[GGP] Explaining Poland's Coal Paradox

In the U.S. coal is succumbing to market forces despite the Trump Administration's push to support the industry. Abundant, cheap and cleaner natural gas together with ever more efficient and increasingly affordable wind and solar continue displacing coal in electricity generation. But to assume this is the general worldwide trend would be a serious mistake. In fact, even in the heart of “renewable-friendly” Europe, coal is and most likely will continue to be a fuel of choice. Despite coal’s obvious shortcomings that include high CO2 content and local air pollutants, Poland projects that in 2050 coal will still constitute 50% of its energy mix. The strong commitment to coal expressed most recently in the government’s program for the hard coal sector, is driven by host of factors that include social, electoral and policy considerations. As a general statement, it is important to understand the powerful role these factors play in the fuel mix across different countries.

Currently, Poland tops the EU list of biggest coal energy producers, and coal continues to dominate the energy mix in Poland (50%), accounting for a whopping 80% of electricity generation. Going forward, the country is looking into expanding coal production through investment in multiple new mines, including those producing lignite. These plans correspond with power-generation and district heating investments in new plants or expansion of existing facilities.

At the same time, Poland has been behind the EU schedule in implementing the mandated share of renewables energy sources (RES) in the Polish energy mix. The government has also been visibly slow with implementing the 2015 law on renewable energy sources, which in contrast to many EU countries, includes coal as part of the renewable energy mix via coal-biomass based cogeneration.

On the surface, the Polish government’s strong commitment to coal is removed from the realities of the current EU policy direction and market conditions. It goes against the trends in most OECD countries where a less-CO2 intensive energy mix includes increases in RES and natural gas while phasing out coal. Additionally, by pursuing coal Poland opens itself to disputes with the EU that can include substantial monetary fines. Moreover, Polish policy seems to contradict the government’s recent commitment to fight high levels of smog in many cities.

However, a deeper dive reveals that the pervasive use of coal in Poland cannot be explained in strictly environmental or market terms, or even in reference to the EU policy direction.

Coal takes a special place not only in Poland’s energy mix but also in the nation’s collective heart. The coal industry has been traditionally revered, if not romanticized, and much of this continues today. As reported by Poland's Public Opinion Research Center (CBOS) in 2016, miners in Poland are respected at levels (82%) comparable to university professors (80%) and more than medical doctors (74%) or teachers (71%).

Miners have also enjoyed high salaries and pensions, often several times higher than the national average. In addition, they are highly organized within politically influential trade unions. The government is well aware that any decision that endangers the future of mining will meet with substantial protest, as exemplified by the events of 2015 when miners threatened to end the government of Ewa Kopacz, then Polish Prime Minister. A new law to restructure Poland’s largest mining company was met with widespread protests by miners and their unions, who saw the law as a prelude to the closing of four mines in the Upper Silesia region. Negotiations that ensued resulted in the government’s strong commitment to keeping all mines open, effectively assuring the mining jobs that could have otherwise been eliminated.

Thus, any policy that could potentially limit coal and negatively affect mining jobs can have immediate negative consequences for the incumbent government as well as serious electoral implications. There are 55 seats (out of 460 seats) in the Sejm (the lower chamber of the parliament) and 13 (out of 100) in Senate (the upper chamber of the parliament elected in Upper Silesia - the region historically known as “the kingdom of black coal.” Additional “coal” seats are dispersed around the country where lignite is mined. When compared to prospective EU disputes and/or fines, electoral and public support considerations are more immediate and can directly affect chances of survival for any incumbent government.

Intertwined with socio-political consideration is the second major issue that explains coal’s strong position and commitment to coal going forward - energy security. In Poland, the concept of energy security is viewed predominantly as low dependence on Russia, and it is at the top of government and general public priorities. Domestically available coal offers predictability and peace of mind at a time when renewable energy is still at the very beginning of its development, a potential nuclear power plant is still in discussion stages, and the majority of natural gas consumed in Poland needs to be imported from abroad, primarily from Russia.

Recognizing the geopolitical consequences of dependence on Russian gas, Poland has diversified its pool of natural gas providers, thanks to the newly built LNG terminal in Swinoujscie. But, LNG imports are intended to back out Russian gas rather then provide substitute for coal; so they are unlikely to push out coal in the same manner domestically available natural gas has in the US. In fact, part of the planned expansion of LNG imports into Poland is designed to capitalize on Poland becoming a hub for LNG distribution to other European countries.

Coal policy is a difficult balancing act for Poland. It needs to take into account immediate electoral, social and energy security considerations as well as the country’s commitments as a member of the EU. Poland receives substantial EU subsidies, including €27.4 billion for the Program on Infrastructure and Environment that stresses low-emission economy and environmental protection in addition to infrastructure development and energy security. Those funds could potentially be at risk going forward if Poland does not live up to its stated RES and emissions obligations.

The situation is also difficult for the EU more generally, as it highlights the tensions and different priorities between "high income Western Europe" and “middle income Central and Eastern Europe". To be truly successful the EU has to understand the heterogeneous needs and priorities of its members. Strict RES development goals not adjusted to local needs, combined with potential fines and reprimands for noncompliance are unlikely to achieve the climate and decarbonization goals the EU has established. Instead rigid rules could push countries like Poland where government’s skepticism towards the EU is already high, toward a non-EU future. The issue seems to have been considered by the EU, which has recently committed €1.25 billion ($1.55 billion) to assist the Polish government with mine closures that could address some of the hardships such closures could have for the affected population. One might suspect substantive help provided to coal-dependent regions – including re-training and unemployment compensation – could alleviate some of the social and electoral considerations. Also, support toward less carbon-intensive energy sources that could be developed domestically – such as biogas – could facilitate a less coal-intensive future. Lastly, research toward and potential development of capture and storage solutions and/or coal gasification could accommodate some of Poland’s reliance on coal while minimizing its negative externalities, such as CO2 emissions and smog.

Anna Mikulska is a nonresident fellow for the Center for Energy Studies at Rice University’s Baker Institute for Public Policy. Follow her on Twitter @anna_b_mikulska

Eryk Kosinski is a Professor at the Faculty of Law and Adminstration of the Adam Mickiewicz University in Poznan, Poland & at the International Graduate School of Management, Peter the Great St. Petersburg Polytechnic University, St. Petersburg, Russian Federation

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