On May 13th 2015 the cargo ship Cape Keystone docked in the Polish seaport of Gdynia after leaving Hay Point, Australia weeks prior and dropping anchor in Gijon, Spain, before making its way to Poland. The arrival of the bulk carrier in Gdynia set a record for being the single largest cargo load ever handled in the Polish town’s port: 110,479 1 tonnes of coking coal from Australia were unloaded from the ship onto freight trains and dispatched around Poland. However, this pile of black sedimentary rock was just a step in the mountain of the coal Poland imported in 2015, a quantity estimated between 8 and 10 million tonnes. All this, while Poland is the 9th largest producer of coal in the world, and the 1st in the EU today. 2 Why would a country of only 38 million inhabitants, that has coal reserves totaling 19.1 billion tonnes, 3 import a raw material that is so abundant in its territory?
The answer is simple: money. Buying coal from abroad is often cheaper than mining it at home. That’s why, despite its huge reserves of mineable coal, Poland became a net importer of this solid fossil fuel in the 2000s. In the span of just 10 years, the country went from importing 2.1 million tonnes of coal in 2001 to importing 16.7 million tonnes in 2011. 4 In the same year, Poland exported just 5.7 million tonnes of its own coal. 5Even though the gap between import and export has decreased over the last four years, Poland still sells less coal than it buys; something that the Polish media rarely mention, and that very few Poles know about.
More import than export
There isn’t just one type of coal. In fact, the coal extracted in Lublin and Upper Silesia, or arriving from abroad in the Polish seaports of Gdynia, Gdansk and Szczecin can be thermal or coking (also known as metallurgic). Thermal coal is burned in power stations to generate electricity or used as fuel to heat households, and metallurgic coal is used in the steel-making and metallurgical industries. Today nearly 85% of Poland’s electricity is generated from its 53 coal-fired plants, 6 with a dozen new ones slated to open in the next five years, replacing some of the old plants, because their energy efficiency and emissions volumes fall short of EU standards. As for heating, around 65% of Polish households still rely on coal – figures that make this country one of the most dependent worldwide.
Seventy-nine million tonnes of coal – thermal and coking – were extracted from Polish mines in 2012, 7 most of it never leaving the country; instead it was used within the domestic market. And yet today, Poland’s production of coal and lignite is not self-sufficient, even though it produces up to 140 million tonnes of the two materials combined. 8 This is much less than the peak in mining and production of over 200 million tonnes in 1979, but it is still a substantial amount. Poland relies on domestic coal output for around 90% of its heat and electricity generation, while the remaining 10% is purchased elsewhere. Coal is imported from neighboring Russia (although significantly less than it was a couple of years ago) and the Czech Republic, but also from as far away as the US, Canada, Mozambique and even Australia.
There may be no shortage of coal in Poland’s mines, but mining in Poland has become a more expensive and less profitable business. Even though mining’s heyday is over, with the number of pitmen dwindling from approximately 400,000 to around 105,000 over the last 25 years, 9 coal mining is still important in some Polish regions where it’s a centuries old industry, providing well paid jobs. And just like in the socialist days, coal mining in Poland today is very much a state-owned business – all operating mines, save two, are still state-owned – and the current Polish government, reluctant to lose its grip on the coal mining sector, does not encourage privatization.
State subsidies and dwindling profits
It is estimated that between 1990 and 2012 state grants and subsidies for the Polish mining sector totaled 39 billion euros, with an extra 11 billion spent between 2005 and 2012 in support of coal-fired power plants. 10 This was money that helped Kompania Węglowa and JSW, the two biggest players in the national coal-mining market, continue to operate. However, this generous spending will end soon as current EU laws forbid national governments’ coal mine subsidization, with the exception of those mines that are due to shut down by 2018.
Sure enough, the Polish coal industry’s profitability has shrunk dramatically over the last few years. Aleksander Sniegocki, an energy market and climate expert from the Warsaw Institute for Economic Studies (WISE) told the V4 Revue that the high cost of domestic coal production is a culprit: “Poland’s state-owned mines are unprofitable and unproductive. Labor costs soared during the coal market boom, and now during the downturn have made the mines uncompetitive. Transport costs give Polish mines some advantage on the domestic market, but not when coal is exported.” 11 This explains why Polish coal producers serve customers in their geographic proximity – so that coal transport costs do not consume their narrow profit margins.
Artur Kluczny, vice president of PD Company, a Polish subsidiary of the Australian Prairie Mining Company, warns that Poland will not be able to attain profitability in exports with current market prices and low productivity. The current difficulties exporting Polish coal abroad, due to its costs, are sometimes experienced in the domestic market, preventing the country from relying solely on its own coal. “If there is an increase in global market prices – in import prices – the country may become coal self-sufficient,” 12 Kluczny told the V4 Revue.
The current productivity of Polish mines however is extremely low, especially when compared with their competitors abroad: Polish miners produce about 670 tonnes of coal per year; while American or Australian miners’ average individual production is between six and tenfold more. 13 What has made Poland’s coal production so ineffective is the decapitalization of Polish mines, as well as their age and technological underdevelopment. “Mining is currently even uncompetitive in some Polish regions,” explained Sniegocki. “While mining companies have recently offered huge discounts, which improved sales, it has only led to higher losses in the longer run, and this is unsustainable,” he added.
As Bob Burton, an Australian freelance journalist and editor of CoalWire explained to the V4 Revue: “Over the last 25-years, coal from open-cut mines has been displacing coal extracted from underground mines; and coal coming from highly mechanized underground mines has been displacing coal from labor intensive underground mines.” 14 Polish coal’s competitive losses at home and in the global market over the last 20-years has encouraged downward trends in domestic coal extraction and subsequent upward trends in coal imports. According to Iwo Łoś, an energy expert at Greenpeace Polska, “the necessity to dig deeper as easily accessible deposits are used, increasing labor costs, excessive extraction in recent years and the mines’ mismanagement,” all help explain the Polish coal mining crisis. And he doesn’t think adding more power plants is the answer: “Building more coal power plants would mean more imports and the increased dependency of the Polish energy sector,” 15 he argued.
As for building new mines, Sniegocki agrees that, in principle, they could be much more productive than older ones especially, he says, “if run by private companies focused on cost optimization rather than social or political goals, like maximizing employment or wages.” New private investors in the Polish coal-mining sector claim that new mines will be up to five times more productive than existing ones, and able to operate for several decades despite increasing labor costs, but “one important caveat,” Sniegocki warned, “is that these new projects will probably supply much less coal than the currently operating mines.”
Foreign investors from “Down Under”
Australia is the biggest exporter of coal worldwide, having shipped 205 million tonnes of thermal coal and 188 million tonnes of coking coal abroad between 2014 and the first nine months of 2015. 16 Australian coal is primarily bought by Asian countries, but the higher priced coking coal is exported globally, and Australia commands about half of the global metallurgical coal export market. In 2014 coal was Australia’s main export item to Poland, for an approximate 116 million euros, representing 54% of the total value of Australia’s exports to Poland. 17 No surprise then that the Australian Department for Foreign Affairs and Trade’s website calls Poland, “a growing market for Australia’s commercial interests,” 18 or that the itineraries of coal-hauling cargo ships leaving the Australian ports of Newcastle or Hay Point for Europe include stops in the Polish ports of Gdynia, Gdansk or Szczecin.
The profitability of the coal business led some Australian mining companies to go abroad for further investments, looking into new or operating mines. “At the height of the coal boom late last decade, when investors expected coal prices and demand to remain high for a long time to come, lots of small Australian companies raised money from investors on the expectation that the boom would last,” explained Burton.
Even though the boom is over, with falling international coal prices and the value of coal assets down, some projects abroad are still ongoing. Among them, an investment by Prairie Mining in the Lublin Coal Basin, which, according to their vice president, Kluczny, has optimal geological conditions, calling it, “a world-class coal field in a region offering well-developed infrastructures.” He explains that, “Poland is a very coal-friendly nation with excellent available mining skills and a workforce keen on embracing the jobs offered by [the] investment project.” And by opening a new mine of semi-soft coking coal sought for steel-making, Prairie Mining plans to create up to 2,000 new jobs in the area over the next few years.
Carbon Investment, a Polish subsidiary of another Australian company, Balamara, is currently working on the Mariola Thermal Coal Project in Upper Silesia, and their CEO Piotr Kosowicz also sees how valuable coal mining is to job creation in the region. “Poland has huge coal production potential. The previous jobs number reduction was necessary, but a further development of the mining industry is necessary and will mean more employment,“ 19 he told the V4 Revue. He also stressed Carbon Investment’s solidarity with Polish miners: “Balamara relies on Poland’s skilled workforce, we are a Polish company operating in accordance with Polish law and we are managed by Poles experienced in the strengths and threats of the Polish coal mining industry.”
A challenge for the new government
Being the daughter of a pitman, Poland’s new Prime Minister Beata Szydło, knows a thing or two about coal mining as well; back in July 2015, while she was still in opposition, she stressed that, “the basis of Polish energy must be coal.” 20 After PiS (Law and Justice) won October parliamentary elections and she was chosen as the new premier, Szydło confirmed her support to the coal mining industry: “There are difficult times ahead of us, but I believe that with joint actions of the government, the state and the miners it will be possible to create good prospects for the coal industry by merging it with the electricity sector,” she said. 21
Szydło’s strategy is nothing new. It actually bears a striking resemblance to what former PM Ewa Kopacz had in mind when, earlier in 2015, she began building a large fuel-energy group by transferring Kompania Węglowa to TF Silesia, a state-controlled fund. However, Kluczny warns that, “the government needs to give coal-mine operators enough time and liquidity to restructure.” He explained that, “if coal prices remain low, it will be very difficult to continue subsidizing the industry; and restructuring will mean shutting down those mines incurring losses. If that happens, the government will have to take care of social rest to avoid what happened when thousands of Polish shipyard workers were made redundant.“ 22
Echoing Szydło’s sentiments, Polish President Andrzej Duda, claimed that, “the idea of decarbonization in Poland is heresy.” 23 Both Szydło and Duda’s words were spoken on December 4th, Saint Barbara’s Day, a day Polish miners are celebrated by the authorities in Krakow and when mining representatives take to the streets, marching in fancy military regalia.
This was all happening while many world leaders, including Poland’s new Minister of Environment, Jan Szyszko, were discussing how to tackle pollution emissions at the UN Climate Change Conference (COP21) in Paris. The position of the Warsaw delegation in attendance was clear, as the Polish PM herself stated: “We see the need to protect the climate, but we’re also talking about the fact that Poland’s economy needs different solutions than those being proposed today. We came to Paris confident that an agreement would be signed and carried out in such as a way that meets our expectations.” 24 Expectations that involve the continued backing of the coal-fueled Polish steel-making and metallurgical industries, as well as exemption from meeting the 28 goals the EU hopes to achieve by 2030, which call for a 40% reduction in emissions and a 27% increase of renewable energy sources.
An agreement in Paris was eventually reached on December 12th, and 196 countries committed to reducing their carbon output in order to keep global warming “below 2 degrees Celsius.” Poland, China, India and South Africa joined the club of nations initially unwilling to sign because they felt regulations would limit their economic growth, but eventually doing so. The Paris agreement’s predominantly voluntary basis and the signatories’ limited legal bounds played a big part in getting all participants to sign the 12-page document.
Solid fossil fuel vs. renewable sources
Today, 11% of Poland’s energy mix is generated from renewable sources 25 – about half the EU 28’s average of 20%. The “green energy” sector employs up to 40,000 people, who, according to projections quoted by Iwo Łoś, “can grow to over 100,000 in 2030 if the government pursues pro-renewable energy policies.” Investing in renewables would mean reducing the number of coal miners by around 50,000 people over the next 15 years, but Łoś told the V4 Revue that by following the current pro-coal policies, 30,000 pitmen are slated to lose their jobs anyway.
A model developed by the Institute for Renewable Energy in Warsaw shows how Poland could achieve a 28% share of renewables in the overall national energy mix by 2030, while a document by the International Renewable Energy Agency (IRENA) lowers that to 25%. 26 However the 2009 document released by the Polish Ministry of Economy, Energy Policy of Poland until 2030, sets a far less ambitious goal, only aiming that 16% of the national energy mix come from renewables by 2030 27 – a share far less than the EU 28’s call for at minimum 27% of energy coming from renewables in 15 years’ time.
Because of the shale gas bubble 28 and the postponement of plans to open Poland’s first nuclear power plant until 2025-2030, some Poles often see solid fossil fuel as the one and only way. Artur Kluczny calls it, “a stable, affordable and independent source of energy that the country can resort to in geopolitically turbulent times,” and Piotr Kosowicz has dubbed coal, “Polish black gold.” However, Bob Burton stresses the fossil fuel’s impact on the global climate and public health: “Coal was a useful servant decades ago but now it has become a deadly master,” he said. Łoś agrees with Burton, citing research Greenpeace International commissioned from Stuttgart University Institute for Energy Economics (IER), which estimated that Polish coal power plants’ emissions in 2010 caused up to 5,400 premature deaths. 29
Kluczny rebuts these claims, saying that, “coal-generated electricity plants of the next generation emit close to zero pollutants, and this is the path Poland is heading down now, by building four modern power plants.” He is quick to point out Poland’s strides: “This country has made amazing progress in reducing CO2 emissions by more than 30% since the 1990s and is well underway to meet the CO2 emission targets imposed by the EU.” Because he sees Poland’s economic growth as a work in progress, Kosowicz does not see the point in “introducing the new, ‘innovative’ technologies subsidized by rich countries.” He suggests Poland look to the most economic energy source, and that means coal: “Our energy production should be based on high-efficient, low-emission coal technologies,” he said.
This is a statement challenged by Łoś, who called coal, “the most expensive source of energy, when one considers the external costs of coal energy.” He defended this, quoting a study by the University of Science and Technology in Krakow (AGH) that estimates those costs (biodiversity, air pollution, healthcare) at 7 billion euros a year – equivalent to 2% of the Polish GDP. 30
There is one thing everyone in Poland agrees on: current emissions from heating of households are noxious. Łoś said that, “households burning coal and other solid fuels for heating are the biggest source of benzo(a)piren, PM10 and PM2,5.” And both Kluczny and Kosowicz agreed that households are the main contributor to air pollution in larger Polish cities, with Kosowicz asking for, “investments in high-efficient low-emission boilers.” It is true that little by little, local authorities are taking steps to both reduce the burning of low-quality coal in house boilers and promote municipal heat generation, but it’s not proving successful enough: a recent study by the European Environmental Agency (EEA) shows that 6 of the 10 most-polluted European towns are currently in Poland. 31
The nation’s heavy industries are likely to continue asking for coal provisions, and Poland’s current government will be reluctant to halt their support for the coal mining industry instantaneously. But if Poland plans to commit itself to the document signed in Paris, something more needs to be done one way or another. The COP21 agreement doesn’t mention penalty fees for a country’s refusal to pursue the expected goal of emissions reduction, but someone in Brussels may think otherwise.
- Gdynia Port Authority, “Rekordowy ładunek,” May 15, 2015, accessed January 7, 2016, http://www.port.gdynia.pl/pl/wydarzenia/aktualnosci/403-rekordowy-ladunek – in Polish. ↩
- Euracoal, “Poland country profile,” December 2014, accessed January 7, 2016, http://euracoal.eu/info/country-profiles/poland/. ↩
- Ibid. ↩
- Polish Ministry of Treasury, “Coal extraction in Poland – essential but declining industry,“ July 12, 2013, accessed January 7, 2016, http://www.msp.gov.pl/en/polish-economy/economic-news/4447,Coal-extraction-in-Poland-essential-but-declining-industry.html. ↩
- Ibid. ↩
- The World Bank, “Electricity production from coal sources 2011-2015,’ accessed January 7, 2016, http://data.worldbank.org/indicator/EG.ELC.COAL.ZS. ↩
- Euracoal, “Poland country profile,” December 2014, accessed January 7, 2016,http://euracoal.eu/info/country-profiles/poland/. ↩
- Bob Burton, “Poland’s crippled coal company a symptom of a far larger problem,“ Endcoal, September 30, 2015, accessed January 7, 2016 http://endcoal.org/2015/09/polands-crippled-coal-company-a-symptom-of-a-far-larger-problem/. ↩
- Polish Ministry of Economy, “Coal Mining Report,” May 2014, accessed January 7, 2016, http://www.mg.gov.pl/files/upload/8155/tekst%20marcowy%202014.pdf – in Polish. ↩
- Warsaw Institute for Economic Studies, “Polski węgiel: Quo Vadis?,“ June 15, 2015, accessed January 7, 2016, http://www.wise-institute.org.pl/pl/aktualnosci.php?news=292 – in Polish. ↩
- Aleksander Sniegocki, all further quotes taken from an email exchange with the author, December 2015. ↩
- Artur Kluczny, all further quotes taken from an email exchange with the author, December 2015. ↩
- As stated and double-checked by my five interviewees (A/N) ↩
- Bob Burton, all further quotes taken from an email exchange with the author, December 2015. ↩
- Iwo Łoś, all further quotes taken from an email exchange with the author, December 2015. ↩
- Australian Government Department of Industry, Innovation and Science, “Resource and Energy Quarterly,” September 2015, accessed January 7, 2016,http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Documents/req/Resource-and-Energy-Quarterly-September-2015.pdf. ↩
- Australian Government Department of Foreign Affairs and Trade, “Poland country brief,“ July 2015, accessed January 7, 2016, http://dfat.gov.au/geo/poland/pages/poland-country-brief.aspx. ↩
- Ibid. ↩
- Piotr Kosowicz, all further quotes taken from an email exchange with the author, December 2015. ↩
- “PiS deputy head: strategy for Polish mining a priority,” Radio Poland, July 20, 2015, accessed January 7, 2016, http://www.thenews.pl/1/12/Artykul/214415,PiS-deputy-head-strategy-for-Polish-mining-a-priority. ↩
- “Poland needs to merge coal mining and power companies – prime minister,”Reuters, December 4, 2015, accessed January 7, 2016, http://www.reuters.com/article/poland-coal-idUSL8N13T1EJ20151204. ↩
- Jane Perlez, “A Once-Defiant Polish Shipyard Is Now Sinking,” New York Times, March 31, 1996, accessed January 7, 2016, http://www.nytimes.com/1996/03/31/world/a-once-defiant-polish-shipyard-is-now-sinking.html. ↩
- Maciej Orlowski, “Prezydent Duda mówi o “herezji dekarbonizacji,” Gazeta Wyborcza, December 4, 2015, accessed January 7, 2016, http://wyborcza.pl/1,75478,19297747,prezydent-duda-broni-wegla-kilka-dni-temu-papiez-wzywal-do.html#ixzz3wYX3E9t0 – in Polish. ↩
- Jan Cienski & Andrew Kureth, “Poland takes a tough line ahead of COP21,“ Politico.eu, November 30, 2015, accessed January 7, 2016, http://www.politico.eu/article/poland-tough-line-cop21-paris-climate-summit/. ↩
- Polish Information and Foreign Investment Agency, June 2015, accessed January 7, 2016, http://www.paiz.gov.pl/polish_law/renewable_energy. ↩
- International Renewable Energy Agency, “Remap 2030 – Renewable Energy Prospects for Poland,“ October 2015, accessed January 7, 2016,http://www.irena.org/DocumentDownloads/Publications/IRENA_REmap_Poland_paper_2015_EN.pdf. ↩
- Polish Ministry of Economy, “Energy Policy of Poland until 2030,” November 10, 2009, accessed January 7, 2016,http://www.mg.gov.pl/files/upload/8134/Appendix2.pdf. ↩
- Andrew Kureth, “Polish shale gas hits a dry well,“ Politico.eu, July 8, 2015, accessed January 7, 2016, http://www.politico.eu/article/polish-shale-gas-hits-a-dry-well/. ↩
- Greenpeace, “Silent Killers,” June 11, 2013, accessed January 7, 2016, http://www.greenpeace.org/international/silentkillers/. ↩
- Greenpeace, “Koszty wegla ekspertyza,“ November 2012, accessed January 7, 2016, http://www.greenpeace.org/poland/PageFiles/461286/koszty_wegla_ekspertyza.pdf – in Polish. ↩
- European Environment Agency, “Air quality in Europe – 2015 Report,” November 30, 2015, accessed January 7, 2016, http://www.eea.europa.eu/publications/air-quality-in-europe-2015. ↩