commitments. The goal was to reduce emissions by 6%, but, as a result of the radical transformation of the Polish economy, the country decreased emissions by 33%.

EU Will Talk on Behalf of Poland

The Paris Agreement of 2015 is expected to be a more effective successor of the Kyoto Protocol. It requires the COP24 participants to undertake emission reduction commitments to limit the average temperature increase in the world below 2 Celsius, preferably, up to 1.5 Celsius. It is expected to happen through the introduction of national action plans reducing emissions. A review of reduction goals and presentation of progress reports will be conducted every five years. There is a number of activities that will be performed, not only in order to limit emissions, but also to adapt and mitigate climate change, and support developing countries which are, on the one hand, at the risk of losing even more because of the climate change and, on the other hand, make a loss because of decarbonisation.

The European nion represents Poland and other member states during the climate summits. The host of the summit, this year- Poland, is reUsponsible for building a consensus around a common goal, which is the adoption of joint, binding commitments to reduce greenhouse gas emissions.

This is the reason why Warsaw will have a limited room for manoeuvre to advocate for its interests. But, at the same time, there will be some expanded opportunities for the country to promote its solutions and views on the global climate policy. EU negotiators will be in favour of ambitious solutions aimed at reducing emissions.

Member States adopted energy and climate packages setting emissions limits by 2020 in, among others, the energy sector. The packages require a reduction in greenhouse gas emissions by 20% compared to 1990, an increase in the share of renewable energy resources to 20% at the level of the European Union with specific national targets, as well as an increase in energy efficiency to 20%. Their implementation is to be supported by the EU ETS emissions trading system, which requires entities emitting carbon dioxide (the primary anthropogenic greenhouse gas) to pay for CO2 emissions by purchasing a permit from the system. Excess from this reduction can be traded on the market. Poland and other countries of the ‘New EU’ were given a pool of free permits which they are successfully trading in.

Energy Will Be More and More Expensive

A severe challenge for the EU ETS is the economic slowdown in the European Union which led to prices’ drop of the certificates. They attained a level which does not encourage suppliers to reduce emissions. For this reason, a market stability mechanism will enter into force in 2019. The mechanism will raise certificates’ prices and, thus, encourage reductions. It means that the fight against emissions will increase energy costs in Poland relies in four-fifths on coal, the most emissive source.

The climate policy will affect domestic energy prices, something that we have already seen in 2018. The electrical energy price in wholesale is about to reach the level of 300 PLN per MWh while in 2017 the cost of it was 150 PLN. It means a decrease in the competitiveness of energy produced in Poland, which prompted giants such as ArcelorMittal Polska to look for cheaper providers abroad.

The government intends to mitigate (this is a scientific term) the impact of climate policy on energy prices through the use of funds from EU ETS trade which is now on account of the National Fund for Environmental Protection and Water Management. These funds are to be used to grant compensations for the increase in energy prices in households. While this solution is consistent with the goal of combating energetic poverty as enshrined in climate regulations, it may be blocked by the European Commission as unauthorised use of public aid.

During the climate summit in Katowice, the Polish energy industry will be torn between a mutual consent, which has been already supported by Warsaw and which stipulates that climate change should be slowed down through reduction of emissions, and the dispute over how and at what pace the changes should be conducted.

On the one hand, domestic electric power industry companies, under the control of the state, warn that too radical climate policy will take away from them the funds that were to be used for modernisation. On the other hand, they want these funds to be used to maintain their position on the domestic market by artificially lowering energy prices with the help of the compensations mentioned above. They also expect that the EU Modernisation Fund will be used to modernise coal energy, in addition to investments which aim is to move away from it.

Furthermore, on the domestic level, Poles introduce a mechanism for subsidising this energy on the energy market. It means that the surcharge for the availability of power plants, which is included in the electricity bill, will additionally raise energy prices. Such a policy will lead to a reluctance of the supporters of the most ambitious climate policy, that is, the European Union countries from Western Europe. But it will probably find a listen among the advocates of moderate solutions from the USA or China.

However, the fact that Poland is the host of COP24 may put it in an embarrassing situation where it will be forced to choose between national interests and the goals of the summit, which is to establish binding commitments. Polish officials will not be willing to present themselves as brakemen, but they will certainly not support the most radical solutions, such as the green tax, that is, a surcharge to the energy bill that would serve to promote OZE

As the adoption of commitments will require consensus, it means that there is possible a scenario where unambitious global goals are agreed on to reflect Polish interests. Otherwise, there may be no breakthrough, and we will have to wait until the next summit.

The Strategy of Energy Development is Still Uncertain

On the eve of the summit in Katowice, the Minister of Energy presented a draft of Poland’s Energy Policy 2040 (PEP 2040), which modifies the energy Strategy included in the previous document (PEP 2030). In the text Poland declares the path towards decarbonisation in the energy sector. The revised Strategy assumes that the average CO2 emission from power plants in Poland will fall from 863 kg CO2 / MWh to 394 kg in 2040. It will allow developing less emissive heating, renewable energy resources (photovoltaics and offshore wind farms), as well as a construction of a nuclear power plant that would produce 1-1.5 GW of power in 2033. Poland, in accordance with the Strategy, will not support the development of wind energy on the land. According to the drafters of the Strategy, the windmills are highly emissive because the conventional power plants need to ensure energy supply in the event of worsening of climate conditions required to produce energy by panels or windmills.

The Strategy assumes limiting the share of coal in the energy mix from 80 to 60% by the year 2040. This point will, once again, trigger criticism of the most ambitious participants of the debate in Katowice and gain an understanding of those who also have a lot of coal despite the declarations of will to reduce its share, including China and India.

Despite the controversy, the presentation of the PEP 2040 means that Poland presented its prescription for reducing emissions from the energy sector even before the climate summit. The problem, however, remains in the details as the said document is not yet final and has only been sent to public consultations. The Council of Ministers will discuss it in January 2019, the earliest. The proposals of the Ministry of Energy are not binding and can be undermined by the government’s next year’s decision. For example, it may be assumed that the model of financing a nuclear power plant, which has not been developed so far, will be impossible to implement or accept, and that nuclear energy will fall out of the energy mix. That is, a list of energy sources predicted in the PEP 2040 project.

The confusion around the energy development Strategy puts in a negative light the Polish presidency which declares the willingness to introduce decarbonisation and conducts, in my opinion, a successful PR campaign.  Lack of a reliable document can, however, lead to accusations of mocking actions and effectively divert attention from the desired image-related activities. Polish energy companies want to present in Katowice Poland’s potential in the electromobility and heating sectors, pioneering solutions in storing energy and other areas. The aim is to convince the participants of the Summit that the Polish power industry is changing and will emerge even stronger from decarbonisation. Meanwhile, the uncertainty of the energy Strategy may give rise to accusations that Poles are undertaking facade actions for image purposes and seeking to protect their status quo in the energy sector. This problem can be solved by one specific declaration expressing support for the Strategy from the Polish Prime Minister.

For the Polish interests, the answer to the question about the development model that Poland wants to adopt regarding the irrevocability of climate policy is key. If we assume that this policy is a global enterprise, accelerating rather than slowing down the pace, then it should be considered that it will involve the necessity of further decarbonisation in the energy sector.

The solution proposed by the Ministry of Energy may be revised just after the Summit. The government will, thus, have to choose between cheap energy, conditioning current economic development, and stable energy sources that will provide its future security. If it was only about cheap energy, the solution would be a rapid increase in imports from abroad. It would be then necessary to close national production capacities including important power plants in the so-called ‘cold reserve’ allowing them to be used in the event of a supply crisis. PEP 2040 emphasises domestic production capacities. Poles must convince the COP24 participants that their energy Strategy will be passed by the government and will provide jobs in energy companies owned by the state. It will also ensure lower energy prices in the foreseeable future. It is a matter of Poland’s credibility at the COP24 Summit in Katowice.