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Ky Krauthamer

Ky Krauthamer

Ky Krauthamer is an editor and news writer at Prague-based Transitions Online, a magazine of politics and current affairs in Eastern Europe and Eurasia.

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Ukraine Crisis Feeding Poland’s Coal Hunger

Poland is the largest European Union member state bordering Russia and, under its current center-right government, has been point man for a group of countries urging the EU to reduce its dependence on Russian energy, even before the Ukrainian crisis sent EU-Russia relations into a deep freeze.

Warsaw also heads a group mainly of former socialist countries that want to water down the European Commission’s climate and energy package, especially the 2020 and 2030 deadlines for deep cuts in CO2 emissions.

Now Polish Prime Minister Donald Tusk has folded these two energy goals into one ambitious plan for an EU “energy union.”

Tusk got the ball rolling with a piece in The Financial Times where he, in effect, called for a U-turn in EU energy policy. Instead of the European Commission’s goal of a decentralized market for gas, he foresees a new EU body to coordinate gas purchases and negotiate a single union-wide price with EU’s biggest gas provider, Russia’s Gazprom.

The plan also calls for the EU to help out member states in the event of a supplier cutting the gas flow, as Gazprom did twice in the past few years because of payment disputes with Ukraine. Currently, Gazprom has separate deals with EU customers, and eastern member states, including Poland, pay some of the highest prices.

Tusk also wants the bloc to co-finance gas infrastructure projects and focus its financial resources on countries most dependent on Gazprom.

Overall, the EU imports about a third of its gas from Russia, and some of the bloc’s eastern members depend entirely on Gazprom deliveries to keep power plants running and homes heated.

Tusk claims this strategy “will return the European project to its roots” – namely, centralized control over key energy and industrial assets, harking back to the EU’s beginnings in the 1950s as the European Coal and Steel Community.

The Tusk plan has so far drawn public support from Hungary, Bulgaria and Lithuania. Initial talks with his French, German and Spanish counterparts have been encouraging, according to analyst Piotr Buras of the European Council on Foreign Relations.

Tusk’s proposal also says, “Europe should make full use of the fossil fuels available, including coal and shale gas,” which happens to be one of Poland’s top energy priorities; Tusk recently declared a crusade on several fronts to prop up the country’s struggling coal industry. Days after workers protested plans to scale down production at the country’s largest coal miner, Kompania Weglowa (KW), he pledged state support for the industry, possibly including “state financing and organization,” Platts reported. He also asked state-controlled power companies to buy coal even when other fuels are cheaper.

Overproduction and aging infrastructure are chronic problems for KW and other Polish miners. KW, the EU’s biggest coal producer, employs 55,000 people but with global demand slack, the company is saddled with 5 million tons of unsold coal. CEO Miroslaw Taras recently said the company will soon announce its plan to restore liquidity and return to profitability.

Coal is by far the most important part of Poland’s energy arsenal. The vast beds of black coal and lignite in the southern Silesian region helped fuel Germany’s rise to power before the area was annexed by Poland after World War II. Coal-fired plants generate 90 percent of Poland’s electricity – and also contribute to making the air in the southern industrial belt some of the dirtiest in Europe.

After meeting with Tusk in early May, EU energy commissioner Guenther Oettinger signed on to the idea of a uniform EU-wide price for Russian gas. The European Commission as a whole, however, is extremely unlikely to get behind Tusk’s call for greater reliance on coal and shale gas, nor the implied weakening of the EU climate and energy package.

By 2020, all EU members must reduce greenhouse gas emissions by 20 percent from 1990 levels and increase the share of renewable energy to help meet that overall target of 20 percent, as well as boosting energy efficiency.

With Poland some way from meeting its 2020 renewables target of 15 percent, some analysts suggest Tusk may be angling for a compromise deal that would allow countries with abundant supplies of “dirty” fuels some leeway in adopting the package.

By Ky Krauthamer of Oilprice.com




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