Poland looks to develop emissions trading system

Efforts are underway to create a nationwide emissions trading system by 2003. Polish companies with excess credits could have a lot to gain.
By : Jeffrey Sparshott

   The Polish Power Grid (PSE) hopes to implement a nationwide emissions trading system by 2003, allowing companies to find an affordable way to reduce the country’s greenhouse gases while meeting goals set out in the Kyoto Protocol to the United Nations’ Convention on Climate Change, according to the PSE.

   A worldwide trading system is still in its infancy, with Poland joining the European Union (EU) and other nations in trying first to establish a workable internal system. The ultimate goal is to cut down on airborne pollutants by setting up a market-oriented system that will make it feasible for developed nations to reduce emissions below a set level by 2012.

   PSE’s tender, which opened in July, has met with nine “good” offers from consulting firms bidding to establish a trading system, said Wojciech Jaworski, eco-development strategy director at the power grid. A deadline for choosing one of the firms has since passed but the state-controlled company plans to make a final selection within six weeks, he said.

   “The system should be implemented in Poland by 2003,” Jaworski told the Business Journal.

   Signatories to the climate convention have agreed to lower greenhouse gases by a specific amount. Poland, which has signed but not ratified the Kyoto protocol, is committed to a 6% reduction of emissions below 1988 levels during a four-year span ending in 2012.

   According to some studies, Poland should be able to exceed this goal with minimal effort. Under general terms of the protocol, this would allow Poland to trade credits on an open market with countries that do not meet their emission reduction obligations. The United States, which has backed out of the treaty, and EU member states are at the forefront of setting up markets, though it is important for Poland to establish its own exchange.

   “In the absence of a domestic trading system it would be unlikely that a Polish company could sell rights to a European company,” said Jochen Hauff, an associate at consulting firm A.T. Kearney and the author of a study on emissions trading in Poland. “And I would recommend that the Polish government should allow companies in these sectors to gain the necessary experience so that they could later trade on an international market.”

   The EU, which is committed to reducing greenhouse gas emissions to 8% below 1990 levels by 2012, wants to have its own trading system set up by 2005, according to a European Commission “green paper.” A worldwide system should be in place by 2008, according to the UN.

   Poland’s National Fund for Environmental Protection and Water Management (NFOŒiGW), the government agency tasked with implementing projects under the climate convention, is working with the EU to make sure that Poland’s system is compatible with the 15-nation bloc’s project. Poland hopes to join the EU in 2003, though analysts see 2005 as a more realistic goal.

   In the meantime, however, Poland lacks the legislation to have an effective trading system.

   “That is the biggest problem and that’s why the power grid wants to prepare complete legislation,” said Witold Redke, an inspector in the NFOŒiGW’s executive bureau. “What we do and the power grid does is give the Environment Ministry the ready proposal for such a system. The power grid wants to prepare the complete proposition. We are working on the idea and rules that should regulate the entire system.”

   Since 1990, legislators have considered four proposals that would have set up the framework for a trading system but each time the proposals were stripped from larger bills, Redke said. No additional laws are now under consideration, he added.

   Still, officials at PSE and the NFOŒiGW are hopeful that a domestic system will come on line.

   “This is what we need the consulting company for – they need to create a plan and define the margins both in terms of how much we will produce and how much we will be able to sell,” Jaworski said. “We need the consultant to determine our production potential and the consequences.”

   Redke will travel to Brussels for a Sept. 10 EU meeting on the trading systems, with an eye to keeping Poland’s proposal compatible with the union – whose members are potentially major greenhouse gas trade partners.

   Poland could stand to benefit from a successful trading system under the climate convention. During its transition from a command to a market economy, Poland has dramatically reduced emissions of these gases as energy prices rose and efficiency became increasingly important.

   A projected increase in efficiency should allow Poland to exceed its greenhouse gas reduction goals with only limited investments, according to Hauff’s study. This would allow the country to trade credits on an international market to countries that have not met emission reduction goals. Theoretically, this system provides an incentive for companies to invest in reducing pollution when economically feasible, knowing they will receive additional economic benefit by selling credits. Companies that find it too expensive to reduce emissions will buy the credits. While individual companies are affected, national governments have to enforce the overall emission targets.

   But without a national system in place, the benefits would remain merely theoretical.

   “Poland has to be ready to prepare a national strategy on greenhouse gas reduction,” said Andrzej Kassenberg, president of the Institute for Sustainable Development, a Warsaw-based think tank. “Without a national strategy it’s like ... you have good sails and wind, but don’t know your destination.”

   The PSE’s proposal would focus on carbon dioxide and sulfur dioxide. CO2 is the most common greenhouse gas.