Is the end near for Polish coal?

In 2019 coal accounted for 74% of Poland’s electricity generation, one of the highest levels in Europe. This was despite increasing awareness and hostility to the negative externalities generated by coal, both in production and consumption. Domestically, the Polish government has also released plans to try and move away from coal, such as through opening nuclear power plants. Meanwhile, the EU is working on plans to raise the prices for carbon dioxide emissions; moreover, the pandemic has reduced demand for coal across the country, due to reductions in services and production. Could these events help expedite the end of Polish coal?

In September 2020 it was announced that the Polish government was planning to continue with building its first nuclear power plant by 2033, with an estimated cost of 40 billion USD. This could provide a viable energy alternative to coal and lower emissions across the country, whilst also creating jobs. In addition, the Polish government recently sent officials to Katowice, a major mining town, with a plan to reform the mining sector, although the plan was shut down by union officials according to the Financial Times. Despite the plan falling through, the initiative by the Polish government shows there is real intent to enact change within the industry and pivot towards a greener future. In 2019, a Polish court ruled that the Polish state-controlled energy group Enea could not participate in building the country’s last coal plant, further highlighting the country’s attitude and awareness around the issue.

There are other features of Poland’s energy sector that could be reformed. The Financial Times’s Central Europe Correspondent James Shotter suggests the removal or reforming of policies that are currently stymieing the growth of Poland’s onshore wind sector. This sector contributed just 10% to Poland’s total electricity production in 2019. Renewables as a whole are supposed to contribute 36% to the grid by 2035, as reported by the International Renewable Energy Agency.

The EU may also play a large role in the future developments of Poland’s coal industry. The EU’s current climate policy mandates that companies pay for their emissions as part of the emissions trading scheme. This has made coal production increasingly unprofitable. Poland’s biggest coal group, the state-run PGG has lost 427 million PLN (approximately 122 million USD as of 06/11/2020), due to increasing costs and competition from cheaper Russian coal. The Financial Times reports that the EU is also considering enacting even tougher climate laws and 2030 emissions targets, which will likely send the costs of coal production even higher.

The EU could also help in Poland’s transition to green energy. On 29 June 2020, the EU Commission announced that it was launching the Just Transition Platform (JTP), to help member states in transitioning away from polluting industries. This allows members to gain access to 150 billion EUR funding to aid the transition, with the JTP also providing technical and advisory support for stakeholders in coal regions. Support can include supporting ‘clean energy research and development, retraining of workers, environmental rehabilitation, and the reduction of emissions at carbon-intensive industrial facilities’, as reported by Yale University. This will be especially helpful for Poland, with over 80,000 workers employed in the coal industry and it contributing to a large part of some regional economies. Silesia, a region in southern Poland for example, had coal contribute to 6.9% of the region’s gross value added (GVA), a metric gauging the value of goods and services produced in a region.

Like many industries across the world this year, the Polish coal industry may be facing a steep decline. The COVID-19 pandemic has highlighted weaknesses in terms of profitability and accelerated plans for further emissions reductions. In Poland particularly, the Polish National Centre for Emissions Balancing and Management estimated coal plants are responsible for 31% of the country’s nitrogen oxides emissions and a recent report by the World Health Organisation and the Organisation for Economic Co-operation and Development estimated that health costs from air pollution are equal to 20% of GDP. Yet despite the issues of over-reliance and transition difficulties, there is a path forward for Poland on from coal in providing greener alternatives for Eastern Europe’s largest economy. This path could be lucrative, especially with the backing of other European states and the EU framework for transition.

 

By Gregor MacDonald

Sector Head: Jared Gibson

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