Poland is in an energy bind

KATOWICE, Poland — Carbon dioxide and global warming have an entirely different meaning when more than 90 percent of your electricity is generated from coal.

That is why Poland has become the leader of a coalition of European coal-burning countries determined to ensure that the costs of CO2 emissions mitigation is borne fairly by wealthy countries as well as poorer developing ones.

The latest fight is over the European Union’s proposal to spread the pain of reducing emissions so that poorer countries also do their share in cutting greenhouse gasses. Poland is adamant that any aid paid to poorer countries in the rest of the world should come mainly from the wealthiest nations of Europe.

“We do not believe that the poorer countries of Europe will help the poorer countries of the world on behalf of the richer European countries,” said Poland's Finance Minister Jacek Rostowski.

The issue is an acute one for Poland because coal is by far the country's main source of energy, and there is no sign of that situation ending in the foreseeable future.

A new plan that looks at the country’s energy needs to 2030, which was accepted by the government earlier in November, is frank about coal’s importance: “Eliminating coal from the portfolio of primary energy resources would worsen Poland’s energy security,” says the document.

The plan does make some concessions to environmental concerns. Energy derived from coal is to drop from 94 percent today to 60 percent in 2030, with the rest made up by a new nuclear plant, renewable energy and gas.

Poland’s current reliance on coal is making it a growing target of environmental groups. In the leadup to an EU summit last month, Donald Tusk, Poland’s prime minister, was portrayed as a green Frankenstein monster (next to a Nicolas Sarkozy Dracula, Angela Merkel skeleton and Gordon Brown witch) above a plea asking EU leaders to support a climate finance package.

But the pressure has not swayed Poland from its strategy. The country is gradually shifting to less polluting forms of energy under pressure from the EU, which has committed to its ambitious 20/20/20 program — producing 20 percent of the EU’s energy with renewables and a 20 percent reduction in CO2 emissions by 2020.

But for now coal continues to be king.

Even Jerzy Buzek, a former Polish prime minister who is now head of the European Parliament, admits that the dirty fuel will continue to play a key role. “No one in the EU doubts that coal will continue to be a fundamental source of energy for decades to come,” he said during a recent visit to Poland.

Poland is Europe’s largest coal producer — digging up 84 million tons last year in an industry that employs 120,000 people and is very powerful politically.

Switching to other sources of energy is problematic both economically and politically.

Poland needs to import about 90 percent of its oil and 70 percent of its natural gas — and the source of both of those fuels is Russia. Poland is already twitchy about its level of dependence on an increasingly unpredictable Russia, and it would be politically impossible to import much more.

Although Poland is hugely dependent on coal, the industry has been underinvested for years. Jerzy Markowski a former minister and now a coal consultant, estimates that Poland would need to invest about $7 billion to upgrade it coal mines, plus an additional $45 billion to build new power plants.

Poland has the lowest electricity use per capita in the EU, and energy demand is expected to rise by about 50 percent by 2030, meaning that the country faces the possibility of blackouts unless enormous funds are invested now in energy.

“If not for the economic crisis we would already have a deficit,” said Markowski.

Although the country is much more energy efficient than it was under communism, when enormous amounts were wasted, it still uses about twice as much per unit of output than the EU average.

At the moment the coal sector invests about $350 million annually in mines, which is enough for running maintenance but not enough to expand production.

“I have to admit that investments should be higher than they currently are,” said Miroslaw Kugiel, CEO of Kompania Weglowa, Europe’s largest coal company.

The problem for the coal companies is that banks are reluctant to lend to them because the sector has had huge difficulties in turning a steady profit in the past. The government is also constricted by EU rules that limit state help for industries. One option would be privatization, which is already under way in the power generating sector, but is still considered anathema in coal.