Poland rejects French CO2 compromise as summit looms

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| Sourced From EU Observer |

EUOBSERVER / BRUSSELS - Poland has given the cold shoulder to concessions offered by the French EU presidency on how the union’s power sector should reduce CO2 emissions.

“It does not solve the problem of electricity prices in a satisfactory way,” one Polish diplomat said on Wednesday (19 November) in response to the French proposal.

The concessions paper is aimed at addressing Warsaw’s key objection - against the buying of 100 percent of pollution permits under the union’s reformed emissions trading scheme (ETS), the cornerstone of the EU’s strategy against climate change.

Under the reform, EU governments would no longer give away permits to pollute to the power sector. Instead, the industry would be forced to buy the right to emit carbon dioxide by auction, with full auctioning expected to kick in from 2013.

To get Poland on board, the French EU presidency has offered a three-year long exemption from the regime to those countries that produce at least 60 percent of their electricity from coal and are poorly connected to the grids of other EU states.

Their plants could receive half of their pollution permits for free until 2016, France has suggested.

Poland - the chief opponent of the ETS reform - swiftly rejected the French ideas, however. It claims the changes would harm its economy, as almost 95 percent of the country’s energy production is based on coal.

Alternative suggestion

Instead, Warsaw has tabled its own alternative to full auctioning - a so-called “benchmarking-auctioning approach” that suggests granting free allocations on the basis of actual production.

In practice, separate benchmarks would be set for each type of electricity production - hard coal, brown coal, natural gas and fuel oil - while free allowances would be granted “ex-post” based on actual emissions.

The system would reward best performers, a Polish diplomat said.

Starting from 2013, the base benchmark would be reduced by one percent each year - something that should put additional pressure on the power sector to modernise technologies.

Warsaw argues that its proposal helps address concerns about the level of electricity prices, while full auctioning is likely to see producers passing on the entire market price of allowances to consumers in the electricity price.

“In countries where coal is the main fuel for electricity production, the electricity price increases will be particularly visible due to a need to purchase a proportionately larger quantity of allowances at auctions,” the Polish paper says.

In addition, Poland suggests to promote development of clean coal technologies rather than to eliminate coal from electricity production. “The EU should treat coal as an energy source, which improves its energy security,” it says.

Another summit?

The 27-nation bloc has been in a race against time, trying to reach a deal on the ambitious package of green legislation in mid-December (11-12 December) when EU leaders are set to meet in Brussels .

But Polish daily Rzeczpospolita reported on Thursday (20 November) that France has floated the idea of an extraordinary summit on the package to be held on 27 December if the 11 December talks fail.

“For the time being, we hope for an agreement on the 11th and the 12th. If there is no agreement, then we will see,” a French presidency spokeswoman told EUobserver.

By RENATA GOLDIROVA