Polish Government Assures Folks that Electricity Prices Will Not be Affected by Reality

In the discussion after the law to transpose the new deal on European emissions controls and CO2 allowances, the Minister of Environment reassures the public that electricity prices wil not go up after 2020.  His basis for optimism is the free allowances given to Poland as a part of the deal reached with Brussels a few months ago.

I commented at the time that the allowances and funding provided would be way short of what is necessary to provide a soft landing for Poland (as long as the country was clinging to coal as its central energy source). Now it seems clear that the assumptions on the limited impact of the deal on Poland were likely a fantasy.

Much of the aid provided is supposed to go to de-carbonization of the Polish economy, not to preserving reliance on carbon. However, the aid is manipulated by Warsaw will likely not provide more than a fraction of the funds necessary to modernize the Polish energy sector.

The impact of higher prices per ton of CO2 in the emission caps is a big unknown, of course. With Brussels handing out free allowances as bribes to get political approval on the package (then and now) it is no wonder that their value never reached the sustained level explicit in the design of the program. However, every projection being done now shows a likely dramatic increase in CO2 prices in the future. Frontier Economics has a forecast that it pretty typical of the most recent projections:

All projections are a bit unreliable at this point, but it is hard to reconcile the general trends in CO2 price estimates with the cheerful picture presented by the Polish Government. As the energy mix in Poland will continue to feature coal-fired power plants subject to a real shortfall in credits versus their emission caps, it seems unlikely that the optimistic scenario will prevail.