Tuesday, December 11, 2018

Poland's Two-Faced Climate Policy

NB: I wrote what follows as an op-ed. When I realized that no one inside or outside of Poland is especially interested in Polish climate policy, I decided just to post it here, along with some added detail that I would have had to excise to meet word-length requirements for most publishers of op-eds.

Poland's Two-Faced Climate Policy

Fool me once; fool me twice. But what about the third time? Poland is hosting the UN’s annual climate summit for the third time in 11 years. Each time it hosts the summit, Polish government officials, regardless of party, wear two faces. While telling the global community that it supports policies to mitigate climate change, Poland reassures its coal mining industry that it has no intention of shuttering the mines. Is Poland a climate policy obstructionist pretending to be a climate cooperator, or a climate cooperator slowly preparing its coal-mining industry for big, politically-contentious changes?

When Poland last hosted the climate summit (COP 19) in Warsaw in 2013, its government simultaneously sponsored a global coal summit right across the street. Then-Prime Minister Donald Tusk (currently President of the Council of Europe) promised that not a single mine in Poland would be closed. During the current COP (24), Poland’s president Andrzej Duda – a political opponent of Tusk (to put it mildly) – issued similar assurances, and more. On the first day of the COP in Katowice, Duda spoke of the need to reduce greenhouse gas, while admitting that Poland had no plans to stop using coal for the next 200 years. Meanwhile, in the most in-your-face of insults, the Polish pavilion at the conference center featured pillars of coal, and COP participants were regaled by Katowice’s coal-miners’ band as they entered the venue. Later in the week, Poland’s Environment Minister, Henryk Kowalczyk, even questioned scientific findings of anthropogenic climate change, adding that the logic of environmentalists requires the elimination of human beings because we emit carbon dioxide.  

On a positive note, at least at first glance, Poland has officially committed to reducing its dependence on coal from 78% to 60% of its energy mix by 2030. But it is unclear that such a reduction would push Poland off its present business-as-usual trend line. At the time of the 2013 Warsaw COP, Poland’s coal reliance was at 85%, and no policy was in place to reduce that dependence. In fact, then-Prime Minister Tusk promised to increase coal use. Yet, in the five years between 2013 and 2018, Poland reduced its dependence on coal by 7% -- 1.2% per year – mainly as a result of market forces, including improvements factor productivity in industries that use coal. It is possible that Polish industries operating in competitive markets could achieve the announced 18% reduction in coal use – 1.5% per year – over the next 12 years, regardless of national climate policies.

Poland also claims to have reduced its carbon emissions by 30% since 1988. But this statistic is grossly misleading because of the baseline date, which marks the end of socialist central planning in Poland, which promoted the extensive use of resources, including coal. From 1989 through the early years of the 1990s, Poland transitioned from a socialist economic system to a competitive, market-based economic system, in which most major industries, notably excluding coal mining, were privatized. In such a transition, great improvements in productive efficiency could hardly be avoided. Certainly, no deliberate policy existed to reduce carbon emissions, which were the least of Poland’s environmental concerns in the 1990s.

The question remains, why would Poland care to appear to the world as a strong supporter of global climate policies, while at the same time assuring miners that it has no intention of ending reliance on coal until the last ounce of it is removed from the ground. Any plausible answer must include two related factors, one historical and the other structural.

First, mining has a long and storied history in Lower Silesia, extending back well over 100 years. After World War II, when communist Poland gained control of the entire region, coal-miners became a blue-collar aristocracy, exemplary communist workers who were able to buy goods and obtain bonuses unavailable to any other workers. Vestiges of their status remain today, including the potency of their political lobby, which has fought plant closures, though not always successfully. The coal lobby has had great success, however, in fighting initiatives to privatize the mining industry, which inevitably would rapidly lead to a reduction in mining jobs.

Because it is state-owned, Poland’s mining sector experiences both over-employment and under-production, which reflects the political costs to the state of reducing coal dependence. Poland’s coal industry today employs more than 125,000 workers, 60% more than in the United States, while producing nearly six times less coal annually than US coal mines. Over-employment is a directly result of Poland’s failure to privatize the industry, under strong political pressure from coal miners. All large coal-producing companies remain state-owned and -subsidized. According to a recent report, in 2013 Tusk’s party pressured PGE, the country’s largest power producer, into making an unprofitable investment in a coal plant the state wanted to protect. PGE refused, and its chairman resigned. Three years later, under a far more conservative government, PGE bought the Polish Mining Group, despite its falling share prices and out-of-date infrastructure. 

Polish mining companies, unlike privatized mining companies throughout the rest of Europe, do not operate in competitive markets, in which survival depends on market profits. Instead, their survival is guaranteed by subsidies from the state. Consequently, they lack incentives to economize on resource inputs, including labor. So, more miners keep their jobs. Under private ownership, excess employment would be squeezed out and levels of productive efficiency would rise. This is, of course, the reason coal miners rationally oppose privatization. Private coal mine owners would not hesitate to reduce excess labor. Because miners comprise an important voting block supported by a powerful mining ministry within the government, they can prevent privatization as well as job cuts at publicly-owned mines. Whenever the government decides to protect excess mining jobs, the cost is ultimately born by either consumers or taxpayers (very often, the same people). Indeed, Poles now pay the highest electricity prices in Europe.

The bottom line is that, so long as coal companies are maintained in state-ownership, it will be difficult for the Polish government to reduce significantly either coal mining jobs or subsidies no matter how sincere its attitude about global climate policies and no matter how many UN COPs it hosts. Coal will continue to flow from the mines into industrial furnaces and residential fireplaces. The Catch-22 is that the political costs of privatizing coal mining in Poland are and are likely to remain prohibitive for any political party. The only hope is that, eventually, high electricity prices could lead to a backlash against publicly owned coal mines and electricity generators, creating a countervailing lobby in favor of privatizing the mines and the generators, despite resulting job losses. Until then, Polish governments, regardless of party, will be forced to maintain two faces on global climate policy.

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