Whither are you headed, Polish coal? Perspectives of development of hard coal mining in Poland.

The report shows that theses about an excessive tax burden imposed on hard coal mining brought forward in public debates do not find their confirmation in data. According to the data, taxes imposed on the sector are on a moderate level in view of the whole economy. A number of sector-specific charges do not significantly affect its competitiveness as they are low, the same as their share in the total tax burden imposed on mines. At the same time, the authors say, due to concealed and explicit subsidies coal mining brings to Poland’s budget twice as little funds per employee as other industries and service-based industries.

According to the authors of the report a very low productivity of coal mining and the related high unit labour costs that cover mainly the salaries of underground workers constitutes the key problem of this sector in Poland. The mean coal mining productivity in Poland – at the level of 700 tons per employee per year – is comparable only to that of old coal mines of Western Europe that have long been subsidizes and are to be liquidated by 2020.  The authors underline that the only successful attempt to significantly improve coal mining productivity took place in Great Britain when Margaret Thatcher was at the head of the government, following a feud with labour unions and closing unprofitable mines. The USA are in a different situation, as the country has large deposits of easily accessible hard coal, the industry is highly mechanized and extraction – well organized.

The report stresses that coal mining modernization will require significant job cuts, with the employment reduction of perhaps even more than 50% within the next five years. The only alternative is to close the majority of Polish mines by 2020. Yet, even successful restructuring measures will not ensure that the coal mining will operate in a different shape in the next decades. The pressure to increase salaries will push further increase in productivity, which in turn will lead to an ongoing restructuring of the sector and closing of unprofitable mines, the authors say.

The report reads that no later than in 2020, restructured Polish mines will extract a lot less coal than nowadays. If the energy sector does not see a faster technological modernization than the one presented in strategic documents drafted by the government, Polish coal mining will be able to meet only on a small part of the country’s coal demand.

Given the above, authors claim that Poland must set its energy sector to other energy sources or to become dependent on imports of the black fuel. Despite being a new thing for Poland, these changes will be a mere repetition of what other EU member states have been through. The comparison of long-term coal extraction trends in Poland indicates that phasing out of Polish coal mining, as in the prognosis by WISE, reflects the British or German pattern both countries walked through 20-30 years ago. Analogical processes – depletion of easily accessible deposits, increase in labour costs, too strong competition from foreign businesses – have already occurred in Western Europe. To see the future of coal mining in Poland in 2015-2030 or 2040, one must look at restructuring changes experienced by Western Europe in 1980s and 1990s.

The report also includes recommendations regarding energy and industrial policy. According to the authors, the policy of Poland should take into account a clear downward trend of hard coal mining. The following are realistic actions to take in order to balance domestic coal supply and demand:

• Restructuring of employment and cutting salaries in the sector by 2020;
• Gradually replacing unprofitable mines with new, more productive ones after 2030;
• Limiting coal consumption by decarbonising fuel mix in the energy sector as well as in households to a larger extent that in the draft Polish Energy Policy until 2050. By 2050, the current values should be reduced by 70-80%.