Carbon-Neutral Poland 2050 Turning a Challenge Into an Opportunity Mckinsey & Company in Poland
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Carbon-neutral Poland 2050 Turning a challenge into an opportunity McKinsey & Company in Poland The Polish office of McKinsey & Company first opened its doors more than a quarter of a century ago. Since then we have become the largest strategic consulting firm in Poland, employing more than 1,500 people. We advise Poland’s biggest companies and public institutions and have played a part in the transformation of key enterprises, contributing to the development of companies that today are leaders in banking and insurance, consumer goods, energy, oil, telecommunications, mining, and many other sectors. In total we have carried out almost 1,000 projects for our Polish clients. In 2010 we opened our Polish Knowledge Center in Wrocław, where we currently employ almost 250 top analysts. A year later we established a Shared Services Center in Poznań, where more than 1,000 of our people now work. A McKinsey Digital Lab has been operating in the Warsaw Office since 2017. Our developers, experts in big data and business consultants support companies undergoing comprehensive digital transformation and perform advanced data analytics. For more information, visit www.mckinsey.pl. McKinsey & Company around the world McKinsey & Company is a global management consulting firm committed to helping organizations create Change that Matters. In more than 130 cities and 65 countries, our teams help clients across the private, public, and social sectors shape bold strategies and transform the way they work, embed technology where it unlocks value, and build capabilities to sustain the change. Not just any change, but Change that Matters—for their organizations, their people, and in turn society at large. McKinsey & Company’s Sustainability Practice McKinsey's Sustainability Practice helps businesses, investors, and governments capture opportunities, transform operations, manage risk, and drive growth in an orderly transition to a low-carbon, sustainable economy. Clients benefit from our integrated, system-level perspective across industries from energy and transport to agriculture and consumer goods and across business functions from strategy and risk to operations and digital technology. Our proprietary research and tech- enabled tools provide the rigorous fact base that decision makers need to act boldly with confidence. The result: cutting-edge solutions that drive business- model advances and enable lasting performance improvements for new players and incumbents alike. www.mckinsey.com/sustainability. Copyright © McKinsey & Company 2020 Carbon-neutral Poland 2050 Turning a challenge into an opportunity By Hauke Engel, Marcin Purta, Eveline Speelman, Gustaw Szarek, and Pol van der Pluijm Preface Over the past decades, Poland has Although subject to uncertainty, in the international arena. The study taken steps toward one of the most the tran sition to carbon neutrality is develops the arguments presented in profound changes in its history: the es timated to require additional invest- our earlier reports, including Poland transformation of the energy system. ments of €10 billion to €13 billion a year, 2030: A chance to join the economic Poland, with average GDP growth or 1-2 percent of GDP, for the next 30 big league, Developing offshore of around 4 percent a year1 over the years. Raising and investing that amount wind power in Poland: Outlook and past three decades, has successfully of capital in a highly coordinated fash ion assessment of local economic impact, decoupled economic growth from would be a considerable challenge for and Poland 2025: Europe’s new growth emissions.2 the country’s government and busi ness engine. leaders. However, the transition path will In the development of this report and be challenging. The country is not At the time of publication, global its insights, we have worked extensively blessed with rivers that could support attention is focused on countering with, among others, McKinsey’s extensive hydro generation, and it the spread of COVID-19, and on sustainability insights, global energy has only 1,400 to 1,9003 sunny hours blunting the force of slowdown that perspective, sustainability practice, a year (half of what California enjoys). is likely to follow. The exact short- automotive practice, and the McKinsey Natural gas is scarce, and geopolitical term impact of the crisis is as yet Global Institute. In particular, we want factors make it difficult to import it at unknown. However, it is not expected to thank Dickon Pinner and Thomas a sustainable scale. The Baltic Sea to change the fundamental structure Vahlenkamp for their leadership and provides an opportunity for offshore of the Polish economy or the available insights. wind generation in the north, but high- decarbonization technologies. In addition, this report would never consumption areas are located in the Therefore, in this report, it is reasonable have been possible without the input south of the country. Also, Poland does to still base our decarbonization and expertise drawn from a broad not have a single nuclear-power reactor scenario on pre-COVID-19 business spectrum of stakeholders, including (in contrast to other post–Eastern Bloc activity and growth dynamics. EU members such as Bulgaria, Czech leaders from public institutions, aca- Republic, Hungary, Romania, and This report does not aim to predict the demia, nongovernmental organiza- Slovakia). What Poland does have are future. Rather, it outlines a pathway tions, conservation organizations, and coal-fired power stations progressively for the Polish economy to decarbonize in dustry players. In particular, The depleting coal reserves, and a huge in the most cost-efficient way. We Woods Hole Research Center (WHRC), agricultural sector. investigate the actions and investments in collaboration with The Nature required and identify opportunities for Con servancy, evaluated the carbon However, the path to decarbonization the economy to benefit from. We hope sequestration potential of Poland's is more urgent than ever as the window our work will serve as a fact base for forests and soils for this report. to keep global warming below 2°C an informed debate on how to make narrows. To become a net-zero- We would like to take this opportunity decarbonization a reality—within emissions economy by 2050, the year to thank all of them for their invaluable and outside of Poland, where the of EU emissions targets and the primary input. pathway could serve as an inspiration reference year in the Paris Agreement, for other countries facing significant Poland will have to triple its rate of decarbonization challenges. decarbonization over the next decade compared with the previous 30 years. It This pro bono effort reflects McKinsey’s Hauke Engel, Marcin Purta, must then further accelerate from 2030 deep commitment to the development Eveline Speelman, Gustaw Szarek, to 2050. of Poland’s economy and its success and Pol van der Pluijm 2 Carbon-neutral Poland 2050 Contents Key findings 4 Executive summary 6 Chapter 1 15 Defining the decarbonization challenge Chapter 2 21 Decarbonizing the economy: A pathway to net-zero emissions in Poland Chapter 3 31 Plausible decarbonization pathways for each sector Chapter 4 43 Transitioning the energy system Chapter 5 55 Decarbonization costs and impact Chapter 6 65 Charting a way forward Appendix A: Glossary of abbreviations 72 Appendix B: Methodology 73 Appendix C: Key assumptions by industry 74 Appendix D: Bibliography 77 Endnotes 79 About the authors 82 3 Potential changes in higher energy production Key ndings Poland's energy up to ~2.5x in 2050 than now 2050 Energy production, TWh/year 458 429 6% Solar Poland’s emissions levels and potential targets 354 MtCO2e 282 244 73% Wind 447 208 380 179 271 2% Other 3% Gas 2% Coal and lignite 14% Nuclear 2020 2025 2030 2035 2040 2045 2050 8 8 Interconnectors 0 -1 -13 Power to gas -40 0 -52 1990 2017 2030 2050 Potential additional investment needed € billion Main decarbonization levers 80 76 MtCO2e or 63 64 Renewable energy and CCUS €380 bn 59 380 156 1–2% GDP p.a. 42 Years 202125 202630 203135 203640 204145 204650 Heat electrication, energy eciency, and CCUS 88 Potential decarbonization benets Replacing ICEs with BEVs and FCEVs 62 Insulation and lower-carbon alternatives for boilers and stoves 46 Low-emissions land management Savings Energy security New industries developed and low-carbon fuels 17 6 3 €75 bn 80% 1–2% 250–300K Total Power Industry Transport Buildings Agriculture Waste Negative savings in reduction of energy boost jobs emissions and heat and other emissions operational commodities imports in GDP created 2017 costs in the carbon-neutral scenario Source: Statistics Poland; KASHUE; Eurostat; EIU; KOBiZE; McKinsey & Company analyses 4 Potential changes in higher energy production Key ndings Poland's energy up to ~2.5x in 2050 than now 2050 Energy production, TWh/year 458 429 6% Solar Poland’s emissions levels and potential targets 354 MtCO2e 282 244 73% Wind 447 208 380 179 271 2% Other 3% Gas 2% Coal and lignite 14% Nuclear 2020 2025 2030 2035 2040 2045 2050 8 8 Interconnectors 0 -1 -13 Power to gas -40 0 -52 1990 2017 2030 2050 Potential additional investment needed € billion Main decarbonization levers 80 76 MtCO2e or 63 64 Renewable energy and CCUS €380 bn 59 380 156 1–2% GDP p.a. 42 Years 202125 202630 203135 203640 204145 204650 Heat electrication, energy eciency, and CCUS 88 Potential decarbonization benets Replacing ICEs with BEVs and FCEVs 62 Insulation and lower-carbon alternatives for boilers and stoves 46 Low-emissions land management Savings Energy security New industries developed and low-carbon fuels 17 6 3 €75 bn 80% 1–2% 250–300K Total Power Industry Transport Buildings Agriculture Waste Negative savings in reduction of energy boost jobs emissions and heat and other emissions operational commodities imports in GDP created 2017 costs in the carbon-neutral scenario Source: Statistics Poland; KASHUE; Eurostat; EIU; KOBiZE; McKinsey & Company analyses 5 Executive summary When the Paris Agreement went 9 percent of emissions, Poland could into force in 2016, countries around reach carbon neutrality by 2050.