Longview: Eastern Europe is still far away from the Green Deal goals

EU is a ponderous entity due to its disparate composition. Conflicting views and interests turn most of the collective decision-making into protracted negotiations frequently bordering on quarrels. But in the case of decarbonization, almost all the members seem to see eye to eye. Change of the EU’s energy supply is essential to meet the Paris Climate Agreement’s targets. Moreover, decarbonization can yield numerous benefits, not only environmental but also economic. The annual consumption of hard coal in the EU declined since the 1990s from around 300 million tonnes to approximately 176 million. The usage of brown coal also contracted since the 90s from 700 million tonnes to 300 million. At the same time, the production of coal in the EU fell from 277 million tonnes in 1990 to 65 million tonnes in 2019. Out of the total supply in 2019, Poland accounted for 61.6 million tonnes (95% of EU output). The second-largest producer’s output – the Czech Republic – amounted to merely 4.5 million (5% of the EU’s output). 

Poland and Germany alone account for approximately 51% of the EU’s coal-based energy production capacity and 54% coal-related emission

The demand for coal in the EU is not shared equally between the member states. Germany, Poland, Romania, Bulgaria, and the Czech Republic are the largest consumers. Poland and Germany alone account for approximately 51% of the EU’s coal-based energy production capacity and 54% coal-related emission (data from 2016). Other countries in the region are relatively advanced in phasing out coal. Despite the current dependence on coal, some countries are better poised to phase it out. Germany derives approximately 29.6% of its electricity from coal but is committed to further reduction of its reliance on fossil fuels through the expansion of green energy. It already generates 47.3% of Germany’s power supply. Poland does not have a similarly developed alternative to coal, which produces 70% of its electricity. Renewable energy remains nascent, producing just 18% of the total output in 2020. 

The Czech Republic generates 54% of its electricity from coal, but it also has other sources like nuclear energy or biowaste. For now, they constitute a small share of the total energy production, but the Czech government plans to expand them. Bulgarian and Romanian plans to add new nuclear reactors are aimed to lessen their dependence on fossil fuels further. Poland wants to build six reactors in cooperation with American companies, but the deadlines for completing these projects are very distant. At present, the reactors are expected to be completed between 2033 and 2043.

The initial cost of decarbonization is high, but it can result in lower prices of electricity in the long-term

Environmental considerations are not the only cause of come countries’ resolve to change their energy supply. The initial cost of decarbonization is high, but it can result in lower prices of electricity in the long-term. Nuclear energy requires large investments, but running nuclear power plants is cheaper than maintaining coal-powered plants. Poland’s dependence on coal translates into rising electricity costs, which are already hurting businesses, particularly in electricity-intensive sectors like manufacturing or steel mills. This illustrates the cost of clinging to means of electricity production, which are comparatively inefficient. Especially in a country so dependent on cross-border trade with other members of the EU.   

The economic development of Eastern European countries such as Poland and Hungary is contingent on their continuous integration with the German economy. Wages in Poland are rising steadily but still remain below the level of Western Europe. However, in 2019 the government announced its intention to increase the national minimum wage from 2350PLN to 4000 PLN (around $1000) by 2023. The emerging combination of rising wages and high electricity costs can in the future undermine the sustainability of Poland’s economic growth due to the slowdown in foreign investments amid rising costs. Similar wage pressure is occurring in the Czech Republic and Hungary. If the global demand recovers after the pandemic, several car manufacturing companies may have to re-evaluate the costs and benefits of keeping production in those countries. Electricity prices can be a crucial factor. 

In summary, the energy market of Central and Eastern Europe is very diverse. With its deeply entrenched reliance on coal, Poland is facing an uncertain future due to the shortage of ready alternatives. Other countries like the Czech Republic are emphasizing nuclear energy, which will probably enable them to meet the emission limits set by the EU. Overall the energy outlook of the region is gradually improving. Hopefully, this course will be maintained. 

The Editor: Kamil Kozlowski

Kamil Kozlowski is a MA student in International Political Economy at King’s College London (KCL). In 2020 he graduated from Kozminski University with a Bachelor’s degree in Management. His research interests are focused on the future of the British economy, especially the development of new sectors in it. Another field close to his heart is the evolution of the global energy market and its implications for regional economic growth.

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