Climate Policy Energy Environment 5 March, 2020 10:00 am   
COMMENTS: Mateusz Gibała

PKEE: Different starting points must be taken into account in reaching climate neutrality

Members of the Polish Electricity Association (PKEE) are aware of the climate change challenges and share the Commission’s ambition to jointly tackle them. Polish energy sector is already preparing for a further transformation in a sustainable development direction, ensuring energy security and affordable energy prices. However, the achievement of the ambitious goal of climate neutrality by changing Polish energy mix, will require significant investment outlays and may result in deteriorating the socio-economic situation of the affected regions. The net-zero emissions economy in 2050 requires significant investment outlays, estimated to reach EUR 179-206 billion (CAKE, KOBiZE1) for the power generation in Poland. Therefore, it is necessary to foresee in the European Climate Law2 (hereinafter also as “ECL”) a proportional compensation for the additional carbon cost resulting from higher climate ambitions. Otherwise, the financial resources of utilities will be dedicated to cover the actual operational cost, instead of being devoted to the new investments in line with transition aimed at reaching the climate objectives.

Climate neutrality objective needs to be accompanied with coherent support policy instruments

Polish energy sector is committed to ensure its contribution to the EU climate and energy objectives by reducing its carbon footprint. It needs to be however noted by the Commission, that such shift towards cleaner technologies requires significant investments, in both transition and destination technologies. There are different starting points and therefore investment needs in particular Member States differ significantly. Therefore, the Commission should avoid ‘one-size fits all’ approach within Green Deal regulatory framework.

The PKEE is therefore concerned that proposal for Climate Law is not referring to the financial dimension of the transition. Such financial assistance could be provided through already existing mechanisms, which would implement clear and well-known rules for applicants. The PKEE recommends Commission to assess potential of the Modernization Fund in terms of providing financial support for regions with higher share of coal in their energy mixes. Part of this support should be provided in the form of ensuring increased number of allowance dedicated for Member States covered by Modernization Fund. Additionally, financial support should be introduced by increasing (at least doubling) ‘solidarity pool’ as well as through the Just Transition Fund. This latter, however should be amended in order to ensure that more funds are available for the most affected regions as well as with less strict exclusions. It is of crucial importance to ensure that the Climate Law implements clear and efficient mechanisms aimed at mitigating risks stemming from increased level of ambitions.

Revision of 2030 targets should be preceded by Impact Assessment

The proposal has also provided legal basis for revision of 2030 climate and energy targets. According to Article 2 of the Climate Law proposal, the Commission wants to “explore options for a new 2030 target of 50 to 55% emission reductions compared to 1990” by September 2020. The climate and energy targets have been agreed in 2019 (under the ‘Clean Energy for All Europeans’ package and the revision of EU ETS directive), and in order to ensure sufficient level of legal and business certainty, should not be amended with very short notice and without the sufficient impact assessment referring to expected costs for each region and individual Member States. Moreover, the Impact Assessment should also explore how new targets would impact price of allowance, and therefore how it would increase transition costs for Member States relying on more emitting technologies.

Ensuring that no one is left behind in the transition requires to cover by this assessment costs of the transition in each Member State. Knowledge and data-based approach would ensure that all Member State can be on board and would provide necessary information to determine the best level of ambition and pace of transition for every Member States. Given that Member States are currently at an early stage of implementation of ‘Clean Energy for All Europeans’ package, impact assessment of currently set 2030 targets and to “explore options for a new 2030 target of 50 to 55% emission reductions” would not be possible by September 2020. Finally, the PKEE draws Commission’s attention to the fact that potential increase of 2030 climate targets will need to be preceded by political consent of all Member States expressed in conclusion of European Council.

It must be clear that trajectory is indicative

The PKEE is also concerned about trajectory referred to in Article 3 of the proposal. It should be clear that this trajectory is indicative and no additional obligations are stemming from it. In its latest proposal, Commission makes this trajectory a benchmark for assessment of the level of Member States’ ambitions. The PKEE is of the opinion that this assessment should refer to the EU target of climate neutrality. It will allow Member States to adjust pace of the transition to their regional and national circumstances and to undertake the most cost effective measures.

Commission should not be entitled to review targets without Union-wide consent

In the opinion of the PKEE, while delegated acts find justification in case of more technical and dynamic issues, climate targets should not be set in the secondary legislation. GHG reduction targets impact the whole EU and therefore should take into account vast range of issues, including its impact on economy of each Member State, citizens’ welfare as well as impact on EU economy global competitiveness. Therefore, any revision should firstly be a subject to political debate, market-wide analysis and should be accompanied by measures aimed at providing support for the most vulnerable regions/Member States. Scope of delegation, proposed by the Commission, raises also our concerns regarding its compliance with the Treaty, particularly with art. 290 of TFUE (‘the essential elements of an area shall be reserved for the legislative act and accordingly shall not be the subject to a delegation of power’).