EU DEAL ON CLIMATE: INITIAL THOUGHTS ON THE POLISH END

First, it is not clear what will happen when the US, China and India refuse to agree to new mandatory GHG targets in the next UN meeting. The EU may reconsider its new 40% GHG reduction target for 2030.

Second, Poland got some concessions, but there are important caveats. First, the total amount of concessions to "reduce dependence on carbon energy" in Poland is about 8 billion Euro. That is somewhere between 10-15% of what is necessary to modernize the conventional power system and to meet the current EU renewable energy targets (not including new efforts on RES for 2030). So there is still a major burden on the Polish energy price structure to come up with funds for new investments in both conventional energy and RES. The annual shortfall will have to be made up by at least a 50% increase in the price of electricity over this period. The increases will likely start after the Parliamentary elections.

Third, the organization handing out the cash from the first deal changed this time, from the Polish National Environmental Fund (NFOSGW) to the European Investment Bank (EIB). The Polish Fund had given out most of the cash from the sold portion of the first batch of free allowances to coal-fired energy projects, largely owned by the state. EIB may be expected to be more demanding in its decision-making and should be looking at the cost-effectiveness of carbon reductions in the investments. A proviso in the deal specifies that it not contribute to market distortion, so the idea that funds will be used to shore up principally state-owned coal plants may be challenged in the next round. It is also clear that funds will not be used as some were last time to go to general revenue in Poland (a violation of the earlier agreement).

Polish politicians may look back on this deal as a way that Brussels' priorities got "through the gate." There is no way to gloss over the fact that the Polish Government has declared its perpetual desire to be dependent on coal and the new European funding is to be structured to "reduce dependence on carbon-based energy.,"

Having been misled once, it seems less than likely that the EU will be tricked again into supporting the status quo in the name of change.

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