Czech Republic, Environmentalists plan to turn to international courts for help following Poland’s decision to prolong mining until 2044
Region: EU to withhold Poland funds over dispute
The European Commission said it would deduct money earmarked for Poland from its budget to collect a €15-million fine. The unprecedented measure follows Warsaw’s refusal to close a coal mine.
The European Commission took the unprecedented decision to withhold millions of euros in budget funds from Poland on Tuesday over unpaid fines related to a long-running coal mine dispute.
The EU funding earmarked for Warsaw that will now be held back amounts to some €15 million ($17 million).
Upon hearing the news, Polish government spokesman Piotr Muller hit back, saying his country would deploy “all possible legal means to appeal against this,” Poland’s PAP news agency reported.
Czech and German complaints
The dispute is over a European Court of Justice (ECJ) case relating to the Turow mine near Poland’s border with the Czech Republic and Germany. Both countries had complained of environmental damage caused by the mine.
In 2020, Prague argued that Warsaw’s expansion of operations there without environmental checks went against EU law, amid fears of polluting drinking water.
These complaints underpinned the ECJ’s interim decision in May 2021 for mining to be stopped until the EU’s highest court issued a final ruling.
Poland refused, and in September 2021, the ECJ imposed daily fines of €500,000 for as long as Warsaw ignored the interim decision.
Deal signed too late to avoid fines incurred, EU says
Last week, Poland reached an agreement with the Czech Republic to end the dispute over the coal mine.
The prime ministers of both countries ended the bitter battle over the Turow mine, but it doesn’t erase the financial penalties previously incurred. While the deal between Warsaw and Prague stops additional court fines from accruing, the outstanding amount still remains, DW writes.
Poland extends Turow mine concession to 2044
EU countries have agreed to cut their combined net greenhouse gas emissions to zero by 2050. Poland, which generates around 70% of its electricity from coal, was the only EU country that did not commit to the goal when the bloc set it in 2019.
Poland’s climate ministry has extended a mining concession for the open-pit coal mine in Turów until 2044, outraging environmental campaigners, who said the move would worsen the climate crisis. The decision comes as the Court of Justice of the European Union is poised to decide in early May whether the mine, located near the Czech and German borders, must close immediately, following a lawsuit filed by the Czech Republic in February.
The Czech Republic said Warsaw had violated the bloc’s law with an earlier extension of mining at Turów until 2026. Meanwhile, Czech residents close to the mine say it has contaminated drinking water and they have suffered from noise, dust and subsidence.
“Extending the concession means a further deepening of the climate crisis,” Greenpeace said in a statement.
“Poland’s actions show a total disregard for EU law,” Zala Primc, campaigner at Europe Beyond Coal, said.
Poland’s climate ministry said its decision was in the public interest as Turów supplies lignite, or brown coal, to a nearby electricity plant, which provides around 5% of Poland’s power, the owner, state-run energy group PGE, says.
PGE has said a sudden closure of Turów, which together with the power plant is a major employer, could lead to economic collapse in the province and shake “the stability of Poland’s power system”.
The company, which plans a new 496 MW unit at the Turów power station, said has begun work to reduce dust and noise.
Poland asks CJEU to reject halting of Turów coal mine
In February, the Czech government decided to take Poland to the court in connection with the building out of the Turów opencast mine. The main justifications were the mine’s impact on cross-border regions, reduction of the level of groundwater, and as a result lack of drinking water in the region.
Poland has requested the Court of Justice of the European Union (CJEU) to reject a Czech motion to halt mining at the Turów lignite mine.
The Czech government had applied to the CJEU for the implementation of interim measures to stop the mining of lignite at the colliery, which is on the Polish-Czech border, citing environmental concerns.
Poland’s Ministry of Climate told PAP that Warsaw’s response to the Czech government’s request had been forwarded to the court on April 6. In its response, the Polish government argued that interim measures are disproportionate and do not ensure a proper balance of interests.
“The application (of interim measures – PAP) would expose the Republic of Poland and its citizens to significant and irreversible harm,” the Polish authorities argue. “Halting mining activities at the Turów colliery until the issuance of a verdict terminating the main proceedings would have severe economic, social and environmental effects for the Republic of Poland, including the country’s energy security.”
The climate ministry pointed out that Poland also believes that the Czech Republic’s request does not fulfil the necessary urgency criteria.
Poland argues that the Czech government’s position is unjustified as the Czech government analysis omits other significant factors.
The Turów mine and power station belong to the PGE Mining and Conventional Energy company (PGE GiEK). In 2020, the mine’s lignite mining licence was extended until 2026.
In the opinion of PGE GiEK President, Wioletta Czemiel-Grzybowska, on the EU court’s decision on Turów rests the future success of the ‘just energy transformation’ at the EU level.
“‘Wild’ energy transformation is extremely dangerous and stands in opposition to the planned, stable and just transformation foreseen by the EU within the framework of the Green Deal,” she said.
The Turów mine delivers 7 percent of electricity used in Poland. Closing the mine would also entail closing the Turów power plant that it supplies, threating up to 80,000 Polish citizens.
Poland’s marshes endangered by mining project
There is an attempt by the Australian company Balamara to open up another coal mine pit in the immediate vicinity of the national park Poleski National Park. The necessary documentation for this has already been applied for.
The area around the Poleski National Park is known for its unspoilt lakes and marshes. However, there are also large reserves of coal underground. These reserves are already being exploited by the Bogdanka mine, approximately 10 kilometres from the border of the National Park.
The mine would require constant extraction of the ground water, and this would almost certainly lead to the drying up of the marshes and lakes. Endangered species that are reliant on the wetlands would die out locally. One such species is the particularly rare aquatic warbler, which has become extinct in Germany and has its last significant healthy population within the national park. 4% out of a world population of 20,000 breed here. The habitats affected by the mining are Natura-2000 sites enjoying European protection, and so any developments must be investigated for their impact on the protected habitat. Any approval of the mining application without a thorough environmental impact survey would be a clear breach of EU law.
The planned coalmine would furthermore have devastating effects on the climate. Instead of acting as carbon sinks, the marshlands would change to being to net emitters of carbon dioxide. “In the context of the Paris Climate Targets, the plans of Balamara and the Polish government are totally cynical. Intact wetlands are of immense importance for the preservation of species diversity and the resolution of the climate crisis,” says EuroNatur Executive director Gabriel Schwaderer. A coalition of Polish and international conservation organisations, including EuroNatur, are campaigning for the rejection of this ecologically destructive project.
Poland agreed to phase out coal mines by 2049
At the end of September, the Polish government and trade unions agreed to phase out coal by 2049.
Coal mining has long been considered the pride of Poland and it is responsible for 80% of the country’s electricity production, according to 2018 figures, and employs around 80,000 people, down from 400,000 in 1990. Coal reserves in Upper Silesia, in the south of the country, are perceived as key to energy security and a patriotic alternative to gas and oil imported from Russia. Their volumes were believed to be sufficient to last for decades.
But the industry is in decline for a number of reasons. Piotr Lewandowski, president of the Institute for Structural Research in Warsaw, says it is being pushed to a “tipping point” by several factors: falling demand for coal because of warmer winters; wind and other renewables becoming cheaper; rising costs of carbon emissions; and a society less willing to tolerate high levels of air pollution.
Poland is also under pressure from the 27-member European Union to lower carbon emissions and is seeing the coronavirus pandemic complicate its coal troubles.
More than half of the EU’s most polluted cities are located in Poland. This is the problem that is proving hard to solve for the Polish government: it is linked to Poles being dependent on coal for heating their homes. Both Poland and the European Union has invested money into transitioning to cleaner ways of heating the country’s households.
But for some coal is the only way to survive the cold season. Like for Mariola, who lives in Zabrze with her three children. Mariola’s partner, a former miner, went to the UK to work in construction, while she stayed in a ‘familok”, a type of residential building in Silesia, built in the proximity of mines, for the workers and their families to live.
The slag heap of the Marcel coal mine in Radlin, Upper Silesia, contains the spoils that are being thrown away during the coal excavation. It became one of the examples of the ecological impact of the coal mining in the region. The waste and active chemical substances contained in materials stored on the site have caused fires. Locals have called for the works to stop in the area, as the smoke and toxic gases have become unbearable to live with. There are already positive examples of transition of the industrial areas. “The familoks” built by the surrounding coal mines in the Nikiszowiec district were completely renovated a few years ago. Since then, it’s considered to be one of the most pleasant areas in Katowice and has even listed on Silesia’s ‘Industrial Monuments Route’ offered by the tourism office.
Miedzi Copper Corporation discovers deposits of silver and copper in Poland
Miedzi Copper Corporation had discovered deposits of silver and copper worth an estimated $60 billion in western Poland. Under Polish law natural resources belong to the state, so, if mined, the deposits could provide a handy boost to the nation’s coffers.
The riches lie buried around 1,900 metres beneath the surface near the towns of Zielona Góra and Nowa Sól, and, if extracted could create 8,600 jobs and bring in an estimated PLN 1 billion a year to the state budget for decades to come, according to Miedzi Copper Corporation, the Canadian firm that discovered the deposits.
“The value of the deposits is worth an estimated $60 billion,” said Professor Stanisław Speczik, CEO of Miedzi Copper Corporation.
“We want to start building the mine in 2024-25. This deposit is the property of the state so we will only get a mining license.”
It may not be all good news for the Canadian firm, however. It has been in competition with KGHM, a Polish mining giant, for a number of years, and there is speculation that the government might award the license to the local firm rather than the foreign company.
There are also environmental concerns
Although modern mining methods have less of an environmental impact than their predecessors there are fears new mines could damage the ecology and lead to people having to give up their homes so the mine can be built.
The news of the new deposits should, however, bolster Poland’s already good standing as a country rich in metals.
According to the Polish National Geological Institute, Poland ranked second and fifth in the world in 2015 when it came to anticipated economic resources of silver and copper.
Polish and Czech dispute over Polish lignite mine and power plant
Poland has some of the worst air quality in the European Union, so it is no wonder why Poland’s planned expansion of its Turów lignite mine on the Czech border is straining bilateral ties and raising questions about compliance with European Union regulations.
Turów’s licence expires in April and Polish state-owned utility PGE hopes extraction will continue until 2044 and expand to within 100 metres of the Czech Republic’s border and close to German territory.
In Bogatynia, the Polish town closest to the mine, PGE is the largest employer.
PGE’s 1.3-gigawatt power belches pollution across the border and a new 450-megawatt plant is due to begin operations this year. The site supplies approximately 8 per cent of Polish electricity.
Environmentally ruinous coal currently makes up about 80 per cent of Poland’s energy generation – the highest coal dependency in the EU – and it is only expected to fall to 50 per cent by 2040. According to the European statistics agency, Eurostat, renewables made up 10.9 per cent of Poland’s energy mix in 2017, which will need to increase to 15 per cent this year to comply with the EU’s environmental targets.
It has been estimated in a European Commission report that around four-fifths of Polish coal mines are unprofitable.
The populist Law and Justice Party administration has maintained support for the coal sector and provides government subsidies to preserve the industry.
Rising carbon emission costs and volatility in the energy market, however, have made that commitment less popular among voters.
The municipal government in Liberec on the Czech side of the border said the brown-coal, opencast mine and plant endangered the water supply for 30,000 Czechs. It has filed a complaint in Brussels that says the site contravenes EU trans-boundary environmental rules and that PGE has failed to consider Czech interests.
“The water crisis caused by decades of Turów mining activity is already happening. The prolongation of mining can make it significantly worse,” said Martin Puta, the Liberec governor. PGE was playing “roulette with our water resources”, he added.
PGE said it monitored groundwater and water in the Czech border town of Uhelná “may be impacted”. The firm added that it was working on a subterranean cut-off wall to “limit the impact of the opencast mine on this water intake”.
Residents in the German border town of Zittau also say PGE has failed to address cross-border pollution and noise from the mine and power station.
“In our opinion, this environmental impact assessment wasn’t made to fulfil laws, it was just made up,” Zittau’s mayor Thomas Zenker told the media.
“We try to be honest, but not too harsh. Because the problems on our side are not comparable to the Czech side. So we try to support the Czech side without taking away from the Polish side every chance for development,” the mayor added.
How long will Santander continue to profit from Polish coal expansion?
The Spanish bank’s use of ‘ESG loans’ for companies with fossil fuel expansion plans is part of a dangerous new trend
Poland’s fiercely pro-coal Law and Justice (PiS) party may have been returned to power following general election, but already a vigorous coalition comprising local and regional authorities, farmers, NGOs and grassroots groups, business associations and local communities has succeeded in thwarting the new government’s reckless coal ambitions.
Faced with vocal opposition from across the country to PiS’s proposed legislation, which would have allowed Warsaw to open new coal mines around the country without the approval of local authorities, yesterday the head of the Polish parliament threw out reading of the special mining bill during the final day’s session of the old parliament.
Should the government re-table the bill in the coming months of the new parliamentary session, it will only escalate tensions between Poland and the EU over climate policy and land the national authorities in further hot water with Brussels. Environmental lawyers in Poland maintain that the proposed mining law would violate EU law.
As this blog explores, with the Polish state’s gung-ho approach to coal intensifying, for how much longer can financial institutions such as Santander maintain their credibility as supposedly ‘responsible’ banks if they are prepared to continue funding Polish companies which are going all out to prolong and expand their coal fleets?
All in for coal
PiS officials have not been shy about disclosing one of the most pressing reasons for trying to introduce the new radical mining legislation, a highly unusual and controversial move even by the standards of the ‘Coal is King’ mentality so dominant in the right-wing party.
The mining bill was intended to assist development of the planned lignite open-pit mine at Złoczew, which stands to become the country’s deepest ever open-pit mine, would displace over 3,000 people and destroy 33 villages. A concession to open the Złoczew mine is being sought by the state-run energy group PGE to fuel its Bełchatów power plant for the next several decades.
Bełchatów, Europe’s biggest power plant, is notorious for being the continent’s single largest source of carbon emissions.
For PGE, with no coal phase out policy in place, no Paris compliant decarbonisation goals and a 91% coal share of power production (according to the recently updated Global Coal Exit List), steamrolling over public health concerns, people’s houses and completely disregarding the global climate imperative is somehow par for the course. Flying in the face of economic reality to just keep on digging and burning more and more coal would also appear to be part of the PGE business model, according to an analysis published last week by the Institute for Energy Economics and Financial Analysis (IEEFA).
Assessing PGE’s ‘all in for coal strategy’ since 2015 (not the strategy’s actual name, but coal and lignite have accounted for 76% of its €8.5 billion capital expenditure and acquisition investment so far over four years), IEEFA’s view is that the financial performance of the company has been ‘woeful’ and that the current, hugely coal-intensive pathway is financially ‘unsustainable’.
The IEEFA analysis found that PGE’s cost of equity has exceeded return on equity for at least the last four years, and that it has performed poorly when compared with European electric utilities that have tilted towards renewables.
Of PGE’s proposed Złoczew lignite, one of the report’s authors Gerard Wynn reckons, “It’s a distraction which would inevitably create huge losses, ultimately paid by energy consumers or the Polish state. The time has passed for energy companies to replace old coal with new coal.”
Some banks refusing to get out of Polish coal
Steering clear of coal – and companies like PGE still looking to develop new coal projects – has also got to be a top priority for commercial banks. Yet just over a year ago, Spain’s Santander, Italy’s Intesa Sanpaulo and Japan’s MUFG opted to back PGE’s ‘all in for coal’ approach with a loan for the company of close to €1 billion.
Based on the environmental, social and financial risks which PGE’s stubbornly enduring, and potentially legally suspect, coal activities pose, these three banks – all of which recently signed up to the UN’s Principles for Responsible Banking, requiring them to align their business strategies with the Paris Agreement in the next two years – must now be prepared to jettison their recalcitrant Polish coal clients and, indeed, other clients still set on coal expansion.
Seeing no palpable signs of a transition out of coal taking shape in its Polish clients, this is in fact what French bank BNP Paribas announced it is doing at its annual shareholders’ meeting in May this year. Another French bank, Crédit Agricole, has also recently laid down a marker for the banking sector by announcing its commitment to fully phase out of coal, including an immediate end to business with companies planning to develop new coal projects.
However, just as they were signing the Principles for Responsible Banking at a launch ceremony in New York in September, two of PGE’s bankers, Santander and MUFG, signalled that they are prepared to give the Polish coal sector further financial leeway.
The two banks have signed off on a PLN 2 billion (approximately €465 million) ESG-linked revolving credit facility agreement with Energa Group, a majority coal-dependent company involved in trying to construct the last new coal power plant on EU soil – the €1.2 billion, 1000 megawatt Ostrołęka C coal plant.
One of the justifications from Santander for this loan (for ‘revolving credit facility’ read ‘company credit card’) is that the agreement with Energa “prohibits the use of loan proceeds for coal power”.
Energa does have business in renewable energy. Yet, according to an anonymous European banking source talking to Reuters about Polish coal power financing trends, “Banks agree to provide financing for energy groups only on condition that it will be spent on distribution networks or renewables. But this helps the energy companies to find money for the coal projects.”
Energa needs funding generally – to buy back domestic bonds this week, and to pay back €500 million worth of Eurobonds (an issue previously arranged in 2013 by BNP Paribas, Bank of America and HSBC) in March next year. And mounting Ostrołęka C construction costs are looming for Energa. The company has ‘stranded asset risk within a decade’ written all over it, chiefly because of its Ostrołęka C ambitions.
But what of the ESG (Environmental, Social and Governance) criteria attached to this Energa loan, which Santander is trumpeting as a first in Poland?
The extent of the interest payable on the loan will be determined by the bank’s assessment of Energa’s “care for the natural environment, social responsibility and corporate governance”. If Energa continues to pump capital into Ostrołęka C – and that is its plan – then under the ESG terms its interest payments on this loan are likely to rise, and hence Santander will profit further.
The emergence of ESG marked lending by banks for companies with explicit fossil fuel expansion plans is a dangerous new trend. If banks like Santander want to encourage companies – like Energa – which are dead set on firing up new coal plants not to do so, the risk of a couple of interest rate penalty points is not going to cut it, especially where state-owned companies such as Energa (and PGE) are concerned.
Rather than profiting by penalising the likes of Energa with exotic new ‘green’ financial engineering, Santander and others should penalise these companies by not funding them at all. Profiting from climate destruction is never going to be ESG-compliant, as much as the finance industry may want to spin it.
Polish government plans last-minute push on new coal mining law
No matter who wins Poland’s election parliament is set to debate a divisive new law that gives the government additional powers in the process of planning new coal mines.
That’s because the ruling Law and Justice (PiS) party government scheduled a parliamentary session immediately after the election to be held by the outgoing parliament’s MPs. Although PiS is way ahead in opinion polls, the final outcome is still in doubt — and the extra-parliamentary session allows the government to push through legislation even if it loses power.
The draft mining law gives Warsaw the power to circumvent local governments and communities if it decides that a mining project is important for “the raw material security of the country.”
The government argues that the law is needed to slash red tape and provide greater certainty to investors. The explanation in the draft says it “will make possible faster and more effective administrative procedures.”
But skeptics are worried about the speed of the legislation — it’s not going through consultations, and instead is being rushed through parliament as a private member’s bill — and on its impact at a time when the rest of the EU is shifting away from coal.
“The effect will be accelerating the implementation of hard and lignite coal mining projects,” said Janusz Buszkowski, a climate and energy lawyer from ClientEarth, an NGO.
About 80 percent of Poland’s electricity is generated by burning hard coal or even dirtier lignite — giving it the highest coal dependency in the EU. The government has promised to cut that to 50 percent in 2040, but that pace is at odds with the EU’s push for carbon neutrality by 2050.
Poland, along with the Czech Republic and Hungary, is blocking the 2050 initiative, and is holding out for generous EU compensation to finance decarbonization.
Poland is also moving ahead with new coal-fired power generation installations, such as a 1,000-megawatt plant in the northern town of Ostrołęka.
“Coal guarantees our energy security. In 20 to 25 years, coal’s share in the energy mix will go down to 40-50 percent because Poland [will] diversify its energy sources,” Piotr Naimski, the government’s adviser for strategic energy infrastructure, said in London last month.
“We want to carry out our energy policy the way we want to run it, not the way imposed on us by French or German companies,” Naimski added.
Local governments are fuming at the prospect of Warsaw overriding their wishes.
“This law will effectively end our planning powers,” said Piotr Kuczera, the mayor of Rybnik in the western Polish region of Silesia, which sits atop some potential coal deposits that remain untapped.
To mine or not to mine
Local governments are whipsawed by conflicting demands — Warsaw’s push to continue burning coal against growing grassroots and international pressure to cut coal use.
“It’s about the environment,” said Kuczera. “We have taken care of former mining grounds, there are new companies coming to town, unemployment is 3.8 percent, we’re no longer dependent on coal for our economy.”
Bapro, a privately held Polish company, is currently going through the permitting process to build a coal mine to extract an estimated 115 million tons of coal sitting under Rybnik. “If that new law passes, we won’t be able to influence the process anymore,” Kuczera said.
The government has tried to calm the regional backlash caused by the proposed law, explaining that it would only apply to coal deposits that have a strategic meaning for the country.
“The law won’t affect any [coal] deposits in Silesia and the Lesser Poland [Kraków] regions,” Deputy Energy Minister Adam Gawęda said in Rybnik on Tuesday. He said the law is being debated to make sure deposits of lignite in central Poland and hard coal in eastern Poland could be extracted in the future.
Silesia is a key battle arena in the election; Polish Prime Minister Mateusz Morawiecki is running for a parliamentary seat from the regional capital Katowice. A poor showing in Silesia could endanger PiS’s chances of forming the next government.
The law appears aimed at Złoczew in central Poland, where there are potential lignite deposits seen a crucial for the future of the nearby power plant in Bełchatów — Europe’s largest emitter of carbon dioxide. Bełchatów will run out of fuel in the mid-2030s, and the government wants to ensure continued operations of a plant that supplies a fifth of Poland’s electricity.
Kuczera was skeptical of the government’s scramble to calm voters.
“It’s the election campaign and I’m not surprised that is their reaction,” he said. “If they wanted an open discussion, why are they skipping the consultation process by tabling it via a group of MPs, not the government? Why is the parliament working on it a day after the election?
“We are ready now to replace coal with other sources of energy. And I’m saying this as a mayor of a town where two coal mines are still operating and will operate for another 20-30 years,” said Kuczera.