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31 May 2019

Poland: The blot on the EU coal landscape, loses its French banker

The long term blot on the European landscape that is Polish energy policy, may have been dealt a body blow this week, as French banking giant BNP Paribas said it would finally cut its financial connections with electricity producers there, especially those strong on coal production. In particular it plans to pull banking facilities from Polska Grupa Energetyczna (PGE), the lead energy supplier there.

PGE in the past has said very clearly that it intends to spend well over 80% of its investment on new coal plants and coal plant modernization and just 1% on renewable energy.

The French bank has long been criticized for saying several years ago that it would do this, and not following through, but it reminded everyone this week that it was obliged to see through existing contracts. BNP Paribas said that bank loans to the Polish electricity sector would decline “significantly” between 2019 and 2023, and that by 2028 the bank would reduce to zero its exposure to Polish electricity companies. By then some skeptics say the entire Polish energy segment will be bankrupt anyway.

Climate change activists initially leapt on a 2017 Paribas statement as a victory, but failed to read the fine print, which essentially says that the bank would continue to support its existing obligations – none of which would have cut in, prior to 2019.

In October 2017, BNP Paribas announced that it was cutting ties with and ceasing all investment in “pipelines that primarily carry oil and gas from shale or oil from tar sands” and similarly said it would severe “business relations with companies that derive the majority of their revenue from these activities.”

Back in March it announced an enhanced coal-exclusion policy intended to shun companies engaged in mining thermal coal or generating electricity from coal, specifically, beginning in 2020.

Pressure on banks to withdraw support from fossil fuel firms has been slow to produce results, whereby other customers put the bank under pressure to withdraw banking support, and for the most part the bank makes a promise and simply hopes that the customers will forget such promises. If the Polish fossil fuel community finds local banks that are prepared to support it, that process of applying such pressure will begin all over again, and may once again take years to bear fruit.

BNP Paribas’ position it that it will exclude all companies that derive more than 10% of their revenue from mining thermal coal and/or account for 1% or more of total global production.

All of this pressure on Poland was supposed to get the energy providers to begin cutting power purchasing agreements with renewables suppliers, but in the absence of government policy to reward this, virtually nothing has happened.

Interestingly a proposal to phase out coal by 2030 has the support of 69% of Polish individuals, just not the power companies or the government, although there has been some recent investment in renewables. Poland has 5.7 GW of wind, but this has not gone up in 3 years; and just 487 MW of solar.

PGE has also been harassed by the European Commission, insisting that Poland ends coal power capacity payments from 2025 and upgrade to EU pollution standards from their smokestacks, a move that will be very expensive for all of Poland.

It is hoped that the banking change, and pressure for the EU will result in PGE cancelling plans and spend the upgrade money instead on renewables.

So far a pro-coal government trying to rescue both mining and power plant jobs, has failed to understand that renewables will simply employ more people in better jobs. PGE’s share price has moved down as the carbon credit system prices have gone up in Europe, which it is obliged to buy at around €20 per tonne of emissions, while it continues to pollute at this level. It is unlikely that BNP Paribas move alone will unsettle PGE and its government’s resolve.