Poland goes all out on coal rescue against EU’s higher climate goal

Energy transition

The Polish government is on the hunt for securing yet another stream of subsidies to its coal industry, two weeks after EU leaders agreed on an enhanced climate target by 2030. But the European Commission can stop this, write Elif Gündüzyeli and Joanna Flisowska.

This op-ed was originally published by Euractiv on 23 December 2020.

Elif Gündüzyeli is the coal policy coordinator at Climate Action Network Europe; Joanna Flisowska is the head of the climate and energy unit at Greenpeace Poland.

Instead of committing to a coal phase-out date in line with the bloc’s new 2030 climate target and ensuring a just transition, the Polish government is looking to secure state aid that would allow it to keep the coal business running until mid-century.

Keeping the coal industry operating for so long is not only undesirable from a climate point of view, it is also not socially or economically realistic. What is needed is support for a just and clean transformation of coal regions that leaves no one behind, rather than subsidies to a killing and dying business.

Public money to dig more coal until mid-century

In September, the Polish government and representatives of Polish trade unions agreed on a rescue plan for the Polish Mining Company (PGG), the largest coal mining operator in Europe.

The agreement aims to maintain hard coal mining operations until 2049, through state aid to be granted to fund current operations of the PGG. Now the Polish Government is looking to start prenotification negotiations with the European Commission.

Granting such state aid would be a waste of taxpayers’ money to prolong a completely unprofitable and polluting industry. Despite heavy subsidies, the Polish hard coal mining sector has been permanently unprofitable and in a sharp decline for years now.

The Polish Supreme Audit Office has estimated that the total support for the coal mining sector in Poland in 2007-2015 amounted to €14.8 billion. And from January to September this year, PGG has been generating more than €100,000 of losses per hour.

All the past public support to rescue Polish hard coal mining has failed to succeed. Hard coal extraction has been in firm decline since 1990. Without public intervention and considering the downward trend from the last three decades, hard coal mining would end in Poland in the 2030s, a situation that is not attributable to Europe’s climate policies.

Sweet dreams are made of this

On top of subsidies to the mining sector and, according to leaked documents, the Polish government is preparing a restructuring plan for the energy sector, which includes the separation of coal assets from three state-controlled energy utilities (PGE, Tauron, and Enea).

Greenpeace has analysed publicly available information regarding existing plans for conventional coal power stations owned by these utilities. This analysis shows that most of these power plants have closure dates in place and that Poland would already phase out coal by 2035 in a ‘business as usual’ scenario.

However, the Polish Government’s restructuring plan puts forward additional state aid under the so-called ‘Early Decommissioning Mechanism’. This would result in some plants operating beyond 2040 – clearly far from early closure.

According to a recent study, PGE utility alone would gain 31 billion Polish Zloty for getting rid of its coal ballast through the restructuring plan. But PGE is still investing in coal.

While claiming state aid to clean its stranded assets in coal, the Polish energy operator is finalising a new coal lignite unit in the Turow plant, pursuing the expansion of the lignite mine in Turow and a new lignite mine to prolong the lifetime of Belchatow coal plant.

The whole plan will need the approval of the European Commission, and it will have to ensure no state aid goes to the coal energy sector to run ‘business as usual’ or delay the coal exit, especially in a time of a health, economic, and climate crisis.

How to bake the new state aid regime à la Green Deal, with a pinch of coal?

The European Commission’s directorate general for competition policy has recently launched various processes to align competition rules with the European Green Deal.

In September, Commissioner Margrethe Vestager started the debate on how EU competition policy can best support the Green Deal, and the institution is set to revise its guidelines on state aid next year.

For this recipe to work, any state aid for coal phase-out must be aligned with the EU’s Paris Agreement commitments, namely preventing the use of coal for power generation beyond 2030. According to IPCC’s special report on 1.5°C, all organisation for economic co-operation and development countries (including the EU) have to phase out coal power by 2030 the latest.

State aid for coal plant closures must also ensure that the public money does not feature as subsidies to make up for the financial losses of coal operators.

Coal is becoming more and more expensive as an energy resource, while the competitiveness of renewable energy sources increases at an unprecedented pace. The risk of coal plants becoming stranded assets have been raised by experts and NGOs since before the Paris Agreement.

It is high time to accelerate the true clean and just transition of the coal sector instead of undermining it through subsidies that would hinder the clean energy transition.

The European Commission must fuel the transition, and ensure EU taxpayers’ money does not jeopardise the Green Deal and its climate, zero pollution, just transition and circular economy objectives.