Poland is on track to meet its international greenhouse-gas emissions commitments. However, it will need to cut emissions
significantly in the future, if the European Commission’s proposal on the Low Carbon Roadmap is adopted. Policies should
ensure that the country’s substantial reduction potential, mainly linked to the energy sector’s high emissions intensity, and
implying overall abatement costs above the EU-average, is realised in a least-cost fashion by imposing an economy-wide
single carbon price. This stands in contrast with current explicit and implicit carbon prices, which vary widely across
different sectors of the economy. Crucial to least-cost abatement is also a high responsiveness to the EU-ETS carbon price
signal. While Poland has made good progress in complying with EU regulations related to the energy sector, the large share
of public ownership and the lack of effective separation between electricity producers and distributors may blur the price
signal for investment decisions in generation capacity. The isolation of the Polish electricity market implies a need for more
investment in low-emission technologies in Poland to achieve a given emissions-reduction target, whereas a deeper
integration with neighbouring electricity markets would spread the burden more efficiently across countries. The
cost-efficiency advantage of uniform support to renewables via green certificates should be retained to minimise abatement
costs. Government policies aimed at a higher share of nuclear power and natural gas from shale formations need to take
fully into account tail risks and the short- and long-term environmental costs of the use of the former and fully consider
environmental risks related to extraction of the latter. Energy efficiency policies can help to address market failure but
should not be allowed to distort relative carbon prices. This Working Paper relates to the 2012 OECD Economic Review of
Poland (www.oecd.org/eco/surveys/Poland)....

Climate Change Policies in Poland: Minimising Abatement Costs

10.1787/5k9b7bz18m0x-en