The third settlement period, in which new, extended operating principles were in force from 2013, has brought many experiences and conclusions concerning further operation of the system. Its structure, the number of obligations arising from participation in the ETS, as well as the economic burden on entities caused by the need to redeem carbon allowances can all make this tool seemingly inefficient and ineffective; 

however, all aspects of the functioning of the system should be taken into consideration, including instruments that bring tangible benefits to our country. 

Revenue from the sale of greenhouse gas emission allowances

Under the EU ETS, Poland receives income from the sale of greenhouse gas emission allowances. Since the beginning of the auctioning of emission allowances, approximately 20.5 billion PLN in revenues were added to the Polish state budget. Over the next ten years, revenues from the EU ETS mechanisms will be significantly higher and are estimated to exceed 100 billion PLN.

Without these revenues, it would not be possible to finance programmes such as “My Electricity,” as well as low-carbon transport programmes, which stimulate the Polish economy and improve the quality of the environment.

These funds also financed a number of programmes aimed at supporting the development of RES, as well as measures aimed at improving energy efficiency of buildings. Such courses of action not only contribute to reducing greenhouse gas emissions, but also reduce emissions of other pollutants and thus improve air quality.

Modernisation of the electricity generation sector in 2013-2020

The EU Member States, whose electricity systems meet the criteria for modernisation pursuant to Article 10c of Directive 2003/87/EC may, on a transitional basis, allocate emission allowances free of charge to installations for electricity production, thereby waiving the auctioning of these allowances.

Poland has taken advantage of this opportunity – to date, 110 installations have used their free emission allowances, balancing 264.6 million emission allowances with an estimated value of 4.65 billion euro. These investments have contributed to the significant modernisation of Polish electricity generation installations and grids.

Supporting the EU ETS in implementing climate and energy policy and raising environmental awareness

Improving energy efficiency is one of the key areas that funds from the sale of EU ETS allowances are used for. This is done thanks to:

• expansion and modernisation of heating networks, which reduces low emissions in cities;
• support for the thermal modernisation of buildings, which has an impact both on improving air quality and reducing energy poverty.

The improvement of energy efficiency also leads to the reduction of electricity and fuel consumption, which leads to the improvement of the country’s energy security by reducing dependence on energy imports.

The EU ETS also supports national targets for the share of RES in gross final energy consumption (by increasing the competitiveness of RES).

The functioning of the EU ETS also leads to raising public awareness and broadening environmental knowledge. The effective implementation of environmental protection measures requires developing new technologies aimed at rational use of resources and minimising environmental impact. The roster of technologies, which are indirectly supported by the EU ETS include the use of recycling.

What is more, EU ETS also encompasses mechanisms that support the development of innovative solutions for the climate and energy transition. 2021 will mark the launch of the Innovation Fund, which may provide outstanding support for the implementation of Polish technological ideas.

What is more, thanks to the implementation of climate policy (including the EU ETS), the Just Transition Fund has been created with the aim of mitigating the socio-economic effects of the economic transition.

Proposals for modernising the EU ETS

However, the EU ETS in its current form is not fully effective. The current system does not generate sufficient funds which, from the point of view of Polish interests, would be needed to finance the process of deep transition of the economy, which would allow for making up for the gap in the innovation of the Polish economy.

However, rather than dismantling the entire system, it should be modernised and changed in such a way that the funds will be funnelled towards where they are most needed and where the investments made will have the greatest reduction effect.

Given the extensive nature of the EU legislative process, it would also be necessary, before the amendments to the EU ETS Directive enter into force, to complement the current mechanism with additional financial resources, redistributed independently of the EU ETS, which would support the process of rebuilding high-carbon economies.