Coal transition in Poland Options for a fair and feasible transition for the Polish coal sector 2018 Authors Jan Baran, Piotr Lewandowski Aleksander Szpor, Jan Witajewski-Baltvilks Coal transition in Poland Options for a fair and feasible transition for the Polish coal sector A project funded by the KR Foundation Authors Jan Baran, Aleksander Szpor, Jan Witajewski-Baltvilks Cite this report as Baran, J. et al. (2018). Coal transitions in Poland - Options for a fair and feasible transition for the Polish coal sector. IDDRI & Climate Strategies. Acknowledgments The project team is grateful to the KR Foundation for its financial support. Contact information Oliver Sartor, IDDRI, [email protected] Andrzej Błachowicz, Climate Strategies, [email protected] Aleksander Szpor, [email protected] Piotr Lewandowski, [email protected] Jan Baran, [email protected] Jan Witajewski, [email protected] Copyright © 2018 IDDRI and Climate Strategies IDDRI and Climate Strategies encourage reproduction and communication of their copyrighted materials to the public, with proper credit (bibliographical reference and/or corresponding URL), for personal, corporate or public policy research, or educational purposes. However, IDDRI and Climate Strategies copyrighted materials are not for commercial use or dissemination (print or electronic). Unless expressly stated otherwise, the findings, interpretations, and conclusions expressed in the materials are those of the various authors and are not necessarily those of IDDRI’s board or Climate Strategies Board/Secretariat. Publishers: IDDRI and Climate Strategies Editors: Pierre Barthélemy, Andrzej Błachowicz, Oliver Sartor Graphic design: Alain Chevallier, Ivan Pharabod Coal transition in Poland Options for a fair and feasible transition for the Polish coal sector Executive Summary 5 1. Introduction 7 2. Coal use in Poland 7 2.1. Role of coal in the energy system 7 2.2. Role of coal in the economy 9 2.3. Policy aspects of transition 12 3. Coal transition scenarios 13 3.1. Quantitative Coal Scenarios 13 3.2. Policy issues and options for implementing <2°C–compatible coal transition in Poland 22 4. Labour market aspects of coal transition 27 4.1. The deteriorating role of coal mining in Poland 27 4.2. Low educational attainment among miners 29 4.3. Wage premia and the lower retirement age in mining 29 4.4. Inactivity among leavers from the mining sector 31 4.5. Ageing of coal mining employment 31 4.6. Traditional roles in miners’ families 32 5. Conclusions and further policy implications 33 References 36 COAL TRANSITION IN POLAND 3 8Executive Summary Executive Summary 1Executive Summary If Poland is to participate in the global effort to minimize thousands to estimated 63 thousand in 2030 and 27 the risk of greenhouse effect at the level comparable thousand in 2050). to other major economies worldwide, it needs to sub- Coal-mining employs a large share of the workforce in stantially reduce its CO2 emissions. In the scenario for the Slaskie region, although it generates a small share of Poland, which we build on based on several assumptions Polish GDP and plays a minor role in total employment and using modelling tools, the CO2 emissions per capi- nationwide. The phase-down of the sector implies that ta reaches the level of 2.80tCO2/capita in 2050, which employment will need to be considerably reduced in the constitutes a 67% reduction comparing to 2010. coming decades. The reduction in employment might Achieving the target is feasible providing a radical re- happen in two ways: (i) by lay-offs in the mining sector duction of oil and gas consumption. As for the total and a shift of workers to other sectors of the economy coal consumption, it would be reduced to a lesser but or (ii) by natural attrition of workers in the mining sector also substantial extent, namely by 20% between 2015 coupled with hiring freeze and directing young genera- and 2030 and by 55% between 2015 and 2050. As the tion into other sectors of the economy. modelling exercise showed, the most cost effective way The challenges facing the Polish coal sector, while diffi- to achieve that is to completely replace coal with alter- cult to accept, also come with opportunities to achieve native energy sources in the power sector by 2050, with some important local and national policy objectives, with the possible exception of existing CHP units. Significant climate mitigation as a co-benefit. For the affected re- reduction in coal consumption can take place also in gions, the need to transition can also be an excuse to the residential sector upon adoption of energy saving more broadly diversify local industry, creating attractive technologies and measures. jobs for the next generation. It can also be an opportu- In the analysed scenario, the drop in coal consumption nity to improve environment and health in the region, to will contribute to but also follow the phase-down of invest in infrastructure and create more attractive local coal-mining sector in Poland. The reason for this is that living conditions for the local inhabitants. most of hard coal consumed in Poland is produced do- Poland has a chance to implement a just transition for mestically: in 2015 Polish mining sector produced 72.2 regions and workers if it acts now to prepare the tran- mln tonnes of hard coal while Polish economy consumed sition. A number of policy options are available. Policy 71.9 mln tonnes. This contrast with the cases of other makers can use a ‘window of opportunity’ for relatively major coal consumers in Europe which cover most of its harmless employment reduction that results from the consumption from import. natural ageing of the mining workforce. They can further At the same time, however, existing lignite mines (rough- guarantee that assistance measures encourage ex-min- ly half of Poland’s coal production) are expected to signif- ers to stay at the labour market; adjust the number of icantly decline in productivity independently of climate students in mining classes; stimulate labour demand policy by the 2030s. This provides a major challenge to in coal mining areas, especially in manufacturing and the local communities, workers and businesses currently construction; promote vocational training to ex-miners linked to lignite. Poland’s coal sector and governments ending with formal certification. However, in general, en- thus has an important window of opportunity to begin rolment into retraining and other forms of active labour preparing for this “lignite transition” that they must use market policies should be a default option to leavers relatively urgently, to prepare for this coming change. from the mining sector who fail to find a new job; engage The cut in production of both lignite and hard coal in broad and inclusive consultation to guarantee broad mining raise questions about how to manage the re- social consensus, including local public administration, duction in employment in the coal sector. We estimate NGOs and local organizations, for the reforms to prevent that employment in that sector will need to be reduced halting due to political reasons. by 47% during the period 2015-2030 and by at least For the affected regions, a key priority is ensuring suf- 77% during the period 2015-2050 (from the current 94 ficient economic activity and infrastructure and soft COAL TRANSITION IN POLAND 5 Executive Summary local attractiveness factors to support employment for However, our simulations show that the lay-offs will not the next generation of workers. Some Polish coal-min- be necessary since most of the employment reduction ing regions are already pursuing activities to diversify could be achieved through natural attrition and hiring their industrial fabric. Such activities should be further freeze. Natural attrition and the hiring freeze would supported. Poland will be looking to allocate regional generate a drop in supply of labour that is very close development funding from the European Union’s next to the drop in demand for labour in the sector under budget to support these activities. Strategic planning our ambitious emission reduction scenario. This result and the creation of a multi-level governance structure is obtained even under the assumption that productiv- to coordinate and identify opportunities at the local ity in the mining sector at fast pace. If the growth of and regional scale will however be required to ensure productivity is slower, the necessity of lay-offs will be efficient governance of this transition. even lower. 6 COAL TRANSITION IN POLAND 9Introduction Introduction 21. Introduction The issue of Polish coal transition is increasingly on the perience with cutting employment in coal mining shows political agenda. It is closely associated with the Euro- that employment reduction might lead to intensification pean debate on the future energy mix and meeting the of social problems and persistent unemployment among global GHG-reduction targets established by the Paris former miners, especially if it is not well anticipated and agreement in 2050. But in Poland there is also an in- addressed with public policies. ternal pressure to speed up coal transition triggered by In this report we discuss a role of coal in Polish econ- economic problems of the Polish coal mining, which, omy. We describe the position of coal in Poland’s en- despite different forms of public support, struggles to ergy mix and changes in coal production in recent keep its medium- and long-term profitability. Indeed, history. We also discuss the condition of the coal existing lignite mines, which currently account for just mining sector and institutional settings affecting the under half of Polish coal production, are expected to be sector. In the following part we present results of sim- largely exhausted by around 2030. A transition of one ulations projecting Poland’s future energy mix under sort or another is therefore going to happen in the Polish conditions needed to meet 2-degree climate targets.