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A New Chapter. Shifting Poland Towards Net-Zero Economy

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A New Chapter. Shifting Poland Towards Net-Zero Economy A new chapter. Shifting Poland towards net-zero economy A new chapter Shifting Poland towards net-zero economy edited by Maciej Bukowski 1 A new chapter. Shifting Poland towards net-zero economy Edited by Maciej Bukowski Authors: Part 1: Małgorzata Błocka, Aleksander Śniegocki Part 2: Karolina Porębna, Zofia Wetmańska Part 3: Maciej Bukowski Translated from Polish: Aleksandra Szkudłapska (Part 1 and 3, Section 2.1) Berligo (Section 2.2) WiseEuropa – Warsaw Institute for Economic and European Studies Aleja Szucha 16/46 00-582 Warsaw www.wise-europa.eu Cover design, typesetting, DTP: Studio graficzne TEMPERÓWKA Copying or distributing with credit to the source. © Copyright by WiseEuropa – Warsaw Institute for Economic and European Studies, Warsaw, 2019 978-83-64813-96-2 A new chapter Shifting Poland towards net-zero economy edited by Maciej Bukowski Warsaw 2019 . wise-europa.eu WiseEuropa Institute is an independent think-tank and research organisation based in Warsaw that undertakes a strategic reflection on European politics, foreign policy and economy. The mission of WiseEuropa is to improve the quality of Polish and European policy-making as well as the overall business environment by promoting the use of sound economic and institutional analysis, independent research and evidence-based approach to impact assessment. We are committed to an active and dedicated role of Poland; to an open, sustainable, democratic and competitive development of Europe; and to constructive transatlantic cooperation on global issues. We are convinced that within a free society all important public decisions must be preceded by a detailed and comprehensive deliberation. WiseEuropa offers a wide range of analytical, research, consulting and communication services and specializes in such subjects as: European and global political and economic affairs, National macroeconomic, industrial, energy and institutional policies, Digital economy and innovativeness, Social and labour market policies. wise-europa.eu Al. Szucha 16/46, 00-582 Warsaw | t.: +48 22 513 14 18 | f.: +48 22 350 63 12 | [email protected] Executive summary 5 Introduction 9 1. Poland’s place in the global and European climate policy framework 11 1.1 From a global accord to national actions 11 1.2 Can Poland transform its key sectors in time? 19 1.3 The development of low-carbon industry – an underestimated challenge of Poland’s climate policy 35 1.4 Towards a net-zero economy in 2050 43 2. The changing environment of climate policy 47 2.1 The international dimension of low-carbon transition 47 2.2 Sustainable finance – a new paradigm for financial markets 58 3. The climate dimension of development policy 70 3.1 Towards a modern climate policy 70 3.2 Climate action in Central Europe and Poland 78 Conclusions 84 References 86 List of boxes 89 List of diagrams 89 List of tables 89 List of figures 90 A new chapter. Shifting Poland towards net-zero economy Executive summary • Climate change has a negative impact on nearly all sectors of the economy, affecting secu- rity and stability in most countries in the world. In order to effectively respond to emerging challenges, we need an efficient and collective climate risk management within the broader foreign policy framework. This, in turn, requires the following systemic measures aimed at developing a global climate policy: – strengthening international cooperation based on sustainable development principles; – implementing climate and energy policy instruments at the level of individual countries and their regional partnerships; – relying on new forms of cooperation resulting from a reconfiguration of the current power structure; – harnessing the potential of low-carbon trade. • The new global climate policy framework has been consolidated in recent years, implying a gradual revision of reduction goals towards achieving net-zero emissions by 2050. • The Polish approach to climate and energy policy has failed: the country is likely to miss all of the European Union’s 2020 targets. Failure to meet the RES development goal and reduce emissions in non-ETS sectors implies a significant financial burden for the Polish budget in the future. • In 2019 all the EU Member States have to submit their National Energy and Climate Plans 2021-2030 (NECPs) as well as a long-term low-carbon strategy until 2050. These documents should indicate individual Member States’ contributions to meeting the EU targets, including building a zero-carbon economy by 2050. • Poland’s draft NECP was published by the government in January 2019. The document con- tains several positive sectoral initiatives that support GHG emissions reduction and techno- logical diversification of the national energy system. • However, the scale and the pace of changes in key sectors (energy, buildings, transport, industry) envisaged in the NECP are not enough to bridge the low-carbon transition gap cre- ated over the last decade. In fact, implementing the government’s strategy would significantly worsen the balance of Poland’s participation in the EU ETS and hinder emissions reduction in non-ETS sectors in the long run. Given the expected increase in emissions allowances prices, Poland’s economic and bargaining position would become extremely unfavourable. 5 A new chapter. Shifting Poland towards net-zero economy • Achieving a deep GHG emissions reduction or even climate neutrality by 2050 would require a qualitative shift in Poland’s internal policies, going far beyond the scenarios considered in national public debate, including: – up to a twofold increase of electricity supply with a near-complete elimination of emissions generated by the power sector; – a complete elimination of fossil fuel heating in buildings; – delivering the energy mix in transport which is dominated by fossil fuel alternatives (electromobility, biofuels, synthetic fuels or hydrogen); – substituting conventional technologies in heavy industry with zero-carbon alternatives and an economy-wide implementation of circular economy principles; – a substantial – and sustainable – increase in biomass supply for energy purposes. • There is a growing awareness among investors that coal assets and other investments in breach of the Paris Agreement are at risk of quickly losing value, which drives divestment from conventional energy and industrial technologies. Individual governments – as well as the European Commission – are also taking action to redirect resources towards investments that are in line with long-term environmental goals. • Consequently, the accelerating uptake of sustainability issues in the financial world will have a significant impact on climate policy choices, leading to a shift in the capital market’s approach to high-carbon investments and the development of new market mechanisms related to the changing business strategies of financial institutions and broadening their offer to in- clude sustainable products. • Whether or not sustainable financing will become reality depends on three key factors, none of which are currently sufficiently addressed by the Polish financial sector: – a clear regulatory signal on the direction and pace of the financial sector’s uptake of sustainable development principles; – streamlining environmental risk assessment procedures in the investment decision-making process by increasing the efficiency and usefulness of non-financial reporting and performing adequate stress testing; – establishing an efficient exchange of knowledge and experience between national and international financial institutions. • A significant climate policy advantage of Western European countries is their readiness to allocate considerable resources to this area, which not only enables governments to plan and implement individual actions, but also to design and promote national and international cli- mate policy with external stakeholders. This means, for instance: – funding independent national research on technological innovation, designing national policies and including them within the broader international context; – allocating adequate resources in public administration, for instance by establishing institutions dedicated to low-carbon transition that have a real impact on national policy. 6 A new chapter. Shifting Poland towards net-zero economy • A substantial part of Poland’s problems with implementing climate policy is rooted in its stra- tegic aspect. Strategic documents prepared by subsequent governments merely react to the European Commission’s requirements and are devoid of any in-depth reflection regarding actual national policy priorities over the medium and long term. Moreover, they are not used as an opportunity to improve horizontal (intersectoral) and vertical (economy-wide) cohe- rence or the efficiency of public climate policy interventions. • Unless Poland abandons the current reactive approach to drafting strategic climate docu- ments, which is further worsened by their slow and inconsistent implementation, the country is facing a pessimistic scenario where its problems with meeting the 2020 climate and energy targets will only exacerbate in the future. If that is the case, instead of playing catch-up to quickly bridge a clear development gap, Poland will wilfully suffer the financial and political consequences of a delayed and ineffective implementation of the Paris Agreement in its fuel and energy system. 7 A new chapter. Shifting Poland towards net-zero economy Key elements of the proposed new chapter for Poland’s climate policy 1. Mainstreaming of climate policy into
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