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  1. 1. 1 29 October 2006 Working translation The standpoint of the Government of the Republic of Poland on the Green Paper: A European Strategy for Sustainable, Competitive and Secure Energy COM (2006) 105 Poland fully appreciates a comprehensive approach adopted towards a new European energy policy in “The Green Paper: A European Strategy for Sustainable, Competitive and Secure Energy” published by the European Commission on 8 March 2006 and agrees that the energy sector faces the threats identified by the EC. The document accurately specifies fundamental factors conditioning the energy sector and its development in the European Union listing the most significant of them: an urgent need for energy investment requiring about 1 trillion euros over the next 20 years, a predicted increase in energy demand by about 60% until 2030, a rise in EU import dependence to about 70% of the Union’s energy requirements over the next 20-30 years, a rise in oil and gas prices expected to continue in the future, and insufficient competition levels on the European internal energy market impeding security of supply and price reduction. These factors will definitely influence the character and shape of the EU energy policy. In relation to six priority areas indicated by the European Commission, Poland’s answers to the questions formulated in the Green Paper are as follows: 1. Energy for growth and jobs in Europe: completing the internal European electricity and gas markets. Is there agreement on the fundamental importance of a genuine single market to support a common European strategy for energy? Poland agrees that an internal competitive electricity and gas market needs to be established, particularly by ensuring common regulations affecting cross-border trade. Significantly, market liberalization and new interconnections created to facilitate energy trade within the EU territory make the EU market more open to energy and its carriers from non- member states and more vulnerable to penetration by non-EU companies . Consequently, market liberalization should be symmetrical, i.e. the EU should promote measures securing the interests of all Member States and not only stronger energy market players, while external energy suppliers should observe the norms specified in the European Energy Charter and the Transit Protocol. It is particularly important to introduce the issue of energy trade into the WTO agenda and persuade WTO member states and the states applying for the WTO membership to respect common regulations. The Green Paper assumes that this new energy policy of the European Union should be based on three equally significant pillars – a sustainable growth, competitiveness and security of supply as well as synergy among the three. Simultaneously, it points to a need to complete the development of a fully competitive internal energy market as an essential condition to ensure security of supply and lower prices. However, Poland believes that the issue of energy security should be dominant over the remaining two pillars and that the measures taken by one Member State to improve energy
  2. 2. 2 security should improve energy security of the whole European Union without undermining it in another Member State. It should be emphasized that Poland sees all the three pillars of the energy policy specified in the Green Paper as inseparable, however, security of supply is the condition without which the remaining two (sustainable development and competitiveness boost ) cannot occur. Significantly, the establishment of a common gas market should be accompanied by the assessment of gas access conditions of respective Member States, bilateral agreements and their own resources affecting the diversification of natural gas supply sources and transport channels. Without such real diversification of supply sources and transport channels, markets of many countries dependent solely on one supplier may be taken over either by this supplier or the supplier’s subsidiary companies. The construction of the North European Gas Pipeline could be a potential danger, while it might be financed under preferential conditions from EU funds coming from Member States contributions. Poland believes that gas market liberalization should be implemented with regard to the capacity of Member States to diversify supply of energy carriers and their energy security strategy, particularly in terms of natural gas supply. Liberalizing the internal market before diversifying supply sources may result in the monopolization of the market by external suppliers and, consequently, threaten energy security and impede the establishment of a transparent and fully competitive market. And thus, the order of the two – the diversification of natural gas supply sources and the liberalization of the market – is significant. According to Poland, the former should precede the latter. How can barriers to implementing existing measures be removed? What new measures should be taken to achieve this goal? New actions proposed in the Green Paper should be based on the assessment of implemented measures put forward in the second package of market directives and the progress of regional market development according to the scope and schedule specified during the Florence Forum. Moreover, they should involve better stimulation and coordination of works within the confines of institutions such as the European Regulators’ Group for Electricity and Natural Gas and associations of operators, energy enterprises and energy consumers. Implementation instruments proposed so far are of institutional nature and should be discussed in greater detail by Member States. Establishing new organizational structures without full assessment of already implemented measures may result in actions unadjusted to the needs of a developing European energy market and may currently become an additional administrative burden. Poland supports the idea to create a list of priority interconnections aiming at complete integration of the EU market. On the other hand, in order to ensure effective use of interconnections, it is necessary to strengthen a national energy network. Significantly, there is an asymmetry between the infrastructure used for natural gas transmission in the North- South direction and the existing East-West infrastructure. The development of the North- South gas transmission infrastructure would improve energy security in the European Union and boost internal market development. According to Poland, however, the extension of cross-border interconnections could entail unequal distribution of additional commitments imposed on respective countries or regions. Consequently, financial support programs should take into account the needs of operators providing their services in respective countries in a
  3. 3. 3 manner that implementation of these interconnections should not deteriorate operating conditions of energy customers who use services of those operators. In the process of common market establishment, it is necessary to adequately define the role of long-term contracts. On one hand, these contracts are key to ensure reliability and sustainability of energy supply. On the other hand, the existing bans on re-export need to be lifted. These regulations are inconsistent with the principle of free competition and have been already abolished in other regions as incompatible with free market standards. Lifting and prohibiting such bans is to the best interest of all EU countries and will contribute to price reduction for all individual and entrepreneurial consumers. How can the EU stimulate the substantial investments necessary in the energy sector? Over the next 25 years, substantial investments in the energy sector will be a necessity. The implementation of investment projects requires transparent, stable and predictable regulations. It is necessary to conduct support programs financed from public funds and the EU budget to ensure that there are equal competition rules for new investments involving low-emission and renewable energy technologies as well as those based on conventional energy resources. How to ensure that all Europeans enjoy access to energy at reasonable prices, and that the internal energy market contributes to maintaining employment levels? Poland agrees that an internal competitive electricity and gas market should be established in order to ensure that all Europeans have access to energy at reasonable prices. Moreover Poland believes that using national renewable energy sources reduces the dependence of the whole European Union on the import of energy sources and stimulates its economic growth by providing additional jobs. In order to maintain employment levels and obtain one of the most desired results – energy savings, we must take measures for radical improvement of energy efficiency and introduce the fundamentals of energy efficiency and energy consumption management at every level of education aiming at children, youngsters and whole societies. And thus, in light of these established targets, the EU should re-examine the existing fiscal policy and taxes imposed on energy carriers. Legitimate unification of EU regulations carried out in these areas should be continued. 2. An Internal Energy Market that guarantees security of supply: solidarity between Member States Which measures need to be taken at Community level to prevent energy supply crises developing and to manage them if they do occur? Poland is convinced that joint actions to prevent energy supply crises and tackle them whenever they occur are consistent with earlier expectations for idea of solidary cooperation.
  4. 4. 4 Poland agrees with the Green Paper that it is necessary to develop an early-warning system, which could help to predict supply shortages or transmission network problems, and to review European regulations (acquis communautaire) on the energy sector to adjust them to current threats. According to Poland, complete implementation of existing directives and regulations is essential. Only after implementing the existing legislation, will the European Union be able to assess whether the measures it points to are sufficient or they are not. Conclusions arising from such an analysis may serve as a basis for new regulations, which should not be implemented prior to the implementation of the existing EU rules. Poland is ready to support a new bill on gas stocks if Member States bring up the problem when discussing suggestions put forward by the Green Paper. Decisions with regard to a new legislative proposal to collect, process and publish data on supply and stocks of respective energy carriers should be taken after assessing additional costs incurred by Member States. Poland suggests that at this stage the EU should make more effective use of data already collected by the International Energy Agency and tighten the cooperation with this institution in this respect. The improvement of energy security requires the mechanism enabling an instant reaction whenever an energy crisis occurs. The Green Paper and the Conclusions of the European Council adopted during the Spring Summit in March correctly assume that such a mechanism should be based on the rules of solidarity and subsidiarity. Consequently, Poland proposes to develop an inter-government emergency mechanism based on solidarity between Member States. In order to develop such a mechanism, it would be useful to specify the EU minimum stock capacities. Still, another issue worth focusing on is a proposal to develop cross-border interconnections, which will not only yield economic benefits, but which will be used exclusively during an energy crisis. Such interconnections would provide security reserve serving to increase energy flow whenever energy security of one Member State is endangered – such measures would constitute a fundamental step towards the realization of the “one for all, all for one” principle. 3. Tackling security and competitiveness of energy supply: towards a more sustainable, efficient and diverse energy mix How can a common European strategy best address climate change, balancing the objectives of environmental protection, competitiveness and security of supply? What further action is required at Community level to achieve existing targets? Are further targets appropriate? Bearing in mind scientific results boosting competitiveness of supply, increasing energy production efficiency, stimulating technological development and reducing a negative impact of technological processes on the environment, Poland supports the idea to apply clean coal combustion technologies and CO2 capture and sequestration on a commercial scale. However, since wider application of these technologies will bring effects only in the distant future, it is necessary to take actions supporting the introduction of high-performance carbon installations in power plants (blocks for supercritical vapour parameters) and a wider use of modern cogeneration technologies over the next few years.
  5. 5. 5 Poland believes that in order to ensure European energy security, energy resources and their accessibility, it is necessary to change a widely-held perception of coal. What is worth mentioning here is that: coal is accessible from many sources, it can be safely stored, its stocks may be used whenever a crisis occurs, it can be safely transported, its transport routes do not require any particular safeguarding measures, its energy costs may be further reduced, and coal pollution effectively eliminated. Consequently, Poland is convinced that in order to establish a long-term strategy in this respect, the EU should further discuss the issue of including coal (particularly its chemical processing and clean coal technologies) in a strategic plan of energy technologies. It should also consider a well-designed, sustainable and predictable regulatory framework for coal technology development. As a result, the 7th Framework Program for Research and Technological Development should ascribe appropriate significance to coal in energy mix and examine the challenges facing this energy source in the context of a sustainable energy problem. According to Poland, it is necessary to devise instruments facilitating participation of new Member States in the 7th Framework Program for Research and Technological Development. Poland suggest that the European Commission should address the issue of nuclear power to be developed in Member States, while examining both: its advantages (low variable production costs, high reliability of supply and zero CO2 emissions) and its risks related to the functioning of a nuclear power plant (failures, waste storage problems). Poland believes that Member States should have a significant degree of autonomy in selecting fuels and technologies. The Strategic EU Energy Review proposed in the Green Paper should merely define regulatory frameworks and point to directions towards the achievement of strategic EU goals without preventing countries from choosing energy carriers and application technologies on their own. The Strategic Energy Review should also take into account the issue of energy trade - assess the consequences of international cooperation, signed or drafted long-term contracts, and the consistency of entrepreneurial policy with national policies and the policy of the EU as a whole. How should we provide a longer term secure and predictable investment framework for the further development of clean and renewable energy sources in the EU? All systems supporting the production of energy from clean sources, including renewable sources, must be compatible with the principles of a developing internal energy market. The creation of a European internal market should be provided with an adequate regulatory framework taking into account subsequent construction stages of the renewable electricity sector. Significantly, the development of these systems should be accompanied by the establishment of state aid rules. 4. An integrated approach to tackling climate change What should the EU do to ensure that Europe, as a whole, promotes the climate- friendly diversification of energy supplies?
  6. 6. 6 In the Green Paper the European Commission indicates that an integrated global approach to climate change is a necessity. However, it fails to emphasize clearly and strongly enough that unilateral agreements on environmental protection should take into account economic competitiveness of the European Union. Currently, according to Poland, the EU and rapidly developing countries should work out a new integrated approach that would more effectively prevent the greenhouse effect than restrictive emission limits applicable in the European Union, which deteriorate the competitiveness of the EU products and services. Consequently, the EU needs to take measures in order to ensure more active participation of the countries failing to accept greenhouse gas reduction goals. Poland believes that strict regulations concerning CO2 emissions and other pollution emissions should be adjusted to the situation of respective Member States and the capacity of each country to meet environmental protection provisions specified in other documents. It ought to be remembered that such adjustment to the EU environmental protection policy entails specific economic and social consequences (e.g. rising energy prices). In Poland, there is an interdependency between measures taken in favour of emission reduction, the necessity to change a fuel mix and social-economic problems (employment reductions in the mining sector, possible energy security disruptions). Recent perturbations with regard to imported gas supply may force Poland to change its fuel policy specified in the document Poland’s Energy Policy until 2025. The system of CO2 emission trade which is being implemented by Poland and the system of SO2 trade what Poland considers to introduce, will help to restructure the energy sector until 2020 (also with respect to consumed fuels) without impeding its economic growth, and ensure energy security, which is Poland’s absolute priority. Consequently, the EU needs to assess the impact of applied and designed environmental protection instruments on the economy and the energy sector, while taking into consideration the competition conditions, the energy infrastructure and resources of respective Member States, and only then take adequate adaptive measures. Poland would like to stress that the system of CO2 emission reduction based on emission trade requires restructuring. The current system is mainly of an administrative nature and works without a clear regulatory framework specifying the distribution of allowances to energy installations. The European Commission estimates that the transport sector is responsible for 21% of all greenhouse gas emissions and that the rate is still growing. In order to achieve sustainable development targets, particularly the reduction of greenhouse gas emissions specified in the Kyoto protocol, it is necessary to reduce emissions in this sector by, among others, increasing biofuel consumption. The government agrees that an integrated approach to tackle climate change should focus on: improving energy efficiency of the economy, promoting and implementing renewable energy technologies, raising the energy efficiency of the transport sector, harnessing the potential of existing technologies and technological research. The reduction of global greenhouse gas emissions is one of the most significant challenges facing the EU coherent energy policy. Individual EU Member States, including Poland, will not be able to effectively prevent the greenhouse effect on their own. The EU needs to enter a global dialogue on the possible scope of other measures taken to stabilize emission levels over the next decades, as well as respecting the rule of common, but varied responsibility of respective countries. Being a new Member State, Poland understands that it is important to improve the energy efficiency of primary energy use. The changing economy structure of new
  7. 7. 7 Member States, lower living standards, a higher assumed pace of their economic growth, higher GDP energy consumption and lower energy consumption per capita require a different approach in old and new Member States, including Poland. Significantly, the EU regulations securing energy efficiency improvement ought to take into consideration the specificity of respective Member States’ economies and their development. New EU countries have a much lower capacity to finance energy efficiency investments and develop renewable energy sources than rich, old Member States. Measures taken in order to improve energy efficiency should not impede economic growth or economic competitiveness. Energy efficiency targets may be achieved by applying market measures that ensure economic benefits and optimising technological-economic processes, while taking into account the complexity of the energy efficiency issue and its links with the problem of environmental protection. Poland supports an initiative to examine a “white certificates” system as an adequate economic-financial instrument stimulating the market towards more rational energy consumption. Moreover, in order to improve energy efficiency, the EU should implement energy demand management programs. It needs to adopt a comprehensive approach to energy demand management reducing energy use by means of, among others, various organizational measures, information and promotion campaigns, improved instruments encouraging steady electricity daily consumption . The Green Paper on Energy Efficiency suggests that the energy use in the EU should be reduced by 20% until 2020. To achieve this target, Poland requires substantial EU funds for projects stimulating a wider use of primary energy, particularly by consumers in the public sector. Poland believes that actions taken to improve energy efficiency, particularly in a long- term perspective, should be based on market mechanisms; it supports a suggestion to establish international cooperation for rational energy use. Poland agrees with the European Commission that Europe should reduce its dependence on mineral (fossil) fuels import, however, it believes that a wider use of renewable energy sources should be considered with regard to a local capacity of individual countries in this respect. According to Poland, further development of the renewable energy sector and security of resources for the production of renewable electricity and thermal energy, biocomponents and biofuels should be based primarily on the potential of respective Member States. Such a policy, except for yielding benefits in the field of environmental protection, will ensure national energy security, help to reduce fuel and energy import and stimulate economic growth by creating additional workplaces. The policy stimulating renewable energy use should be based on the national balance of these resources. Poland with satisfaction notices that the Green Paper points to CO2 sequestration technologies, underground storage and clean fossil fuel combustion technologies as the ones that will be widely used in the future especially by the countries for which coal is a safe and plentiful source of energy.
  8. 8. 8 Poland is deeply convinced that if coal is ascribed an appropriate significance, it will become an increasingly clean energy carrier. In order to secure its supply over the next few decades, Poland, being a country where hard and brown coal are almost dominant energy carriers, will strongly emphasize the problem on the European Union forum. According to Poland, the issue should be further discussed in order to produce a long-term forecast whether coal (particularly its chemical processing and clean coal technologies) is taken into consideration in a strategic energy technology plan. 5. Encouraging innovation: a strategic European technology plan What action should be taken at both Community and national level to ensure that Europe remains a world leader in energy technologies? What instruments can best achieve this? In light of achievements and challenges awaiting power engineering of the 21st century, it is necessary to intensify research on new energy generation technologies, rational energy use and low-emission technologies. And thus it is reasonable to focus scientific investigations on this field and develop a strategic energy technology plan. The coordination of technological research supported by specific industry sectors and European expert research platforms should accelerate technological advancement and reduce costs of access to new technologies. Poland is particularly interested in participating in the research and implementation works on new technologies to obtain, enrich and produce energy from coal, including the 7th Framework Program of Research and Technological Development. 6. Towards a coherent external energy policy Should there be a coherent policy on energy to enable the EU to speak with a common voice? The European Union is one of key consumers of energy carries in the world. Coordinated actions concerning its energy policy taken on international forum will yield the EU and all Member States benefits in the field of energy security, environmental protection and growing competitiveness of Member States. A European external energy policy is a necessity. Only be speaking with a common voice will the EU be able to influence relations and rules of cooperation with non-EU countries oil and gas exporters and change international standards on environmental protection and energy efficiency. Consequently, Poland believes that a number of ideas put forward by the Green Paper should be explored: We should begin an open and honest exchange of views with regard to the priorities of respective countries so that each country’s voice is heard and taken into consideration, and make a list of our problems and priorities. We should review the European energy legislation (acquis communautaire) through the prism of the EU external policy to adjust it to the threats the energy sector faces nowadays. In order to achieve European energy policy targets, it is necessary, as it is stated in the Green Paper, to focus on more effective application of various EU policies, including trade policy.
  9. 9. 9 A truly coherent European policy should be implemented in the area of energy supply. We should consolidate partnerships with external suppliers and consider introducing an energy dimension into the European Neighbourhood Policy. This postulate is particularly significant with regard to energy security as the EU is largely dependent on energy supply from unstable countries or the countries using the export of resources as their foreign policy tool. The implementation of these measures should allow for the development of a legal instrument ensuring mutual guarantees of energy supply whenever supply disruptions do not result from a supplier’s fault based the “one for all, all for one” principle. How can the Community and Member States promote diversity of supply, especially for gas? Poland agrees with the Commission’s diagnosis that the energy sector faces increasingly more threats posed by natural catastrophes or political action. Undoubtedly, Europe requires greater diversification of energy sources. Poland believes that such diversification as well as cooperation terms specified for EU external suppliers should be prior to complete liberalization of the market. Europe needs a greater degree of solidarity in order to effectively meet security threats. Member States should speak with a common voice to energy suppliers, taking into account individual interests of respective Member States. The diversification of supply, especially for gas, should be accompanied by actions supporting the development of the infrastructure for transmitting energy carriers in various countries. We should promote initiatives contributing to actual diversification of energy supply sources. However, we should also remember about the impact of the industrial infrastructure on the environment, about its economic usability and political motives behind certain investments. Should the EU develop new partnerships with its neighbours, including Russia, and with the other main producer and consumer nations of the world? We should consolidate our partnership with external suppliers and consider introducing an energy dimension to the European Neighbourhood Policy. Poland supports the idea to create a Pan-European Energy Community. And thus, Europe could reflect on creating an Energy Community for South-East Europe established between the European Union and South-East Europe. This new Energy Community could be enlarged by the countries such as Ukraine, Norway and Turkey. We are ready to work towards the successful establishment of the Pan- European Energy Community proposed by the Green Paper. According to Poland, a major tool to ensure energy security will be a coherent policy of cooperation with major suppliers, particularly with the Russian Federation and the countries of the Middle East. The European policy of cooperation with major energy suppliers should specify more clearly the principles of oil and gas trade, security of supply and jointly undertaken infrastructural investments. Such possible cooperation would encompass: the diversification of supply,
  10. 10. 10 energy sources and carriers, the development of market cooperation between energy sectors, the creation of sustainable conditions for foreign investments. In light of an external energy policy, it is particularly important to enlarge the territory where the energy sector regulatory model developed by the European Union is applied. The enlargement of the territory ensures sustainability and security of the countries applying the model and, simultaneously, it reduces transactional costs for EU companies. Thus, we should put more pressure upon the Russian Federation to ratify the European Energy Charter and agree on a Transit Protocol.

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