The Climate Veto

Brussels, Thursday, 20 June 2019. Prime Minister Mateusz Morawiecki vetoes the European Council conclusion on the 2050 full decarbonisation objective. Poland objects, alongside Czechia, Hungary and Estonia. Climate neutrality must be achieved by 2050, “for a large majority of Member States”, reads the European Council conclusion’s footnote.

Mateusz Morawiecki in Brussels, 21 June 2019. Source: Council of EU

Mr Morawiecki: “Today we did not agree on the additional, more ambitious climate objectives and we have secured the interests of Polish entrepreneurs, citizens who would bear the risk of additional taxation, costs and we could not agree to it”.

Prime Minister says: “Decisions taken at the EU summit and ongoing discussions are in the interest of Poland”. During the summit Mr Morawiecki is said to have a “frank and honest” interaction with the French President Emmanuel Macron. Apparently the German leader, whose country only recently joined the group of states seeking climate neutrality by 2050, was a more passive interlocutor in the debate.

Morawiecki’s main point is that the 2050 objectives are declaratory and unclear. Before he agrees to them, he needs to know the costs of the energy transition. “We need to know what funds we will receive for the modernization of various sectors of the economy, so that any changes and new commitments that may arise – for example as a result of the EU climate policy – reflect the state of economic development and our challenges, as well as our risks”, says the Polish premier to the media.

“The energy transformation related to climate change and the adoption of possible new goals must be fair, it must be responsible, and this means responsibility for our citizens, for energy costs, for the costs associated with additional risks through new objectives”, he continues.

You may think Poland=coal, but the real problem and the real reason for the government are the rising energy prices.

Warsaw, 18 June 2019. Prime Minister Morawiecki announces a new financial support for the energy-intensive industries. They shall receive 1.9 bn zł, or 450 million Euro subsidies to counterbalance the EU ETS’s CO2 permits.

This move has been expected since January, when the energy prices were fixed for the individual consumers, but not for businesses and the local government. Since the beginning of the year the Polish government has been negotiating with the Commission what kind of solution it could offer to the energy-intensive business in order to avoid the accusation of disproportionate public assistance.

Morawiecki says the move will “save jobs in the industry”. The Polish ministers add sometimes that Poland missed out 50 years of normal economic development. Meanwhile some Western countries are hypocritical as they have outsourced the heavy industries to Asia and import goods from factories which pollute other people’s air… while not being accountable for the pollution. The Polish government does not want the heavy industry to emigrate from Poland.

EU Emission Trading System (ETS) is to blame

The government initiative is a response to the EU ETS forcing the costs to rise. There are some 1.3 million people working in the energy-intensive industries. Collectively they amount to about 11% of the national GDP and consume 20% of national energy consumption.

Jadwiga Emilewicz, the minister who is tipped as one of the candidates for the next EU Commissioner: “The EU climate and energy policy has caused a jump in the price of CO2 emission allowances. This increase will particularly affect enterprises from the energy-intensive sector. This is threatening their profitability and market position. In the case of the [energy-intensive] companies, the energy expenditure accounts for up to 40 percent of the total company costs”.

Ms Emilewicz ministry is Entrepreneurship. The ministry wrote about the new initiative as addressing the following problem: “As a result of EU regulation, the level of costs of these allowances is constantly growing. Compensation will help our industry maintain its position in competition with foreign countries”.

In the recent EP campaign a leading Law and Justice (PiS) candidate from Silesia, the coal country, Jadwiga Wiśniewska MEP, has been talking about “EU climate policy is a security threat for Poland”. She is not alone in her views. Ms Wiśniewska has been re-elected.

In the meantime Poland is nowhere close to reach it’s 20-20-20 objectives by 2020, most notably in the share of the renewable energy in gross energy consumption. Instead of rising, the share is decreasing since PiS took office: 11.7% in 2015, 11.3% in 2016, 10.9% in 2017. The national target is 15%. Back in January the government said it publicly: Poland will NOT meet its renewable target by 2020.

Et alors?

The Polish government is blaming the EU climate regulation for undermining the competitiveness of the Polish economy. The government only wakes up to the idea of climate change being a threat to the Polish security. Instead it is the climate policy that constitutes a threat.

How to address the problem? The government’s response is to mitigate the high costs with a mix of subsidies, delays and vetoes. The PiS politicians who are not sitting in the EU Council or the European Councils are more direct, but short of saying this: “Poland should withdraw from the climate package”, or at least renegotiate it. This used to be the view of the entire Law and Justice when in opposition back in 2012. Today the far-right Robert Winnicki MP agrees: “If Poland does not terminate the climate package imposed by the EU we will have a collapse in the energy production and we will have huge increases in electricity prices”, Winnicki warned in 2018.

Maciej Małecki, who is MP with PiS, says in 2018: “Although the increase in energy prices is not yet perceptible for the Polish society, nobody has any doubt that it will hit us like a ‘tsunami wave’. The European Union, which manipulates CO2 emission norms, puts a hand to this. In the European Union we observe an attempt to manually control the energy prices by limiting the supply of allowances authorizing the CO2 emissions. If a significant number of these allowances is removed from the market then the prices of CO2 allowances jump up and this is a significant component of the price increase”. Mr Małecki chairs the Sejm’s Energy and Treasury Committee.

Everybody sees the consequences of ETS, nobody remembers the reason why ETS was created in the first place. The purpose of ETS was to incentivise business to cut emissions by forcing the fossil energy prices to increase. This is meant as an instrument which favours non-emitting energy production.

Meanwhile the Polish government did everything in its power to de-incentivise the renewable energy production at the beginning of its mandate in 2016, especially the wind and solar power-making was first frozen, and many investors have withdrawn from the Polish market. Only in 2017-18 the process of de-incentivisation stopped, and now, maybe the green power may grow again.

The main reason for that change is the change of public mood, especially in the context of the quality of air. About 66% of Poles consider renewable energy sources “the main source of energy in the future”, including over 50% of PiS voters.

Still, the reflection in the Law and Justice is slow, mainly due to its socio-economic ruling coalition, which includes the powerful mining trade unions, the coal mining companies and the power plants based on coal. There are some 171 coal-based power plant blocks in 37 locations in Poland. They are generating 80% of the Polish power. 5 new blocks are under construction (Opole x2, Jaworzno, Turów and Ostrołęka) and 2 further have been announced (Puławy, Gubin), according to the Global Coal Plant Tracker.

The Polish dependence on coal is producing strange effects. The number of power plants increases, but the domestic production of coal goes down. In effect, more and more of coal is imported from abroad. So goes the principle of self-dependency when it comes to energy sources.

The Polish middle way strategy could be a fast increase of the gas-based power plants. There are more gas imports into Poland from Russia and beyond via the Świnoujście LNG terminal (from i.e. Qatar and US). There is a massive gasification process – building the necessary infrastructure which shall bring the natural gas to 90% Poles by 2022. This could both reduce the CO2 emissions from power plants (some of the coal power plants are being re-build into natural gas-based plants) as well as from domestic heating systems (frequently poor quality coal). In effect it could be that the quality of air in Poland improves, but not due to the renewables.

Not yet. Hence, the climate veto.

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