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DE RUEHWR #1179/01 1411447
ZNR UUUUU ZZH
R 211447Z MAY 07
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 4311
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHKW/AMCONSUL KRAKOW 1712
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAEPA/HQ EPA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/WHITE HOUSE WASHINGTON DC

UNCLAS SECTION 01 OF 03 WARSAW 001179 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/NCE, EUR/ERA, EUR/PGI, OES/GC, OES/STC, 
OES/ENV, OES/PCI, G, EB/ESC, EUR/PPD 
EUR/NCE FOR DKOSTELANCIK, BPUTNEY 
EUR/PPD FOR MJ BUSHNAQ 
WHITE HOUSE FOR CEQ DAVE BANKS 
PASS TO USTR FOR WMOORE 
COMMERCE FOR 4232/ITA/MAC/EUR/JBURGESS, JKIMBALL, MWILSON 
COMMERCE FOR SHANNON FRASER 
DOE FOR LEKIMOFF, MGINSBERG, GKERESTES 
EPA FOR APHILLIPS, KBUCKLEY 
 
E.O. 12958: N/A 
TAGS: ECON SENV EINV ETRD PL
SUBJECT: POLAND COMPLAINS ABOUT NEW CO2 LIMIT, BUT WILL 
FIND A WAY 
 
REF: 06WARSAW 2216 
 
WARSAW 00001179  001.2 OF 003 
 
 
- - - - 
SUMMARY 
- - - - 
 
¶1.  The Government of Poland is upset that the EU approved a 
CO2 emissions limit 1/3 lower than the GOP requested. 
Although the approved limit is close to Poland's current 
emission level, and Poland lowered CO2 emissions 18% since 
1990, the GOP fears that such a cut-back in emissions will 
slow future growth of the Polish economy.  The announcement 
of the new CO2 limits came a day before the visit to Warsaw 
by Margo Thorning, a PAS Strategic Speaker on environmental 
issues.  Thorning's visit focused on how economic growth can 
help reduce emissions, and how Kyoto targets may be 
inhibiting growth.  The future for Poland's continued 
reduction in CO2 emissions lies in increased production of 
biofuels and the use of clean coal technologies. END SUMMARY. 
 
- - - - - - - 
CO2 Allotment 
- - - - - - - 
 
¶2.  The EC allotted 208.5 million tons of CO2 to Poland for 
the years 2008-2012 as part of the European Emissions Trading 
Scheme (ETS).  Poland requested 284.6 million tons, based on 
an expected growth rate of 5.1% - 6%.  Poland's emissions for 
2005 amounted to 203.1 million tons, lower than the 239.1 
million tons allocated.  Because Poland came in under its 
targets during the period 2005-2007, Polish industry has not 
been forced to innovate to reduce emissions significantly. 
 
¶3.  Although not forced to do so, Poland reduced its CO2 
emissions by 18% since 1990, mostly through modernization of 
coal-fired power plants.  Poland decreased CO2 emissions by 
more than 25 other EU countries.  By retro-fitting old plants 
for cleaner burning, emissions went down significantly 
without a major increase in prices.  Due to these reforms, 
Poland moved from 10th to 20th on the list of the 50 largest 
polluters worldwide.  But, to meet the new targets, much more 
will need to be done. 
 
¶4.  Although Poland is upset about the new CO2 limits set by 
the EU, it will not be filing a case in the European court as 
Slovakia did.  Almost 80% of Poland's CO2 emissions are 
generated by the energy and heating sector.  The remaining 
20% comes mostly from cement producers, and the steel, 
chemical, paper, and fuel sectors.  Poland is currently 
working through how it will allocate credits among various 
sectors, with an eye to lessen the potential impact on 
economic growth. 
 
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Economic impact addressed by Thorning 
- - - - - - - - - - - - - - - - - - - 
 
¶5.  Poland's economy grew at more than 6% in 2006 and 
promises to maintain similiar growth rates for the near 
future.  With such growth comes increased energy use.  Poland 
is now struggling with how to meet the EU-imposed CO2 targets 
without significantly reducing economic growth. 
 
¶6.  This discussion coincided perfectly with the visit of 
PAS-sponsored Strategic Speaker Margo Thorning of the 
International Council for Capital Formation (ICCF).  ICCF is 
an organization that promotes economic growth while 
maintaining environmental protection.  Thorning met with the 
Polish Emissions Trading Administration, the American Chamber 
of Commerce Environmental Committee, and gave a lecture at 
the Warsaw School of Economics. 
 
¶7.  Thorning's main message was that the U.S. economy grew 
steadily at around 3-4% while at the same time reducing 
 
WARSAW 00001179  002.2 OF 003 
 
 
greenhouse gas intensity significantly.  She pointed out that 
as an economy grows faster, it replaces its capital stock 
faster, resulting in newer, cleaner burning, more efficient 
capital, machinery, appliances, etc.  But, since Europe aims 
to meet its Kyoto targets, Europe's economy is growing at 
just over 1% and its greenhouse gas emissions have gone up. 
 
¶8.  Thorning's message provides another perspective as the 
GOP deliberates how to address the new lower CO2 emissions 
allotment.  The GOP is concerned that rapid recent growth 
could be deterred by the new allotment, as companies would 
have to cut back production to stay within the target.  Or, 
if Poland does not meet its CO2 target, it will have to 
purchase carbon credits, which some estimate could cost EUR 
2-8 billion if Poland's GDP growth continues to be 6%. 
However, with insight from Thorning's presentation, it is 
possible that if the Polish is growing fast enough and 
replacing capital stock at a faster rate, that their CO2 
emissions could go down significantly from the use of more 
efficient equipment. 
 
- - - - - - - - - - - 
Poland must do more 
- - - - - - - - - - - 
 
¶9.  In addition to the lowering of CO2 limits, the EU 
requires energy from renewable sources to constitute 7.5% of 
total energy produced in each Member State by 2010.  The EU 
also aims to reduce CO2 emissions by 20%, increase the share 
of renewable energy in total energy production in the EU to 
20%, and increase the share of biofuels in transport to 10% 
by 2020. 
 
¶10.  Currently, 97% of Poland's electricity is generated 
through the burning of coal and the share of renewable energy 
in total energy production is only 4%.  In order to meet EU 
targets, Poland needs to invest significantly in biofuels, 
the most viable renewable energy source in Poland.  The GOP 
claims that investments in renewable energy sources is an 
economic priority and plans that by 2010, 4.7% of domestic 
electric energy production will be generated by biomass, 2.3% 
by wind, and 1.2% by hydroelectric power.  Poland plans to 
earmark PLN 1.6 billion ($570,000 million) for renewable 
energy projects over the next six years, most of which will 
come from EU funds. 
 
¶11.  Although nuclear power is also an option, and is the 
cheapest option, Poland currently has no nuclear power 
stations.  This year, the GOP announced that it plans to join 
Lithuania, Latvia, and Estonia in a joint nuclear power 
project in Lithuania, but electric production is not expected 
to begin until 2015 at the earliest.  Poland is discussing 
building its own nuclear power plants, but any such plans 
would not produce power for at least 10-15 years. 
Investments in wind power are on the rise, with reports of 
Japanese and Czech firms planning construction.  Although 
wind may be an alternative, it will likely not be a major 
player in the Polish renewables market as the environmental 
conditions are not ideal for wind power.  Therefore, biomass 
production, which is on the rise, promises to be the easiest 
way to increase the use of renewable energy sources.  Despite 
these efforts, experts unofficially state that they don't 
expect Poland's renewable energy use to go much above 9 or 
10% by 2020. 
 
¶12.  The real answer to reducing Poland's CO2 emissions will 
come with clean coal technology.  Poland has already invested 
in cleaner burning coal facilities (ref A), but will need to 
make the leap to truly clean burning coal to make significant 
progress.  Poland is in discussion with companies worldwide 
who produce such technologies, but the GOP appears to be 
awaiting a breakthrough that will lower technology costs. 
 
- - - - - 
 
WARSAW 00001179  003.2 OF 003 
 
 
COMMENT 
- - - - - 
 
¶13.  Poland is rightfully concerned that its lower emissions 
allotment could hamper economic growth.  However, such strong 
growth is also an incentive to modernize and switch to more 
efficient and less-polluting equipment.  Other EU Member 
States, such as Germany, who received similarly reduced 
allotments, are not experiencing such strong economic growth. 
 Poland has the capacity to increase production of biofuel 
and alternative sources of energy, but it is unlikely that 
development of these alternatives will occur fast enough to 
meet the demands of the next allotment period under the ETS. 
However, in the longer term, Poland will need to not only 
produce more biofeuls, but also utilize more advanced clean 
coal technologies to make any significant reduction in 
overall CO2 emissions. 
ASHE