A five-day EU summit – one of the longest in history – ended in the early hours of 21 July with a deal, thanks to EU leaders doling out goodies to all six countries threatening to veto a desperately needed €750bn coronavirus recovery fund.
The “frugal four” (the Netherlands, Austria, Denmark and Sweden) won an increases in their budget rebates, a much-hated system that the EU had hoped to dispose of after Brexit. Major cuts were made to EU health, research and climate funds in order to return rich countries millions of euros from their EU budget contributions. For the “illiberal two” (Hungary and Poland), provisions that would have made receipt of funds conditional on adhering to rule of law and climate principles were watered down.
The Polish prime minister, Mateusz Morawiecki, returned to Warsaw waving the Council deal and claiming victory. Poland is the only EU country refusing to agree to reach net-zero emissions by 2050, and an earlier draft text had said countries had to accept this target to receive climate funds for greening the economy. But Morawiecki used his veto threat to convince other leaders to drop this demand. The result is that Poland will still be able to access 50 per cent of those funds without signing up to the climate goal.
“We won better rules than what the European Commission proposed [with] the possibility of getting 50 per cent immediately without committing to the climate target,” said Morawiecki.
What he failed to mention is that his victory is largely hollow because as a trade-off he agreed to shrink the climate funding in question, which was designed specifically at the request of Poland, by half. Poland could have had 100 per cent of a potential €38 billion top-up to the Just Transition Fund, aimed at supporting coal-reliant countries transition to clean energy economies. Instead it will get 50 per cent of a potential €18 billion – all for exclusion from a 2050 goal analysts say Poland will eventually sign up to anyway.
“This is a failure for Warsaw,” says Robert Tomaszewski, a senior energy analyst at the Warsaw-based think tank Polityka Insight. The country has simply postponed a decision on climate neutrality until the next European summit; if it later decides it needs the remaining half of the Just Transition funds, it could then commit to the 2050 goal.
Morawiecki is under intense pressure from coal producers and unions representing coal workers as the industry is suffering from significant falling demand, cheaper competition from other global fossil fuel sources, and coal reserves resulting in major losses. This is a long-term trend, but has been accelerated by the Covid-19 crisis because of lower demand for electricity and outbreaks of the disease in coal mines. On 17 July the Polish government announced a $33m strategic reserve of hard coal to prop up demand.
Morawiecki’s position is also under threat from the coalition partner to his newly re-elected Law and Justice party, the far-right United Poland party, which is heavily critical of him accepting any conditionality on climate.
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His response is therefore in line with Poland’s traditional role of climate spoiler in Europe. It has vetoed EU climate ambitions twice over the past decade, forcing the rest of the bloc to adopt plans with an asterisk saying Poland will not participate.
Yet analysts have been puzzled by the country’s insistence on keeping coal, which is losing market share because of economic factors, rather than adhering to EU climate laws. With expanding wind power in the country, renewables are also increasingly competitive with coal, making expensive mining less appealing. Poland doesn’t yet have any offshore wind farms, but plans to have installed 3.8 gigawatts by 2030 and a massive 28 gigawatts by 2050. If realised, this capacity would make Poland the largest operator of offshore wind in the Baltic Sea.
A report published last month by McKinsey concluded that Poland could meet the 2050 decarbonisation target with a combination of wind and new nuclear power. It also found that there will soon be no market for Polish coal, regardless of what policies are set at national or EU level.
“This is just a symbolic fight,” says Tomaszewski. “Economic forces are pushing Polish coal away from the energy market and will eventually force mines to shut. What happened during the summit had no real impact on the sector, which is in a process of transformation regardless.”
Izabela Zygmunt, a climate expert with Polish Green Network, says all this wrangling over the Just Transition Fund – a small proportion of the €160bn available to Poland in overall EU recovery package funding – misses the point. To get that wider funding, countries will also need to demonstrate projects are consistent with the EU 2050 target, even if a government hasn’t technically signed up to it. Thirty per cent of the overall EU budget will be ring-fenced to be only used for projects to mitigate climate change, while the rest has to be seen as not working against the 2050 goal.
“The larger chunk of money will be subject to climate rules, and this will pose the bigger problem for the government,” says Zygmunt. “It’s not a matter of being barred from accessing the money, it’s a matter of being able to propose projects that meet the criteria. And the problem is we don’t have a strategy consistent with climate neutrality because we don’t have any long-term strategy at all.”
Members of the European Parliament will negotiate with national governments over the coming weeks before signing off on the final long-term budget deal. The French MEP Pascal Canfin, head of the parliament’s environment committee, says even if the conditionality for the Just Transition Fund is dropped to 50 per cent, he will ensure the overall budget contains “strict taxonomy” to define what is a green investment and what is not. And Poland won’t get any money for projects that aren’t consistent with the 2050 goal.
The EU Parliament, Canfin says, “will ensure strong consistency between the recovery plan and our climate ambitions”.