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Executive summary

Prior to the onset of the Covid-19 pandemic, Poland experienced a decade of strong economic growth. From 2010 to 2019, Poland’s gross domestic product (GDP) increased by 38% and its economic growth rate was 4.7% in 2019, significantly higher than the European Union (EU) average of 1.5%. Poland’s economic growth drove a significant increase in energy demand. From 2010 to 2019, total final consumption (TFC) grew from 70 million tonnes of oil equivalent (Mtoe) to 75 Mtoe, driven mainly by increased energy demand from transport and industry. However, improvements in energy efficiency and the increasing role of the service sector have decoupled energy demand from economic growth. From 2010 to 2019, the energy intensity of Poland’s economy (TFC per GDP) declined from 79 tonnes of oil equivalent (toe) to 61 toe per USD million.

The Covid-19 outbreak had a major impact on Poland’s economy and energy system. From 2019 to 2020, GDP declined by 2.7%, total energy supply (TES) dropped from 103 Mtoe to 98 Mtoe and TFC fell from 77.3 Mtoe to 75.8 Mtoe. Both Poland and the EU have taken steps to address the impacts of the pandemic and support a return to economic growth. Poland’s economy has begun to recover from the impacts of the pandemic, with GDP growing by 3.7% in 2021. However, the trajectory of the energy sector in 2021 (increasing demand, higher use of fossil fuels and growing emissions) are not in line with the trends needed to support the energy transition and address climate change.

Poland’s energy supply remains dominated by fossil fuel (85% of TES in 2020), with the largest share coming from coal (40%), followed by oil (28%) and natural gas (17%). Coal plays a central role in Poland’s energy system and economy. Among IEA member countries in 2020, Poland had the highest shares of coal in energy production, TES, TFC and electricity generation, and the second-highest share in heat production. The high shares of coal place Poland second among IEA member countries for CO2 intensity of energy supply and fourth for CO2 intensity of GDP.

The role of coal in Poland’s energy system declined from 2010 to 2020; the share of coal fell in TES, electricity generation, district heating and TFC. Coal production is also declining, and since 2017 Poland has been a net coal importer. However, coal demand increased significantly in 2021, with coal‑fired electricity generation bouncing back to 80% of total generation.

Despite the continued dominance of coal, Poland has had notable success in pushing for energy transition. Government support for solar photovoltaics (PV) has made Poland one of the fastest growing PV markets in the EU. From 2016 to 2021, Poland’s PV capacity increased from just 0.2 gigawatts (GW) to 7.7 GW, driven mostly by residential deployment of small-scale distributed PV systems (5.9 GW). Poland also has a comprehensive and well‑designed offshore wind strategy that has resulted in deals for 5.9 GW of capacity to come online by 2027 and plans for at least 11 GW by 2040.

State-controlled companies have dominant roles across Poland’s energy sector and there are still regulated prices in some energy markets. Poland’s electricity market is mostly liberalised and every consumer has the right to choose a market offer and to change supplier. However, the majority of household consumers purchase electricity through contracts with regulated prices from incumbent suppliers. The household consumer switching rate is among the lowest in Europe and the commercial consumer switching rate is also well below the European average. Ownership of generation and wholesale and retail electricity sales are highly concentrated, with four state‑controlled energy companies.

Poland is still in the process of liberalising its natural gas market, which is highly concentrated with a very low level of competition at the wholesale and retail levels. The state-owned oil and gas company PGNiG has a dominant position across Poland’s entire gas sector. Most regulation of natural gas prices ended in 2017, regulation of retail gas prices for household consumers was set to end in December 2023, but was prolonged until 2027 because of government concerns over price volatility. Poland’s markets for crude oil and oil products are fully liberalised, with prices set by market forces. However, there is a high level of market concentration and limited competition. State‑controlled companies own all domestic oil production and all refining capacity and account for most wholesale oil products sales (almost 75% in 2020). Poland’s coal sector is also dominated by state controlled companies.

Poland’s energy policy aims to reduce the carbon intensity of its energy supply through increased use of renewables and natural gas, the introduction of nuclear energy, higher electrification of energy demand (especially for transport), and improved energy efficiency. Poland places a strong focus on energy security and a just transition that maintains affordable access to energy to promote economic growth and protect vulnerable consumers. The main documents defining Poland’s energy and climate policies are the National Energy and Climate Plan (NECP), which is required for all EU member states and was adopted in 2019, and the national Energy Policy for Poland until 2040 (EPP2040), adopted in February 2021.

Under national laws and EU directives, Poland has a wide range of energy and climate targets for 2030. Greenhouse gas (GHG) emissions from Poland’s energy-intensive industrial facilities and electricity generation are regulated under the EU Emissions Trading System (ETS). Poland’s NECP defines 2030 targets for non-ETS GHG emissions, renewable energy and energy efficiency that are intended to help achieve EU‑wide 2030 targets (Table 1.1). The EPP2040 has numerous 2030 and 2040 targets that serve as indicators of Poland’s energy transition progress.

Poland achieved most of its 2020 energy and climate targets. However, the status of Poland’s energy sector in 2021 presents a difficult starting place for the next decade and significant additional efforts are needed to achieve the sustained reductions in GHG emissions and energy demand, and the strong growth in renewables needed to keep Poland on a path to achieving its energy transition goals. 

Poland’s 2020 and 2030 energy sector targets and 2020 status

   

2020 status

2020 targets

2030 targets

Non-ETS GHG emissions

CO2-eq emissions versus 2005

+10%

+14%

-7%

Energy efficiency (Mtoe)

Primary energy consumption

96.5

96.4

91.3

Final energy consumption

71.0

71.6

67.1

Renewable energy share

Gross final energy consumption

16.1%

15%

23%

Electricity*

16.2%

19%

32%

Heating and cooling*

22.1%

17.4%

28.4%

Transport*

6.6%

10%

14%

* Indicative trajectories.

In December 2020, the 2030 EU-wide GHG emissions reduction target was increased from 40% to 55%, and the EU is in the process of developing more ambitious 2030 targets for renewables and energy efficiency to support the new emissions reduction target. It is likely that Poland will need to increase its 2030 targets and measures for GHG emissions, renewables and energy efficiency to support the EU-wide 55% reduction target.

A central aspect of Poland’s energy policy is reducing reliance on coal, especially for electricity generation and building heating. However, a large amount of financial support is given to the coal sector, for both mining and generation. Analysis from the European Commission (EC) and the Organisation for Economic Co-operation and Development (OECD) show that Poland’s fossil fuel subsidies have increased substantially and are approaching EUR 1.8 billion per year, with most of them going to coal. Poland also provides notable subsidies for renewables. For example, the government estimates that support payments for Poland’s offshore wind programme will amount to around EUR 7.8 billion by 2040 and around EUR 22.5 billion over the life of the programme.

The social contract concluded in May 2021 between the government and coal trade unions aims to gradually close all of Poland’s hard coal mines (excluding coking coal mines) by 2049. The contract guarantees that workers in the hard coal sector will have a job until retirement or receive a severance package, and commits to supporting economic transition in the main hard coal mining regions. The contract does not cover lignite and Poland has no targets for phasing out lignite mining or lignite‑fired electricity generation. The objectives of the contract are not in line with Poland’s commitments to EU climate and goals and do not reflect the reality of coal becoming less competitive.

Poland sees a major role for natural gas in supporting a secure transition away from coal, but the role of gas in long-term decarbonisation is not clear. There are some goals for decarbonising the gas supply through biomethane and low‑carbon hydrogen, but these plans are too modest to offset government expectations of a large growth in natural gas demand. The current high reliance on gas to support energy security and plans to significantly expand gas-fired generation and the gas network will increase energy import dependency, the risk of stranded assets and exposure to volatile gas prices.

The government estimates that modernising the energy sector and achieving the NECP’s 2030 targets will require EUR 195 billion from 2021 to 2030 (around 3.5% of annual GDP) and that the cost of energy transition from 2021 to 2040 could reach EUR 350 billion. The government expects that most investments to support the energy transition will come from the private sector, but that public funding will also make a notable contribution. The majority of public funding for the energy transition in Poland is expected to come from a variety of EU mechanisms, but national funds will also provide notable funding. The government expects that EU and national funds will provide around EUR 72 billion for Poland’s energy transition by 2030. 

Poland has a wide range of measures to support energy transition while maintaining energy security. There is a strong focus on reducing the dominant position of coal in electricity generation and heating by continuous deployment of renewables and natural gas, and introducing nuclear energy.

Deployment of renewable energy is encouraged through numerous programmes. The green certificate scheme requires all electricity suppliers and certain energy-intensive electricity consumers to obtain green certificates that are issued to renewable energy projects based on their electricity generation. Poland introduced an auction system in 2016 that supports projects generating renewable electricity through a contract for differences. Auctions held from 2016 to 2021 awarded support mostly to solar PV (6.1 GW) and onshore wind (5.1 GW).

Poland’s offshore wind programme has awarded support to 5.9 GW of capacity though government decision. Small-scale distributed renewables (mainly solar PV) receive support through several measures, including the My Electricity programme (grants to cover installation costs) and net billing. A new support scheme for co-generation was introduced in 2019 that is expected to drive a transition from coal to gas. The cost of Poland’s support measures for renewable generation and co-generation are covered by a fee charged to all electricity consumers.

The Polish Nuclear Power Programme defines the measures and timeline for implementing nuclear energy and ensuring safe operations, decommissioning and waste storage. Poland aims for the first reactor with a capacity of 1-1.6 GW to be in operation by 2033 and for six reactors with a total capacity of 6-9 GW to be in operation by 2043. The government estimates that by 2040, nuclear energy could account for up to 16% of generation.  

Poland has several measures to drive energy transition in the transport sector. Its biofuels blending mandate requires all companies producing or importing transportation fuels to have a minimum share of biofuels by energy content in their annual fuel sales (8.7% in 2021, increasing to 9.1% in 2024). Poland aims to improve transport efficiency and reduce transport emissions through modal shifts away from private cars to walking, biking and electrified public transport.

There are numerous support measures to increase the adoption of electric vehicles (EVs) and expand EV charging infrastructure, including subsidies for EVs. The government should accelerate the alignment of vehicle taxation with the goals of higher electrification and reduced emissions, including expediting the introduction of annual taxation for all vehicles based on their efficiency, and measures to reduce the import of second-hand inefficient vehicles.

Policy in the buildings sector is mainly focused on reducing the significant health impacts of local air pollution that result from Poland’s heavy reliance on coal for building heating.

The Clean Air Programme provides subsidies for owners of single-family residential buildings to replace inefficient heat systems with new ones (including gas boilers, renewable energy sources and heat pumps). To date, 45% of the applications to the programme have been to switch to gas boilers. The IEA recommends improving the Clean Air Programme to focus on the deployment of heating systems with the lowest emissions and highest efficiency to minimise the deployment of gas boilers.

Poland’s main measure to improve energy efficiency across the economy is a system of tradable energy efficiency certificates (white certificates). Suppliers of electricity, natural gas, heat and liquid fuels must either achieve annual energy savings of 1.5%, purchase certificates covering any deficit or pay a fine. Any company undertaking energy-saving projects can apply for certificates and sell these to energy suppliers to help them reach their targets.

Under EU rules, large companies must complete audits every four years that cover at least 90% of their energy demand and identify cost-effective energy-saving opportunities. Poland does not require companies to implement measures identified in audits, but companies can apply for white certificates for completed projects that reduce demand. The government should consider making it obligatory to implement measures with short pay‑back times identified in energy audits, as is done in other IEA and EU countries.

Poland’s carbon pricing system is based mainly on the EU ETS, which covered about 47% of Poland’s emissions in 2019. The government has announced a plan to set up an Energy Transformation Fund that would use 40% of ETS revenues through 2030 to modernise the energy sector.

In addition to the ETS, Poland has a national emission fee covering certain types of GHG emissions across the entire economy. However, the emission fee is much lower than the ETS price. In 2021, the emission fee was only EUR 0.07 per tonne of CO2 (t CO2), while the ETS price reached 89 EUR/t CO2. Bringing the emission fee in line with the ETS price, while taking into account the issue of energy poverty, would complement and strengthen the effect of Poland’s subsidy schemes supporting cleaner alternatives in buildings and transport, and discourage the use of polluting options.


The government of Poland should:

  • Update the Energy Policy for Poland until 2040 and the National Energy and Climate Plan with targets and measures that support the European Union’s increased climate and energy ambitions, and that reflect energy market developments, technical innovation and increased European carbon prices.
  • Reconsider the timeline for closing all coal-fired generation to achieve Poland’s commitment to the EU’s 2030 climate targets and 2050 climate neutrality goal.
  • Accelerate the expansion of the transmission and distribution systems to facilitate a higher share of renewables, planned nuclear generation and increased electrification while ensuring security of supply.
  • Review the regulatory framework to increase energy market competition, ensure a level playing field among all market participants, strengthen the position of consumers, and open markets for new investors and services.
  • Adjust taxes, market regulations and financial support measures so that energy prices drive behaviours and investments that support a just energy transition, increase system flexibility and reduce the risk of stranded assets.
  • Reconsider the need for large investments in fossil fuel infrastructure, taking into account the risk of stranded assets and the need to direct limited capital to investments supporting the Polish energy transition.