Op-ed by Wojciech Szymalski, Institute for Sustainable Development, Poland.
The Polish government has declared a “success” after securing an EU agreement to postpone the implementation of ETS2 – a new emissions reduction system covering household heating and road transport. Since last year’s presidential elections, the system has been turned into a scapegoat, with the ruling coalition portraying it as a looming disaster for Polish households. “Pressure makes sense,” wrote Prime Minister Donald Tusk after the postponement was announced. “This is another success for our government in talks with the European Commission.”
But is it really a success?
Politically, yes. In 2027, when ETS2 is set to take effect, parliamentary elections will be approaching, and the government fears backlash over introducing a new fee. But otherwise, this play for time is a pyrrhic victory, one that will ultimately do Poland no favours.
Poland imports a substantial share of its fossil fuels from abroad. 98 per cent of transport fuels are imported, as well as about 80 per cent of fossil gas – a quarter of which is used for household heating. About 15 per cent of coal is imported and over 60 per cent of it is used for household heating. Altogether, these imports amount to over 120 billion zlotys spent abroad, benefiting suppliers such as Saudi Arabia, Qatar, Kazakhstan and the US.
Over the last decade, Poland’s dependence on imported fossil fuels has grown, leaving the country increasingly vulnerable to global price volatility. This is a far greater risk for households than the ETS2. It was proven true when Russia attacked Ukraine and rose to become an important issue for the economic security of the country. Should energy security really mean simply changing fuel suppliers? Or should it mean breaking free from fossil dependence altogether?
Moreover, Poland already faces some of the EU’s highest levels of air pollution from household heating and vehicle emissions, yet it remains poorly prepared for the system’s eventual introduction. Key mechanisms meant to ready the economy for ETS2 are either missing altogether (as in transport) or largely ineffective (as with the Clean Air Programme). Will this delay spur the government to finally act – or simply push the problem further under the carpet?
ETS2 does not have to be scary
The political panic over ETS2 has grown so inflated that it’s drowning out any space for a sensible debate. If we had one, we’d see that the government actually has the means to shield households from its effects.
The first step is for Poland to finalise its Social Climate Plan – the key document that will determine how ETS2 funds are spent. Up to 50 billion zlotys could flow to the country by 2032 to support less affluent households, but despite its planned launch next year, the plan is still not ready.
But there are also other methods to ensure that ETS 2 will not be burdensome for citizens. Fuels in Poland are subject to various taxes. We have VAT, we have a fuel surcharge. And if the government deems the ETS2 surcharge to be too harsh on citizens, it has room to reduce these burdens. The ETS2 surcharge would increase the price of gasoline by about 0.50 zlotys per litre, while VAT accounts for over 1 złoty per litre of fuel, and the fuel surcharge adds another 0.20 zlotys.
When comparing Poland’s fossil fuel import spending with potential ETS2 costs, we discover that yearly fuel import values are 4 times higher than potential yearly ETS2 revenues. Since ETS2 is designed to place additional fees directly on imported fuels, it could substantially help Poland reduce fuel dependency from abroad. This, in turn, could improve Polish energy security and sovereignty.
No Social Climate Plans without ETS2
Poland and other countries fearing ETS2 argue that they need more time to prepare their societies for it by insulating houses, replacing furnaces and extending sustainable transport. Yet the paradox is that ETS2 already includes an effective mechanism for exactly this purpose: the Social Climate Plans (SCPs). Without ETS2, these plans will have to be weakened. A one-year delay of ETS2 would cut SCP funding by 16 per cent, since revenues from ETS2 directly finance SCP spending.
Where would the funding come from to prepare societies for ETS2? Would it be financed from increased country debts? Not likely. Countries such as Poland, Slovakia, Hungary and Romania are already under excessive deficit procedures. Would governments introduce new local taxes to finance low-emission investments? On the contrary, in Poland, political leaders are currently focused on cutting energy taxes. Could they instead phase out fossil fuel subsidies to support the energy transition? Poland spends around 10 billion zlotys per year to subsidise coal mining – that’s half of the country’s projected ETS2 yearly revenue.
There is no realistic alternative source of funding for SCPs other than ETS2. Without it, any additional financing will be hard to secure. And after one year – or even longer – of delay, societies might still not be ready to accept ETS2. What then? Drill Europe, drill?