The Polish economy may benefit from the European Green Deal if before the negotiations at the European Council we will know what we want. Jadwiga Emilewicz, Deputy Prime Minister and Minister of Development sat in an interview with us.
BiznesAlert.pl: We are one step away from final decisions on the European Green Deal, which will turn the EU economy green, so that the bloc can reach its climate neutrality target by 2050. Will Poland’s economy be climate neutral by 2050 as well?
Jadwiga Emilewicz: We should understand Poland’s position adopted in December 2019 well. Climate neutrality should be achieved by the community as a whole, but the individual member states have different starting points and different paths of achieving that goal. Poland is an exception in Europe, because 80 percent of our power system runs on coal, we have a large heavy industry and our cattle stock is huge. Therefore, in our case transitioning to climate neutrality is not only extremely difficult from the financial point of view, but also technologically impossible. In December the Prime Minister said that we need to take our own path to achieve that objective. Neutrality is a political goal and, according to the press, it is comparable to sending a man to the Moon. It remains unknown whether it will be a specific plan that will have to be implemented, or a distant harbor to which Europe should sail. Still, this plan has specific consequences. It is an investment impulse because we are talking about investments of up to 1-1.5% of GDP in the European Union for 30 years. Poland will need to invest even more – 2-3%. This is also about changing our life style and social and public behavior. Climate neutrality is mostly associated with transforming the power system, but the biggest changes will take place in transport, further steps include removing the carbon footprint from the food industry and construction. It has been proposed to limit travel by planes and cars and switch to trains, change eating and shopping habits. This is a shift in the linear socio-economic model we have known since the industrial revolution, which introduced the idea that the goal was to constantly increase production and consumption. An economy that is neutral to the climate is an economy of moderation and self-restraint, to a large extent it is devoid of materialism. It is an exceptionally ambitious task, but it seems that we should try to achieve it, especially if our country receives sufficient funds and will be able to use custom plan to reach this goal. It looks like that’s exactly what is going to happen. We are trying to show our European partners that climate neutrality, fight for being competitive and the simultaneous need to continue free trade is Europe’s new trillema. How are we supposed to talk about the competitiveness of the European economy if our products are more expensive because they include environmental costs? This means the costs of the entire production cycle will go up. If we want to defend free trade will we allow all products to enter our market? The last PV factory in Europe was in Germany. It was recently closed because it was cheaper to produce the panels in China. What should we do with the carbon footprint of Chinese products? If we tax it, are we ready to pay more for these products on the European market? Will we be able to modify steel production to make it less energy-intensive?
Will Poland join the avant-garde of innovation? Let’s talk about a specific example – green hydrogen. Will Poland invest in expensive electrolyzers today to later on make money selling this technology and repeat the success of renewable energy sources?
It is worth investing in some areas of small- and large-scale energy projects to reap the profits in a few years. Hydrogen seems to be a very exciting fuel of the future that is being developed in Europe and Japan. Thanks to the IPCEI projects in the battery industry we learned about a support scheme that works from first research to the first industrial implementation. So we are counting on ambitious Polish companies that want to develop in hydrogen technologies, and we have already announced a call for new projects. Gas networks in Germany will be adapted to transport hydrogen. It makes sense to adapt our gas grid expansion plans, so that the pipelines can transmit hydrogen. The EU Reconstruction Fund could be used to do this. These investments are a little more expensive, but once we have hydrogen, the pipelines will not limit its application, especially that our steel plants will need it a lot.
Will it be easier for projects that are adapted to the climate neutrality target, such as in this example where hydrogen is used as a recyclable gas, to acquire EU funding?
Definetely. The European Union created an entire architecture for financing green projects, which is based on a green taxonomy. We are glad the Reconstruction Fund was proposed by the European Commission. As part of the Fund a EUR 67 billion debt will be incurred by the entire bloc. A large portion of the money will be used to speed up the energy transition because we are facing a large increase in CO2 emissions costs. We should already have these projects on our desks. This money needs to be granted within five years and should be contracted by 2022. This will be an additional boost to implement ambitious or more expensive endeavors a little easier and quicker.
Those who think that the EU economy needs to be protected from competition believe the bloc should implement a carbon border tax and establish economic champions to tackle this threat. What is Poland’s opinion of these tools?
Without limiting access to the European market for some commodities, the climate neutrality goal will negatively impact competitiveness. If we do not erect green barriers in the coming years we will lose some industries, especially those that are energy-intensive. They have been calling for restrictions on imports for a long time. We have products and semi-finished products, for instance made of steel, that come to Europe from markets where environmental limits are not present, e.g. from Turkey, Ukraine, Russia and China. If we want to save this kind of industry in Europe we need to introduce restrictions. Poland supports these solutions. The same applies to technological competitiveness. It is hard to imagine that single, small entities that invest in new technologies will be able to individually take over other companies that are way ahead of them without linking their potential with other European players. Poland, France and Germany initiated a discussion on this subject during the previous term of the EC. The competition rules for the hydrogen industry have to work differently because there are only a few European companies that should join their potential. We should change the benchmarks for competitiveness and rules for awarding public aid, especially at early stages of a project. The rules for financing, at various stages, since the 50s have been different between various agencies, such as the DARPA and EARPA in the US on the one hand and the European Commission rules for the National Centre for Research and Development (NCBR) on the other. We can’t afford to wait a few years for financing because this race is measured with time. Europe’s financial potential is still huge. We need to be quicker at selecting projects, we need to trust the managers more; so that we can profit in case of a success or stop the financing without any consequences if the project fails. There is no other way in improve Europe’s competitiveness. One of the Commissioners once said that Europe is very quick to usher in projects to the first stage of implementation, but later on they are turned into a commercial success in the Silicon Valley because Europeans make that bit harder than it needs to be. We cannot allow for a situation where we come up with an idea and someone else implements it.
What if German and French champions will be established and Poland will serve as their assembly line?
If we repeat this day in and day out that’s what’s going to happen. In 2019 for the first time ever we have decided to award financial aid to states that are not on the public aid map. This decision was consulted with companies in Poland. We talked about the battery sector, we organized a round table with a few active entities. They told us that other European companies have invited them to cooperate. This means we can play as equals. We are not able to produce everything in the aeronautics sector, but we are capable of producing some components. The battery sector shows that this is not about huge companies, but about those which are known only to the connoisseur of a given industry. If companies build competencies, sufficient financial aid will allow them to grow quickly. In our Strategy for Responsible Development we correctly predicted the sectors of the future, for instance batteries, which a few years ago seemed impossible, but today are a fact. If we play our cards right, we might just win. NCBR has already bent the EC rules. We fought for replacing heating systems at homes. Germans and the French dominate the gas industry. However, over a dozen companies across Europe offer heat pumps. This is where we should expand. We have six companies that produce the pumps. Therefore, we are launching a research and development program at NCBR. Its goal is to increase their competencies and boost the coppersmithing industry, whose products do not meet the requirements for eco-design, so that it can learn new skills and provide heat pumps. It should also produce cheaper products, so that it will be more cost efficient to use them in dispersed single-family housing instead of stoves. The demand for this technology in Europe will appear. A similar scenario may apply to technologies for small- and large-scale power industry, such as hydrogen. This will not happen because the European Union told us so. It seems to me that all of us would like to live in leak-proof houses with good woodwork that will be energy efficient.
This is an optimistic vision. The pessimistic version says that inertia, especially when it comes to strategic planning, will leave Poland on the sidelines looking at the growing tide of innovations. What then?
If this comes true, it will mean we did not pass the exam on our 16-year membership in the European Union. The Directives adopted between 2004 and 2007 could be treated as a necessary evil that had to be accepted because back then we were learning the rules of the game in the EU. After all those years with a few thousand EU officials from Poland, after the start of yet another term at the European Parliament with Polish MEPs, we cannot say today that those are not our goals. This is our common policy to which, paradoxically, Poland may give new meaning. During the economic crisis and the immigration crisis Poles talked about the need for changes. At that time Europe realized that its future generations may not experience the promised social advancement and prosperity better than their parents’. Their material status will be worse, they will not be able to go on vacations twice a year and eat at their favorite restaurants every day. This is what the yellow vest movement and other protests of this kinds in Europe are about. When we treat Europe in a transactional way, we impose on ourselves a postcolonial way of thinking. This community promises a lot more than just social advancement. It promises security and development. This is our raison d’etat. We should contribute to shaping this game at the level of the European telos, i.e. the idea of what the Union exists for. I am under the impression that today we are the ones who remind Europe why the Founding Fathers created it. We cannot just review the EU policies, we should also create them. Today Europe says it wants climate neutrality. Will we find in places such as Kraków, Rybnik or other locations that are “red” on the EU air pollution map, people who will say they still want to exploit raw materials without any control whatsoever? Poles who live in such places, near the mining industry want to benefit from these changes. We want to clearly define our goals and take a seat at the table to say that we want to spend the investment funds on: strengthening the power grid in the north of the country, constructing hydrogen-ready pipelines, developing green generation in the east, buying metropolitan trains, and ensuring the energy transition of old prefabricated buildings. To do this we need legislative support at the national level and financial support at the EU level. We should be ready for such a discussion.
Are we ready for this on the 23rd of June 2020 when this discussion is actually happening?
The European Council summit was supposed to have been about climate neutrality, but this topic will be discussed at another time because of the pandemic. This subject will be very much present in discussion on the Multiannual Financial Framework, the Reconstruction Fund and the Just Transition Fund because they are connected to one another. The ministries that are most engaged in these negotiations and investments are engaged in a dialogue. We set clear goals. We want to prepare our Prime Minister for the discussion. We want present a list of investment projects to implement the Reconstruction Fund in coming years, and we want to simplify the financing rules so that we do not have to add new plaques to existing institutions and instead propose new, easier procedures that may be Polish contribution to this discussion.
Interview by Wojciech Jakóbik