Europe's Climate Push Won't Come Cheap

(Bloomberg) -- Poland holds a veto to the European Union’s goal of achieving climate neutrality by 2050, and its support isn’t going to come cheap.

The government in Warsaw is demanding aid to bear “significant costs” of the EU’s environmental efforts, according to an internal document it prepared for a two-day summit in Brussels that began Thursday. The cost of bringing infrastructure up to standard and moving away from coal could run to dozens of billions of euros a year for Poland, which relies on the most polluting fossil fuels for most of its power production.

Europe's Climate Push Won't Come Cheap

Zeroing out greenhouse gases by the middle of this century is a top priority for Ursula von der Leyen, the incoming President of the European Commission, as Europe steps up efforts to fight climate change. Poland’s Prime Minister Mateusz Morawiecki teamed up with Hungary, the Czech Republic and Estonia to block a German-led push toward climate neutrality at a summit in June.

“We need to develop new instruments (including finances) in order to support effectively the transition to a climate neutral economy,” Poland said in the document, which was seen by Bloomberg. “We have a clear goal but there are still some important dilemmas to be solved. The necessary and sought ‘green transition’ is related to significant costs and challenges faced by our economies.”

Europe's Climate Push Won't Come Cheap

The cost of the shift to climate neutrality is dizzying. The commission, which is the executive arm of the EU, estimates that the energy system and infrastructure will need an extra 175 billion euros ($190 billion) to 290 billion euros a year in investment from 2030. Poland is using the cost argument to slow down the talks and win more financial aid.

“As the transition costs can vary significantly across the EU, we expect that the commission will present concrete figures broken down by member states representing the necessary investments across the EU and in particular in the regions facing the biggest challenges,” according to the document.

Poland has stopped short of putting a price tag on the green transformation, but said existing instruments are not sufficient to reach climate neutrality. The financial wrangling will center around a Just Transition Fund, which von der Leyen promised to create to protect the regions most affected by the shift to net-zero emissions. The fund should be created on top of what has been proposed under the draft next EU budget, according to the government in Warsaw.

While details are scarce, the von der Leyen proposal will probably build up on a 4.8 billion euro energy transition fund endorsed last year by the European Parliament to help 41 coal-dependent regions in 12 member states in the clean transformation. Member of the EU Parliament Jerzy Buzek, a former Polish prime minister who proposed the instrument, said that under the Green Deal its budget should be “significantly bigger.”

The Polish Economic Institute estimated that to be effective, the EU fund needs at least 10 billion to 20 billion euros annually in the 2021-2027 period. Under a mid-range scenario of 15 billion euros, Poland would be its largest beneficiary with 2.1 billion euros. Greece and France would rank next, with 1.7 billion euros and 1.6 billion euros, respectively.

The EU should first direct its funding “to those sectors, regions and member states where emissions are the highest and challenges with access to capital are the greatest,” Poland said. It also highlighted the role of the EIB in lending for energy projects, including those linked to natural gas, and called on the European Central Bank to support green bonds issuance.

Europe's Climate Push Won't Come Cheap

The climate neutrality proposal has support of 25 member states after Estonia dropped its opposition earlier this month.

Eight progressive nations, including the Netherlands, Luxembourg, France, Sweden and Spain, have already stepped up a campaign to secure a deal on the 2050 strategy in December at the latest. Some of them are expected to highlight the issue at the summit. Endorsement by EU leaders would traditionally pave the way for the commission to propose detailed laws in on how to meet the climate objectives.

Adopting the 2050 target would bring Europe into line with the targets set out in the Paris Agreement, which called on nations to work toward capping global temperature increases since pre-industrial times to 2 degrees Celsius (3.6 degrees Fahrenheit) and acknowledges the need to strive for 1.5 degrees. That would still be the quickest shift in the climate since the end of the last ice age more than 10,000 years ago. Without deeper cuts in greenhouse gases, the world is on track for at least double the targeted amount of warming.

©2019 Bloomberg L.P.

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