Poland to propose ETS reform if coronavirus pandemic prolonged

Poland will propose changes to the EU Emissions Trading System if the coronavirus pandemic continues to hit European economies over a long period, the Climate Ministry said Thursday.

The ministry said the pandemic would create two possible scenarios. The first would be a weakening of European economies, which would create relatively higher ETS costs. The second would be that the spread of the virus would cause a surplus of EUA allowances and a subsequent fall in their price.

"If the difficult economic situation persists, the Polish government will propose to the European Commission the introduction of ad hoc solutions that may improve the situation," the ministry wrote in response to a question from the state news agency PAP on the crisis and the costs of the carbon abatement system.

Poland generates about three quarters of its electricity from coal. The rise in carbon prices until the recent rout has been a significant factor affecting the profitability of the country's coal plant. The price of allowances has fallen heavily recently, trading at Eur16.10/mt CO2 Thursday, down 30% in a week.

This is not the first time the government has raised the possibility of reforming the EU's ETS system to mitigate the impact of the virus' spread.

On Tuesday, deputy state assets minister Janusz Kowalski wrote a tweet saying, "How to help the European, and above all the Polish, economy during a pandemic? The reform of the EU ETS is necessary -- CO2 allowance prices have increased from Eur5 [$5.37] to Eur30. Poland and other states should take care of the climate on their own and the ETS should be abolished from January 2021."