The feasibility of domestic CO₂ emissions trading in Poland

In early 2000, neither a comprehensive upstream system nor an all-encompassing downstream approach to CO₂ emissions permit trading seems feasible in Poland. However, a pilot emissions trading system in the power and Combined Heat and Power (CHP) sector is thought to be a realistic option in the near future. A comprehensive upstream approach would require permits for the carbon contained in fossil fuels produced or imported in Poland. It is ruled out due to the perceived difficulties of the inclusion of the coal sector in such a system. While inclusion of the gas sector, and especially of the oil sector, seems possible within a relatively short time, relying on an upstream approach without the coal sector is not advisable. Once the restructuring of the coal sector as well as the privatization of the gas and oil sector is advanced, an upstream approach might become an option again. A comprehensive downstream approach would regulate CO₂ emissions at their source, that is mostly at point of combustion of fossil fuels. A system which includes industry, households and transport can be assumed to be infeasible. Instead, a "core program" was examined, which would
focus on power and heat generation as well as energy intensive industries. Such an approach was found feasible in principle. Currently, however, only the largest emitters could be easily integrated in a reliable system. Drawing the line between those included and those excluded from such a partial system requires careful analysis. Including all enterprises in the relevant sectors would require significant improvements in monitoring and reporting reliability. For both the upstream and downstream approach, the issue of electricity imports from the
liberalizing European power markets poses a serious challenge. A national permit system might discriminate against domestic power producers and the environmental goal might be undermined by imports from foreign producers, if these are not subject to carbon regulation in their home country. Unless internationally agreed solutions are found to solve this problem, trading systems are unlikely to become a binding policy tool with significant environmental effects. A pilot emissions permit trading system could be introduced in the professional power and heat sector. Here, awareness concerning the instrument was found to be high and the system could be based on monitoring requirements already required by law. Gradual inclusion of more relevant sectors and eventual combination with an upstream component to include oil refineries, and with them the growing CO₂ emissions from transport, seem possible. Such a pilot program would allow firms and the policy maker to gather relevant experiences for the possible future introduction of a comprehensive system and for the emerging international emissions trading system. To determine whether a pilot system is desirable, however, an extensive and comparative analysis of different climate protection policy options is still needed for Poland. It should include a close look at the implications of EU climate protection policies and the effects of the liberalization of international electricity markets on domestic policy options.