Are EU environmental regulations consistent with the concept of internalisation of externalities – the case of Polish electricity sector

Abstract

The article’s goal is to examine whether the existing EU environmental regulations implemented in the Polish electricity sector are consistent with the concept of internalisation of external costs. The tool used in the research is the partial equilibrium model of the mid-term development of the Polish power sector. There are two scenarios. The first ‘base’ scenario assumes gradual decarbonisation of the Polish energy sector. In the ‘int’ scenario, the structure of energy production results from the full internalisation of external costs. The structural changes in the ‘base’ scenario are a significant challenge. All coal-based technologies are being drastically phased out and will be replaced by RES and nuclear technologies. The climate policy leading to a gradual reduction of CO2 emissions in Poland makes sense, assuming much higher external costs of CO2 emissions (€65/Mg CO2 ) than those assumed in this study.