Depending on the price of allowances, proceeds from EU ETS can reach up to 100 billion PLN over the years 2020-2030 and are intended to lower the costs of the energy system, and, consequently, to improve the efficiency, flexibility, and innovation – stated Maciej Bukowski, President of WiseEuropa, while introducing the latest analysis published by Forum For Energy Analysis.
Polish energy sector needs roughly 200 billion PLN for the necessary modernization: improving efficiency and innovation, modernization of the manufacturing base and lowering emission. Where will the money come from? According to experts from WiseEuropa and Forum for Energy Analysis (FAE), it is an ETS system, despite being widely criticized in Poland, that can aid low-carbon modernization of the economy. Up to 100 billion PLN for low-carbon investments, protection of energy-intensive industries, support for electric cars and 100 thousand jobs in Silesia. ‘ETS can be the instrument for the modernization of the economy. It is worth seeking a compromise in this case’, comment the experts from WiseEuropa and FAE in the latest analysis: ‘The ETS auction proceeds – a source of financing low-carbon modernization in Poland’.
According to the directive, at least 50% of the funds from the sale of carbon emission allowances under the EU Emission Trading System (EU ETS) are to be intended for investments supporting modernization of the energy sector. In Poland, however, these proceeds are credited to the state budget. Joanna Maćkowiak-Pandera, Chief of the Forum for Energy Analysis, comments: ‘Currently, the cost of carbon emission allowances is borne by the consumers of electricity without giving them anything in return. Those resources are not being invested in energy efficiency or the network development, which could have improved the quality of electric power supply and stimulated the development of activity of prosumers on the market, as well as facilitated the network integration of renewable energy.’
Maciej Bukowski, a co-author of the analysis, explains: ‘In our analysis we propose to allocate ¾ resources to well-thought-out modernization of the energy sector, from which consumers – both industrial and individual – will ultimately benefit.
During the auctions, Poland will be able to sell allowances for the emission of 984 million tons of CO2.. A maximum of 28% of that pool (282 million of allowances) may be eligible for derogation (it will be possible to grant these allowances free of charge to the energy sector in exchange for the implementation of modernization investments). The remainder, i.e. at least 702 million of allowances, will have to be sold at auctions – over the years 2021-2030 total sales revenues may reach from 44 to 100 billion PLN .
What should be done with that money? The paper indicates that these resources ought to be allocated to the expansion of transmission infrastructure, the improvement of energy efficiency in buildings, the modernization of district heating and the support of distributed energy development. Due to the scale of the available funding, it could also be used for the support of the development of electric cars, which could contribute to reducing emission from transport and improving air quality in cities, as well as to the development of Polish automotive industry. Assigning nearly one fifth of the proceeds for preventing carbon leakage in the case of energy-intensive industries would also have merit, as it would motivate them to develop innovation and improve energy efficiency as well. Part of the proceeds from the auction should also be dedicated to sustainable transformation of regions affected by relocation of jobs, including Silesia, that would support innovative industry. 2-3 billion PLN over the years 2021-2030 would allow professional activation and would create roughly 100 thousand of jobs.
Allocating only the half of ETS proceeds to low-carbon modernization, as the directive requires, would mean 22-51 billion PLN to be intended for this purpose. Taking into account resources from the Modernization Fund, as well as from derogation, it would ultimately set up the financial envelope of 48-111 billion PLN for the energy sector. However, if Poland allocated all of the auction proceeds to supporting low-carbon investments, it would have at its disposal the total of 70 to even 162 billion PLN over the period 2021-2030.
Therefore, proceeds from the auction of emission allowances may be the main source of financing the support of low-carbon economy, providing from 45% to 63% of all ETS resources for the national modernization investments. The majority of the other Member States use proceeds from the auctions to finance low-carbon modernization, including improving the energy efficiency of residential buildings, especially those inhabited by poorer families. A large part of the EU countries also employs these resources in distributed energy support, followed by the development of low-carbon transport (e-mobility) and the protection of the industry in danger of carbon leakage.
‘The ETS auction proceeds – a source of financing low-carbon modernization in Poland’ was published by Forum for Energy Analysis. It was authored by Maciej Bukowski, Urszula Siedlecka and Aleksander Śniegocki (WiseEurope)
Information about Forum for Energy Analysis, as well as other FAE publications, are available at: www.FAE.org.pl