Free economy will accelerate decarbonisation
Wojciech Wrochna, Wojciech Śliż, Jakub Dittmer, Aleksandra Pinkas and Jan Janukowicz have co-authored an expert report prepared in collaboration with the Warsaw Enterprise Institute, entitled Energizing the energy sector in Central-Eastern Europe. Review of barriers on the path to efficient, dynamic and green economy in Poland, Czechia, Slovakia, Hungary, Romania, Bulgaria, and Ukraine. The report is a cross-cutting analysis of existing regulatory, fiscal and market barriers in Central and Eastern Europe to increasing economic competitiveness and achieving the global goal of climate neutrality.
The main contention of the report is that the private sector must play a greater role in the climate transition, as the success of climate goals depends on the transformation of the economy into a liberal, competitive and sustainable one.
Here are the key findings of our experts.
Do EU climate policy mechanisms work in the Polish energy system?
Member States need to work closely with EU institutions on the climate and energy transition.
The EU’s ambition to make the internal market carbon neutral, whilst at the same time boosting competitiveness and innovation, relies first and foremost on mobilising private capital, with the subsidiary use of state aid.
The EU’s efforts to reduce greenhouse gas emissions are increasingly extending to its economic relations with third countries, which affect the carbonisation of supply chains (e.g. CBAM).
Energy investments are urgently needed as climate commitments are high compared to the situation in many EU energy markets, including Poland, and will continue to become more ambitious.
The EU supports the climate and energy transition at many levels.
At the regional level, the EU has provided dedicated ‘just transition’ funding under the Just Transition Mechanism. The instruments under this mechanism are designed to help mitigate the negative impacts of the economic transition. However, the long wait for funding under the National Reconstruction Plan has delayed these processes.
Companies involved in the energy transition (active players in the energy market) have been provided with new regulatory support mechanisms for investments in renewable energy sources (RES), including through:
- Revision of the Renewable Energy Directive – with the potential to develop projects in this field in areas of accelerated development of energy from renewable sources
- Revision of the internal electricity market – with the possibility of flexible connections
- ETS reforms – Poland, as the largest participant in the Modernisation Fund, can modernise the national energy system (Polish: KSE) and increase energy efficiency
- Extension of the ETS to trade with third countries – implementation of the Carbon Border Adjustment Mechanism (CBAM) and the Regulation on Deforestation-Free Products will significantly reduce emissions in European and global supply chains
Challenges for the climate and energy transition in Poland include:
- Transforming the operation of energy-intensive businesses based on low- and zero-carbon sources while meeting the need to build a competitive and sustainable European industry
- The growing need to support energy projects, including in particular long-term strategic investments (e.g. offshore wind energy)
- Reconciling the development of large-scale and distributed energy investments with increasingly ambitious climate targets
- Balancing values such as energy security and sustainability, competitiveness and environmental protection, innovation and a just transition
Overview of taxation regimes for selected energy investments, barriers and challenges
The Polish tax system has a significant impact on the energy sector, particularly in terms of innovation, modernisation and overall competitiveness.
Its benefits include:
- A research and development (R&D) tax relief, which allows for a deduction of up to 200 % of R&D expenditure
- Excise duty exemption for electricity from renewable sources
However, in the context of the development of renewable energy, areas for change can be identified, such as:
- The need to extend and adapt the accelerated depreciation of green energy assets to the requirements of new technologies
- Revising the Act on support for new investments in order to better address the specificities of the energy sector and broaden the range of incentives for renewable energy investments
- Reducing VAT rates on energy products (currently significantly higher than in other EU countries, which negatively affects the competitiveness of the Polish energy sector)
Decisive reforms are needed to effectively modernise Polish tax law in the energy sector. It is not only necessary to fine-tune the legislation, but also to raise public awareness of renewable energy sources.
Although the current tax incentives provide a solid basis, they need to be expanded and modified. This will effectively promote sustainable development and significantly strengthen the competitiveness of the Polish energy sector.
We invite you to read the report.
Questions? Contact us
