Poland produced 380 metric tons of carbon-dioxide equivalent (MtCO2e) in 2017, remaining the European Union’s third-most carbon-intense economy, emitting more than 800 grams of carbon-dioxide equivalent per euro of GDP (Exhibit 1).
While there are multiple paths to achieving carbon neutrality by 2050, this report lays out a possible cost-effective economic pathway that Poland could adopt to reach this goal. This economically driven decarbonization scenario references the time period from 2020 to 2050, a period relevant for current investment decisions and staying on track to meet the Paris Agreement targets.
We assume that by cutting GHG-emission levels by 91 percent from 2017 to 2050 and by increasing carbon sinks to abate the remaining 9 percent of emissions, Poland could reach carbon neutrality by 2050.
Five sectors—industry, transport, buildings (predominantly heating), agriculture, and power—are primarily responsible for GHG emissions in Poland, and a substantial number of these sectors use coal as the primary fuel (Exhibit 2).
Power
Switching power-generation technology from fossil fuels to renewable energy will be a major challenge for Poland. Currently, coal dominates Poland’s power sector (with a 77 percent share in electricity production in 2018), where it is the largest source of GHG emissions.
Moreover, according to our analysis, electricity demand is expected to grow by more than 50 percent by 2050 because of increased economic activity, mainly GDP growth. The electrification of processes (such as the rapid adoption of electric vehicles, heat pumps in buildings, and electric furnaces in industry) adds another 50 percent to this growth. Compared with today, therefore, electricity demand in our decarbonization scenario is expected to double. Poland’s power generation stock is aging: about two-thirds of Poland’s installed coal capacity is older than 30 years. With a possible life span of up to 60 years, these assets would need to be replaced by 2050. Moreover, investment in new power generation capacity is urgently needed to meet the expected increase in electricity consumption. This creates an opportunity to replace fossil-based power generation with zero-emission generation capacity.
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Three fundamental changes will likely be necessary to move toward full decarbonization of the power supply by 2050 (Exhibit 3).
- Coal-fired generation would have to decrease by almost 95 percent from 2020 to 2050 (with a corresponding reduction of capacity by 80 percent).
- Renewable generation would have to feature more heavily in Poland’s power mix, with wind and solar accounting for about 80 percent of the total power supply in 2050.
- Gas would need to play a prominent role in the transition period, covering up to 20 to 25 percent of the demand from 2025 to 2030, and playing an important system-balancing role thereafter.
Industry
In 2017, the industry sector was responsible for 22 percent of Poland’s emissions (91 MtCO2e), primarily concentrated in fuel production, cement, chemicals, and steel. According to our analysis, from 2017 to 2050, Polish industry growth is expected to drive a 19 percent emission increase if no action is taken. This industrial expansion can be used as an opportunity to install lower-emission equipment in greenfield facilities.
Our analysis shows that the industry sector could potentially reduce emissions by 97 percent. This reduction can be achieved by implementing several decarbonization levers: energy-efficiency improvements, electrification of heat, and technology for carbon-capture use and storage (CCUS).
Transport
In 2017, Poland’s transport sector emitted 63 MtCO2e and was responsible for 15.3 percent of the country’s emissions. Road transportation represented 98 percent of emissions, while rail and domestic aviation together accounted for 2 percent. Our analysis suggests the transportation sector would need to almost fully decarbonize (with a 99 percent reduction, or 62 MtCO2e) by 2050 for Poland to achieve climate neutrality.
Technology option for moving the transport sector toward carbon neutrality require replacing internal-combustion-engine (ICE) vehicles across road-transportation subsegments with battery electric vehicles (BEVs) and, in the case of trucks and buses, hydrogen-based alternatives such as fuel-cell electric vehicles (FCEVs).
Buildings
In 2017, buildings accounted for 17 percent of Poland’s emissions (70 MtCO2e), of which 84 percent came from the residential sector and 16 percent from the commercial sector. Efforts to decrease emissions in buildings fall into two main categories:
- The energy efficiency of structures could be improved through actions such as retrofitting buildings with better insulation to reduce energy consumption for both heating and cooling.
- High-emitting fuel sources could be reduced by replacing boilers and stoves that currently use coal, natural gas, and oil with lower-carbon alternatives.
Agriculture
In 2017, agriculture accounted for 10.6 percent of the country’s emissions (44 MtCO2e). Methane and nitrous oxide generated 75 percent of this total, primarily from the application of inorganic fertilizers to land, the cultivation of organic soils, and enteric fermentation from dairy and beef cattle. Carbon dioxide, mainly caused by the fuel consumption of agricultural equipment, contributes the remaining 25 percent. The sector has several option for decarbonization:
- low-emission land management (for example, optimizing fertilization and reducing tillage)
- switching to low-carbon fuels (mostly to ammonia) for farm equipment
- reducing enteric fermentation (for instance, by optimizing feed and improving animal health and breeding)
Decarbonization’s cost and impact
Full decarbonization will require additional capital expenditures for mobility transformation and for upgrading energy infrastructure and building stock. To achieve it, total investments in the Polish economy from 2020 until 2050 would need to increase by €380 billion, an average of around €13 billion a year. At the same time, operational costs are expected to decrease by €75 billion.
The Polish trade balance is expected to structurally improve as the country reduces its imports of fossil fuels by €15 billion each year.
Our analysis indicates that a portfolio of five low-carbon economic activities can bring economic benefits to the country. Such a portfolio could involve developing a set of industries: BEV-component manufacturing, Baltic offshore-wind development, industrial-scale production of electric heat pumps, electrified agricultural-equipment manufacturing, and R&D and deployment of bioenergy CCUS technology. The combination of these activities could boost Poland’s GDP by 1 to 2 percent and create 250 thousand to 300 thousand jobs.
It is possible that during the postpandemic economic slowdown, governments and citizens may deprioritize climate change with the pressing needs of economic recovery. This could set back planned investments, previous commitments, and regulatory approaches. Investments in a carbon-neutral infrastructure could significantly drive job creation and accelerate rebuilding of the economy.
