Impact assessment of climate policy on Poland's\xa0power sector

Tadeusz Skoczkowski,Magdalena Włodarczak,Arkadiusz Węglarz,Piotr Gutowski,Sławomir Bielecki

doi:10.1007/s11027-018-9786-z

Tadeusz Skoczkowski, Magdalena Włodarczak + Show 3 more

Open Access

https://doi.org/10.1007/s11027-018-9786-z

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Abstract

This article addresses the impact of the European Union Emissions Trading System (EU ETS) on Poland’s conventional energy sector in 2008–2020 and further till 2050. Poland is a country with over 80% dependence on coal in the power sector being under political pressure of the European Union’s (EU) ambitious climate policy. The impact of the increase of the European Emission Allowance (EUA) price on fossil fuel power sector has been modelled for different scenarios. The innovation of this article consists in proposing a methodology of estimation actual costs and benefits of power stations in a country with a heavily coal-dependent power sector in the process of transition to a low-carbon economy. Strong political and economic interdependence of coal and power sector has been demonstrated as well as the impact caused by the EU ETS participation in different technology groups of power plants. It has been shown that gas-fuelled combined heat and power units are less vulnerable to the EU ETS-related costs, whereas the hard coal-fired plants may lose their profitability soon after 2020. Lignite power plants, despite their high emissivity, may longer remain in operation owing to low operational costs. Additionally, the results of long-term, up to 2050, modelling of Poland’s energy sector supported an unavoidable need of deep decarbonisation of the power sector to meet the post-Paris climate objectives. It has been concluded that investing in coal-based power capacity may lead to a carbon lock-in of the power sector. Finally, the overall costs of such a transformation have been discussed and confronted with the financial support offered by the EU. The whole consideration has been made in a wide context of changes ongoing globally in energy markets and compared with some other countries seeking transformation paths from coal. Poland’s case can serve as a lesson for all countries trying to reduce coal dependence in power generation. Reforms in the energy sector shall from the very beginning be an essential part of a sustainable transition of the whole nation’s economy. They must scale the power capacity to the future demand avoiding stranded costs. The reforms must be wide-ranging, based on a wide political consensus and not biased against the coal sector. Future energy mix and corresponding technologies shall be carefully designed, matched and should remain stable in the long-term perspective. Coal-based power capacity being near the end of its lifetime provides an economically viable option to commence a fuel switch and the following technology replacement. Real benefits and costs of the energy transition shall be fairly allocated to all stakeholders and communicated to the society. The social costs and implications in coal-dependent regions may be high, especially in the short-term perspective, but then the transformation will bring profits to the whole society.

Highlights

Well-functioning energy sector is a key element of the country’s economic development, stability, wealth and energy security; its development should be planned with great thoroughness
Being for long the concern to the limited number of the countries committed to the United Nations Framework Convention on Climate Change Kyoto’s Protocol, the issue of addressing the aspects of climate change in energy policy has at last gained a truly global dimension after the 21st Conference of the Parties Paris Agreement. This conclusion is likely to remain valid despite a new, not yet fully recognisable, situation which emerged after the United States (US) declaration to withdraw from the Paris Agreement and which was counteracted by strong re-commitments from other main players including China, India, Japan, Canada, Russia and the European Union (EU)
The short-term calculations were made on the basis of commonly accepted economic and emission factors to assess the financial standing of power plants and estimate the costs caused by European Union Emissions Trading System (EU ETS) participation

Summary

Introduction

Well-functioning energy sector is a key element of the country’s economic development, stability, wealth and energy security; its development should be planned with great thoroughness. Being for long the concern to the limited number of the countries committed to the United Nations Framework Convention on Climate Change Kyoto’s Protocol, the issue of addressing the aspects of climate change in energy policy has at last gained a truly global dimension after the 21st Conference of the Parties Paris Agreement. This conclusion is likely to remain valid despite a new, not yet fully recognisable, situation which emerged after the United States (US) declaration to withdraw from the Paris Agreement and which was counteracted by strong re-commitments from other main players including China, India, Japan, Canada, Russia and the European Union (EU). The main policy instrument used by the European Commission (EC) in its efforts to reduce GHG emission in the power sector is its obligatory participation in the EU Emissions Trading System—EU ETS (Directive EU ETS 2009)

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