Fossil fuels provide the bulk of Poland’s energy supply (87% of its total energy supply in 2021), and particularly indigenous bituminous coal, which accounts for more than 40% of its total energy supply (TES). Poland has one of the highest levels of coal-based electricity generation among OECD countries in Europe, ranking behind Germany only in terms of electricity units generated by coal. Increasing reliance on energy imports has been growing and in 2019 the country recorded its energy net imports reaching three-fourths of its indigenous production. Net imports of crude oil and natural gas – constituted 47% of total energy trade (by energy unit) in 2020. Poland has been successfully trying to reduce its reliance on imports from the Russian Federation (hereafter “Russia”); it reduced Russia’s share of gas imports from 90% in 2010 to 55% in 2021 and halted Russian gas imports in April 2022. Poland has also become independent of Russia in coal imports, replacing it with supplies from countries like Colombia, Indonesia, and South Africa.1 From February 2023, Russia stopped exporting oil to Poland via the Friendship pipeline and since then, alternative supplies come primarily from Saudi Arabia.

The structure of Poland’s energy sector has changed dramatically since the early 1990s, following the collapse of the Communist Bloc. Some assets were privatised, but the state has retained large stakes in most of the main companies. The state holds 100% of shares belonging to the biggest coal producers ― Katowicki Holding Węglowy S.A. ― and a majority of shares in the second, Jastrzębska Spółka Węglowa S.A. Former second largest producer ― Kompania Węglowa S.A. was liquidated in 2017, and its 11 mines have been subsequently transferred into state-owned Polska Grupa Górnicza (PGG).

There are four oil-producing companies in Poland, belonging to two capital groups: PGNiG and Grupa LOTOS. The Polish Oil and Gas Company (PGNiG), which is majority-owned by the government, is by far the largest, accounting for 81% of domestic production, mostly from on-shore wells. Through its subsidiaries, PGNiG S.A. also dominates the downstream gas sector, even after the implementation of market reforms in recent years to comply with EU directives. The company controls virtually all gas imports and owns the majority of distribution pipelines and underground storage facilities.

In Poland, more than 100 companies are licensed to generate electric power in Poland, though only four control a substantial part of the market: Polska Grupa Energetyczna (PGE), Tauron Polska Energia, Energa, and Enea. These companies, created in 2007 out of the former state monopoly Polskie Sieci Energetyczne S.A. (PSE), are vertically integrated with activities in generation, distribution, and direct supply. Poland's transmission grid is operated and owned by PSE Operator S.A., which remains in state ownership.

Prices for coal, oil, and oil products in Poland are set by the market. The Energy Regulatory Authority (ERO) regulates natural-gas prices for all consumer groups.2 It also approves tariffs for electricity and gas transmission and distribution. End‐user electricity prices are not regulated except for household tariffs, which are subject to approval by the ERO. Most natural gas pricing regulations ended in 2017, with regulated retail gas prices for household consumers expected to end in December 2023, but was extended until 2027 because of government concerns over the current natural gas supply turmoil and its resulting price volatility. Sales of all fuels in Poland are subject to the country’s regular 23% value‐added tax (VAT) however in 2022 a reduced VAT rates applied for the supply of natural gas (0% VAT), electricity and heat (5% VAT) and the supply of motor petrol, diesel, biocomponents, LNG and LPG (8% VAT). Oil products and electricity sales (both commercial and non-commercial) are also subject to excise taxes and a fuel tax in the case of motor fuels. Excise tax exemptions exists for certain uses of natural gas and coal, notably on electricity generation, passenger and freight rail transport, agriculture, fishing, and mining and metallurgical processes.

Support for fossil fuels in Poland mainly comes in the form of compensations for the decommissioning of coal mines and for the termination of long-term Power Purchase Agreements (PPAs) that were signed with power plants. The stranded-costs compensation scheme provided to power plants was introduced in 2008, peaked in 2009 but has slightly declined since. In 2018, substantial aid was provided for restructuring the coal mining sector in relation to covering extraordinary costs borne by mining enterprises. Poland also provides refunds, financed from the state budget, for farmers to offset the tax imposed on diesel used as propellant in farming. Support is limited based on area of utilised agricultural area but can be increased for agricultural producers engaged in cattle farming. The amount of refund per litre is determined each year. Because of the energy crisis triggered by Russia’s war of aggression against Ukraine in February 2022, the government introduced a number of support measures to mitigate the inflated energy prices, such as a freeze of natural gas prices in 2023 at their 2022 level covering households, subsidies for households using coal and fuel for heating, or support to suppliers to mitigate gas prices in the form of tariffs spreading price increase and the option to recover costs over three years, until 2025.

As a result of the energy crisis, some companies in the energy sector reported unusually high profits due to smaller supply and inflated prices. In 2022, the government made it compulsory for coal companies to register on a government portal with the aim to provide information for customers where to buy the cheapest coal.3 Most recently, the draft legislation proposes to introduce additional levy on such excess profits made by coal companies in 2022, with the intention to use the money to reduce electricity prices for households and other entities.4

Ending Russian energy imports was planned in Poland regardless Russia’s war of aggression against Ukraine, as contracts with Russian state-owned gas company Gazprom were due to expire at the end of 2022. In May 2022, the construction of an interconnector pipeline between the transmission systems of Poland and Slovakia at the Výrava point was completed.5 The government has also announced an acceleration of the construction of a floating storage regasification unit (FSRU) terminal in the Gulf of Gdańsk. The floating terminal in Gdansk will have the capacity to unload, store, and re-gasify up to 6.1 bcm of gas fuel per year. The start-up of the unit, as announced by Gas Transmission Operator GAZ-SYSTEM, which is implementing the project, is planned for January 2028.6

In February 2023, the NFOŚIGW launched the programme Aid for energy-intensive sectors related to sudden increases in natural gas and electricity prices in 2022 with a budget of PLN 5.1 billion (approximately EUR 1.1 billion).7 The aim is to support energy-intensive industries such as metallurgy, ceramics, cement or fertiliser production. The aid provided ranges from several thousand to several hundred million PLN.

The fiscal cost of support measures for fossil fuels in Poland was estimated at PLN 58.53 billion in 2022 (Table 1). Seventy-five per cent (75%) was directed at end user beneficiaries, as opposed to 24% directed to firms. Support was mainly given out in the form of tax expenditures (PLN 36.71 billion) accounting for 63% of the total fiscal cost of support measures. Direct transfers amounted to PLN 21.81 billion.

The fiscal cost of support measures for fossil fuels has increased by 462% since 2017. Since last year, tax expenditures have increased by 370%, from PLN 7.82 billion to PLN 36.71 billion and direct transfers increased by 539%, from PLN 3.01 billion to PLN 21.81 billion. All growth rate percentages above are expressed in terms of nominal national currency amounts.

Table 2 highlights a selection of support measures associated with a large fiscal cost. A description of these measures is provided in Table 3.

Aggregate numbers from the Inventory represent the fiscal cost of support measures for fossil fuels. They should not be interpreted as a level of support for fossil fuels, nor as an indicator of the extent to which the considered policies are favourable or unfavourable to climate mitigation.

The Inventory reports tax expenditures as estimates of revenue foregone due to measures that reduce or postpone tax payments relative to a jurisdiction’s benchmark tax systems to the benefit of fossil fuels producers or users. Tax expenditure estimates can thus increase over time due to either an increase in the offered concession (relative to benchmark tax systems) or an increase in the benchmark itself. Cross-country comparisons of tax expenditures can also be misleading due to differences in countries’ benchmark tax systems.


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