The Challenge of Climate Change - Opportunities, Threats, Hopes
and Achievements: a Polish Perspective
Speech by Marcin Korolec – Polish minister of environment
London, 15 November 2012
Ladies and Gentlemen,
First of all let me thank the Embassy for making this happen and you, the audience for coming here to listen. I’m glad that I have the opportunity to present the Polish take on the climate policy here in London, the capital of the country pushing for quite radical climate policy objectives, at least from our perspective. Hopefully I will be able to explain our point of view and at the end we will have a good discussion. And I’m sure that some of you will leave this room with better understanding of the Polish position which does not have good press in certain parts of Europe today.
For some time already Poland has got this image of an anti-climate policy nation. We have collected many awards, mainly from the green NGOs for being stubborn mostly at UNFCCC meetings. This reputation we have stems mainly from the fact that we were quite tough negotiating the energy and climate package back in 2008; that we had a different opinion on the conclusions on the Low Carbon Roadmap 2050 back in 2011 and again last March; and that we call for prioritizing of global negotiations over the EU unilateral target culture. And this is it, really. The Polish status of enfant terrible explained in one sentence.
In any other field we are praised and hailed all around Europe and the world. Our economy has been constantly growing since 1990-ties. The GDP has increased by around 150% while the GDP per capita increase is even more impressive – almost 200%. Our companies are successfully competing on the European internal market and slowly carving out their share in the foreign markets although we do not yet have the likes of BP and Marks and Spencer. The financial sector is healthy and resisted well the financial crisis. Unlike the UK, we didn’t have to bail out the banking sector. The infrastructure developments since 1990-ties are immense. The unemployment rate is in check just around 13% which is a significant drop from the high of around 20%. All in all Poland is slowly becoming an important player in the region and beyond. We successfully organised the European Football Championships last summer and the next test for our growing aspirations will be hopefully organizing the climate COP next year in Warsaw. I hope see you some of you there.
Taking the robust nature of our success into consideration one might ask why the climate policy is so different and why it is not a prominent part of the Polish success story. Well, I may be controversial here but I dare say it is NOT different. And it is my big task as the Polish minister of environment to explain this as clearly as I can to our partners around the world. This is also why I’m here today. Let me focus your attention on three main points.
First of all, the achievement so far. It is worth recalling that under the Kyoto Protocol UK is supposed to cut the greenhouse gas emissions by 12.5% and according to latest figures you managed to achieve an impressive 26% cut. How do we compare against this staggering performance - the coal-black nation bashed by so many for its climate policy. Well, we had a target of 6% but we achieved 30%. If your ministers want some advice on that I will be happy to help.
Some experts say that these reductions were caused not by dedicated efforts but by the collapse of the inefficient part of the industry. In Poland this argument is simply frowned upon. Our effort cannot be so simply dismissed. Emissions were reduced and it is a hard fact. It took a lot of effort and significant cost to restructure the economy and this should not be taken lightly. The example of the coal industry is the most telling one. We didn’t have Margaret Thatcher but since signing Kyoto, the employment in the coal mining sector was cut by a striking 74%. At the same time production dropped by almost 50%. Hyperinflation and raving unemployment also featured when we were rebuilding the economy. Believe me, transition from centrally planned economy to a market economy is not an easy ride. Whatever we have achieved so far it is through honest sweat and toil. Nothing was given to us for free.
Second, it is important to realise what our starting point is in terms of the EU climate policy objectives for 2020. There is no denying that our energy mix is special and in a way very dull. It is just one fuel that dominates the mix and it is coal. Today around 93% of electricity in Poland is coal-based. Our CO2 intensive power generation is a legacy of a robust coal mining sector that fuelled the birth and growth of the Polish heavy industry, like it fuelled yours only during the Industrial Revolution.
This fossil fuel heritage makes it difficult to find a common ground on climate policy with some European countries, considering that coal contributes on average only around 30% towards electricity generation in Europe. But you should understand us perfectly. With the North Sea gas you made a leap from coal to gas. The famous dash for gas changed your energy mix and also reduced emissions. We don’t have such luck with conventional gas resources but we still could make similar transition if the efforts to exploit our shale gas potential are successful.
But today, at the beginning of the climate policy road some countries are already way ahead of us due to a simple factor of inherited fuel mix. And bear in mind that the finishing line is the same for all.
The Polish government works towards changing this situation but diversifying the energy mix is not a task for months or even years but rather decades. It is because apart from the emission reduction effort we still have to bridge the gap between us and the Old Europe in terms of economic development and also energy consumption.
We may be happy with our performance so far and as I said already, our economy has grown significantly since 1990-ties, but we are still lagging behind even the EU average. Take for example the energy consumption figures. Poland’s per capita energy consumption is still approximately 30% lower than that of the European members of OECD. The electricity consumption per capita is ca. 50% of the OECD Europe. Or let’s just compare your GDP per capita of $28’000 to our of $6’500. The difference is simply striking.
Therefore it is a priority for Poland to grow further and eventually catch up with you. The trouble is we know how difficult it will be to decouple the growth from the increase in energy consumption and associated greenhouse gas emissions. But it is a challenge Poland is eager to undertake. Only we need proper conditions and time. And these are hard to come by.
This brings me to my third point, the design of the EU climate policy. The European Union has the ambition to lead the global process. In order to lead by example three distinctive targets were adopted for 2020: 20% reduction in CO2 emissions, 20% energy consumed from renewable sources and 20% increase of energy efficiency.
Now, the renewables target was set at the EU level but it is divided into individual targets for countries according to their potential and wishes. For example Poland will have to increase its share of renewable from 7 to 15% while the UK from 1.3 to 15%.
Energy efficiency target is not even obligatory and again countries will work towards it considering their national circumstances.
The 20% emission reduction target is a different game altogether. The main tool to cut emissions in Europe is the Emission Trading Scheme. It was designed as a cap and trade market-based mechanism forcing CO2 reductions through a single price of emission allowances. No matter where you are, what is your reduction potential or cost, where you started and what fuel you burn you have to pay for your emissions. National specifics are not factored in here so they could either benefit you or be a problem for you.
I don’t have to explain that after the introduction of the ETS, basically overnight, coal-based Poland lost its competitive edge to countries with limited exposure to carbon emissions. I will not shy away from stating that we did not like it. This system assumes that fuels with high carbon footprint will have to be removed from the market eventually, simply by making them too expensive. Coal will be first but with ongoing decarbonisation gas will soon follow. Countries with high share of coal face the highest bill to pay and the most daunting task to rebuild their energy systems. And what should we say in Poland where coal does not simply have a “significant” share in the energy mix. It is a monoculture.
Every time the price of CO2 goes up, we surrender a bit of our competitiveness vis a vis those EU members who have less carbon-intensive industries and of course to the countries from outside the EU where CO2 emission is not even a cost factor at all since all signs tell us Kyoto 2 will be just Europe and Australia. And if the carbon price goes significantly up because Europe want to lead a non-existent pack and a new 30% reduction target is introduced, in order to escape from the cost of CO2 we would need to completely change our energy supply system and pay huge costs. And of course the Polish consumers would pay the bill.
The figures of the World Bank’s Transition to a Low Emission Economy analysis give interesting insight in this respect. The effects of reduction of emissions by 20% by 2020 on real GDP could be more than twice as high for Poland as for the rest of the EU. Such a difference in costs, especially in times of austerity cannot be taken lightly. A wrong step today could close the door to our welfare tomorrow.
But let me assure you, it is not like we are waiting for the EU to grant us a special status without committing to necessary changes. We do realise that the greatest challenge in the near future will be to satisfy the growing hunger for energy from sustainable sources and overhaul the aging power system. We just need to smooth out this transition in time. The transition that has already started!
Poland initiated a deep investment programme targeted at replacing existing generation capacities with new ones with superior efficiency rates. We got a transition period from the full auctioning in the power sector. But the free allocation will be counter balanced by an obligation on the beneficiaries to invest in lower emission technologies. The scale of the undertaking is massive as it covers almost 50 billion euro worth of investment.
Energy efficiency in Poland is also regarded very much as a climate policy tool. It is quite simple, the less energy we consume – the less CO2 we emit, especially if your economy is based on fossil fuels. We are about to launch an ambitious white certificates scheme that should incentivise wide investment into energy efficient solutions in the economy.
An important way to reduce emissions is through a fuel switch. Poland is slowly building up gas capacities in the power sector but there is one thing I want you to remember about our situation. Today, a switch from coal to gas could seriously undermine Poland’s security of supply and to put it even more bluntly – it would be a national security concern. More gas would mean less CO2 but also greater dependence on one Russian supplier. In the near future this will change, first with the opening of the LNG terminal in 2014 and second, hopefully, with tapping into the unconventional gas resources. Undoubtedly, commercial shale gas exploration in Poland would create a Polish dash for gas with massive impact on CO2 emissions. Mind you, shale gas in the US caused greater cuts in CO2 that our climate policy in Europe. And they don’t have any targets!
Stimulation of renewable sources of energy is another of our climate policy related projects. The exercise is on-going of overhauling the support scheme for renewable sources of energy. The reform should spur another wave of investment into RES although Poland is already a dynamic market recording unprecedented growth rates. It is expected that the renewables capacity in Poland doubles in 2012.
Another long-term objective is to build up nuclear capacity in Poland with a first block to be commissioned in 2022. The technology may be regarded as controversial by a number of member states but we think as you do in the UK that it is a zero-emission power source and we simply cannot ignore it when faced with necessity to radically reduce emissions cost-efficiently.
We also realise in Poland that the technology development and deployment will be the key to a sustainable future of the European energy policy. My ministry has successfully launched a green accelerator programme called GREENEVO aiming at commercialising Polish green technologies. I know it is not the scope and scale some countries are doing things. I’m quite impressed how your climate minister convinced Treasury to splash 1 billion pounds for CCS demonstration. This scale of project support is still unknown in Poland but certainly we have just started and we want to learn from the best and most experienced in this field.
To sum up, I would like to recall the main messages.
Considering our difficult starting point and the characteristics of our energy mix we have already come a long way. We managed to shift our economy from the centrally planned mode to the market-oriented system cutting CO2 emissions by 30% and increasing our GDP by more than 150%.
We have a set of policies in place that will enable us to make yet another systemic jump towards sustainable and low emission economy. But for this we need time and respect to our national circumstances. One cannot change the basis of the country’s economy which is the energy sector in a couple of years and in addition expect that the energy prices stay at affordable level. The laws of economics are quite cruel in this respect and they tell us it is simply not possible.