Bringing down the house
The European Commission has decided to reduce Poland's carbon-dioxide emissions limits for 2008-2012 by another 26.7 percent, bringing the level down to 208.5 million tonnes a year. Given that the chemical processes involved in the production of some building materials - such as bricks and tiles - release significant amounts of CO2 as a byproduct, the construction market could soon see trouble. Production output could fall, raising prices, despite booming demand and an influx of E67 (zł.258) billion in EU funds.
"The reduced limits are close to the 2005 carbon-dioxide emissions threshold," says Grażyna Gęsicka, Minister for Regional Development. The Deputy Minister for Regional Development, Janusz Mikuła, points out that, at that time, Poland was assigned roughly U300 (zł.1,150) million in EU funds per year.
"Between 2007 and 2009 we were allocated some E1 (zł.3.83) billion per year that was still part of the 2004-2006 budget. In addition, we have the new budget so we could have up to E5 (zł.19) billion annually to spend (on development)," Mikuła states. Poland is likely to have difficulty spending more money with CO2 emissions at 2005 levels, he suggests.
Jan Deja, director at the Polish Cement Association, says the decision would impact cement production, reducing output to 11.5 million tonnes of cement per year. This is a level that hasn't been recorded since the recession in the construction sector between 2003-2004. "According to the prognoses within the National Strategic Reference Framework (NSRO) and the National Development Plan (NPR), the average demand for cement between 2008 and 2012 will amount to 18.5 and 23.5 million tonnes, respectively," adds Deja. He expects the price of cement, which currently ranges between zł.220 and zł.240 per tonne to increase by zł.60-130.
Ireneusz Kazimierski, general director at Opoczno, a tile producer, says the lower limits will also affect his sector. "To satisfy demand we need to increase production by 20 percent. At the same time, due to lower CO2 emission quotas, prices may rise by two percent," adds Kazimierski. The restrictions on emissions will block companies from increasing production and, according to Deja, imports from neighboring countries won't be possible since they will be in a similar position.
Mikuła says countries such as Ireland, Spain or Portugal had their limits increased soon after EU accession. "We cannot decrease the emission limits as it puts countries still in the stage of development at a disadvantage. Furthermore, we will not be able to use the funds provided for real-estate development if we don't have a sufficient stock of building materials," he adds.
