Coal transition in Poland

Options for a fair and feasible transition for the Polish coal sector

2018

If Poland is to participate in the global effort to minimize the risk of greenhouse effect at the level comparable to other major economies worldwide, it needs to substantially reduce its CO2 emissions. In the scenario for Poland, which we build on based on several assumptions and using modelling tools, the CO2 emissions per capita reaches the level of 2.80tCO2/capita in 2050, which constitutes a 67% reduction comparing to 2010.

Achieving the target is feasible providing a radical reduction of oil and gas consumption. As for the total coal consumption, it would be reduced to a lesser but also substantial extent, namely by 20% between 2015 and 2030 and by 55% between 2015 and 2050. As the modelling exercise showed, the most cost effective way to achieve that is to completely replace coal with alternative energy sources in the power sector by 2050, with the possible exception of existing CHP units. Significant reduction in coal consumption can take place also in the residential sector upon adoption of energy saving technologies and measures.

In the analysed scenario, the drop in coal consumption will contribute to but also follow the phase-down of coal-mining sector in Poland. The reason for this is that most of hard coal consumed in Poland is produced domestically: in 2015 Polish mining sector produced 72.2 mln tonnes of hard coal while Polish economy consumed 71.9 mln tonnes. This contrast with the cases of other major coal consumers in Europe which cover most of its consumption from import.

At the same time, however, existing lignite mines (roughly half of Poland’s coal production) are expected to significantly decline in productivity independently of climate policy by the 2030s. This provides a major challenge to the local communities, workers and businesses currently linked to lignite. Poland’s coal sector and governments thus has an important window of opportunity to begin preparing for this “lignite transition” that they must use relatively urgently, to prepare for this coming change.

The cut in production of both lignite and hard coal mining raise questions about how to manage the reduction in employment in the coal sector. We estimate that employment in that sector will need to be reduced by 47% during the period 2015-2030 and by at least 77% during the period 2015-2050 (from the current 94 thousands to estimated 63 thousand in 2030 and 27 thousand in 2050).

Coal-mining employs a large share of the workforce in the Slaskie region, although it generates a small share of Polish GDP and plays a minor role in total employment nationwide. The phase-down of the sector implies that employment will need to be considerably reduced in the coming decades. The reduction in employment might happen in two ways: (i) by lay-offs in the mining sector and a shift of workers to other sectors of the economy or (ii) by natural attrition of workers in the mining sector coupled with hiring freeze and directing young generation into other sectors of the economy.

The challenges facing the Polish coal sector, while difficult to accept, also come with opportunities to achieve some important local and national policy objectives, with climate mitigation as a co-benefit.For the affected regions, the need to transition can also be an excuse to more broadly diversify local industry, creating attractive jobs for the next generation. It can also be an opportunity to improve environment and health in the region, to invest in infrastructure and create more attractive local living conditions for the local inhabitants.

Poland has a chance to implement a just transition for regions and workers if it acts now to prepare the transition. A number of policy options are available. Policy makers can use a ‘window of opportunity’ for relatively harmless employment reduction that results from the natural ageing of the mining workforce. They can further guarantee that assistance measures encourage ex-miners to stay at the labour market; adjust the number of students in mining classes; stimulate labour demand in coal mining areas, especially in manufacturing and construction; promote vocational training to ex-miners ending with formal certification. However, in general, enrolment into retraining and other forms of active labour market policies should be a default option to leavers from the mining sector who fail to find a new job; engage in broad and inclusive consultationto guarantee broad social consensus, including local public administration, NGOs and local organizations, for the reforms to prevent halting due to political reasons.

For the affected regions, a key priority is ensuring sufficient economic activity and infrastructure and soft local attractiveness factors to support employment for the next generation of workers. Some Polish coal-mining regions are already pursuing activities to diversify their industrial fabric. Such activities should be further supported. Poland will be looking to allocate regional development funding from the European Union’s next budget to support these activities. Strategic planning and the creation of a multi-level governance structure to coordinate and identify opportunities at the local and regional scale will however be required to ensure efficient governance of this transition.

However, our simulations show that the lay-offs will not be necessary since most of the employment reduction could be achieved through natural attrition and hiring freeze. Natural attrition and the hiring freeze would generate a drop in supply of labour that is very close to the drop in demand for labour in the sector under our ambitious emission reduction scenario. This result is obtained even under the assumption that productivity in the mining sector at fast pace. If the growth of productivity is slower, the necessity of lay-offs will be even lower.

Insitute

  • IDDRI

  • Climate Strategies

Employer

IBS - Instytut Badań Strukturalnych,