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Poland’s Transition to a Low-Emissions Economy is Feasible by 2030, But Will Require Concerted Effort, Says New World Bank Report

February 24, 2011

WARSAW, February 24, 2011 – While challenging, Poland can transition to a low-emissions economy as successfully as it underwent transition to a market economy in the early 1990s, according to the new World Bank report, Transition to a Low-Emissions Economy in Poland, launched today in Warsaw.

The report is part of the World Bank’s series of low-carbon growth studies. Poland’s greenhouse gas emissions are not large by global standards, constituting just one percent of the total. Moreover, its per capita emissions now stand similar to the EU average, at ten tons of emissions per capita, a reflection of the sharply reduced emissions that accompanied the transition to a market economy in the 1990s. However, given its lower income levels, Poland’s economy remains today among the least emissions-efficient in the EU. Over the next few decades, Poland appears to face a particularly difficult test: catching up to EU income levels while becoming less dependent on abundant domestic coal for energy needs.

The international agreement on climate change that is expected to eventually supersede the Kyoto Protocol and, more immediately, compliance with EU energy and climate policies, pose policy challenges for Poland. The EU 20-20-20 package requires Poland’s energy-intensive sectors, covered by the EU Emissions Trading Scheme, to contribute to the EU-wide target of a 21 percent reduction (compared with 2005) while allowing Poland’s other sectors’ emissions to increase by only 14 percent until 2020.

“We deliberately use the word ‘transition’ to indicate how comprehensive, cross-sectoral, long-lasting, and challenging this process of moving to a low-emissions economy is,” said Erika Jorgensen, Economic Adviser for the World Bank’s Europe and Central Asia Region and leading author of the report. “Still, we think this process should be much less challenging than the transition from central planning to a market economy that Poland went through in the early 1990s.”

Jorgensen added, “Of course, we need to be aware of the starting point: Poland is a European and global outlier with more than 90 percent of its electricity generated from locally-abundant coal. So, on the one hand, the starting point for transition towards a low-emissions economy is unfavorable, but on the other hand, the package of available abatement options is quite broad ― about 120 technical options are found to be reasonable possibilities for reducing emissions in Poland, ranging from on-shore wind power and biogas to more efficient new residential buildings and retrofitting of existing commercial buildings. These changes reach across sectors ― the energy sector is central, but transport, manufacturing, and energy end-use must also be part of the solution.”

If Poland were to take no action (the “business-as-usual scenario”), the models developed in the Transition to a Low-Emissions Economy in Poland report suggest that overall greenhouse gas  emissions in 2020 will stand roughly 20 percent above 2005 levels, while 2030 levels will be 30 to 40 percent higher.

The report notes that:

  • Poland can cut its greenhouse gas emissions by almost a third by 2030 by applying existing technologies, at an average cost of €10 to 15 per ton of carbon dioxide equivalent abated.
  • Costs to the economy will peak in 2020; but by 2030, the shift towards low emissions will augment growth.  Overall, this abatement will lower GDP by an average one percent through 2030 from where it otherwise would have been.
  • The economic cost in output and employment of Poland’s required abatement by 2020 under EU rules is higher than for the average EU country; and the restrictions on emissions trading between sectors aggravate that cost.
  • The energy sector currently generates near half of Poland’s emissions; but the transport sector — with precipitous growth and the need for behavioral change in addition to the adoption of new technologies — may end up posing the tougher policy challenge.

The switch to low-emissions energy supply, end-user energy efficiency measures, and transport policy will be the central pillars of Poland’s low-emissions strategy. The power sector, as the dominant source of today’s emissions, necessarily must be addressed, but the sector’s large investment costs raise financing challenges while long lead times guarantee that its structure will shift only slowly.

The combination of technologies chosen or new investments will depend not only on capital costs, operational savings, and emissions abatement potential, but also energy security, domestic sourcing, and a raft of other issues. With lower capital costs and earlier returns, energy efficiency measures hold out the promise of relatively low cost abatement that works directly to delink emissions from growth, the essence of a low-emissions economy.

Yet, the transport sector may prove the most challenging to hold emissions growth within the EU target since most technological solutions are already in place, leaving policymakers with only behavioral solutions — such as getting people out of their cars and onto public and non-motorized transport— that are much more complicated to implement.

Poland’s transition to a low-emissions economy by 2030, while not free or simple, seems to be affordable. However, capturing the full package of technologically feasible and economically sensible abatement measures requires coordinated and early action by the government. With an ambitious approach, Poland can aim to reduce its GHG emissions by about one-third by 2030 (relative to 1990) with little cost to incomes and employment.

Similarly, meeting the EU targets for 2020 appear generally feasible for Poland at manageable cost, albeit likely more challenging for less energy-intensive sectors such as transport than for sectors that are covered by EU-wide carbon trading.

According to Jorgensen, “Positive trends are observable already ― such as improvements in energy efficiency ― but there is still a relatively long way to go to achieve EU averages, and long-term strategies on carbon emissions abatement are under preparation. We hope our work contributes to these efforts to some extent. Poland has already weathered one economic transition and emerged with a strong and flexible economy. This next transition — to a low-emissions economy — while requiring an evolution in lifestyles and priorities over the next 20 years, may well turn out to be easier.”

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