Analysis of activities to qualify for the so-called taxonomy

According to the most recent information from the European Commission (February 2nd 2022), it approved in principle a Climate Delegated Act¹ to the EU Taxonomy (the College of Commissioners will formally approve the document when its translations are available in all EU languages). The document includes nuclear and gas energy activities in the list of economic activities covered by the EU taxonomy. This means that it will be possible to raise EU funding for investments of this type. Subject to strict conditions, the document includes gas, among others, as a transitional fuel in the energy transition process. The European Commission classified technologies based on natural gas as transitional activities under Article 10(2) of the Taxonomy Regulation.These are activities that cannot yet be replaced by technologically and economically feasible low-carbon alternatives, but do contribute to climate change mitigation and with the potential to play a major role in the transition to a climate-neutral economy, in line with EU climate goals and commitments, and subject to strict conditions, without crowding out investment in renewables.

Natural gas has thus become virtually the only fossil fuel on the basis of which economic activities may be in line with the EU’s climate and environmental objectives and help accelerate transition from solid or liquid fossil fuels, including coal, towards climate neutrality.

The delegated act issued by the Commission allows, for example, that any new gas-based power plant which obtains a construction permit by the end of 2030 be defined as sustainable if their direct GHG emissions are below 270gCO2e/kWh or their annual GHG emissions do not exceed an average of 550kgCO₂e/kW of the facility’s capacity over 20 years.

The new supplemented list of environmentally sustainable activities gives a reason to a re-examine the PGNIG Group’s activities and determine the qualifications and compliance with technical criteria.

* Details here

Through its operations, PGNiG is directly involved in Poland’s energy transition. For Poland, this transition is both particularly urgent and challenging as, owing to rich coal deposits, for the last century Poland’s energy sector relied almost exclusively on this energy carrier. In 2018, the benchmark year for Poland’s Energy Policy until 2040, the share of coal in electricity generation was as much as 77%. According to this governmental document, reducing the share of coal by 2030 to less than 56%, while simultaneously lowering CO₂ emissions by 30% relative to 1990, will be largely effected by increasing the use of ‘transition fuel’, that is natural gas, in the energy transition process**. According to the International Energy Agency (“IEA”), the accelerated switch from coal to natural gas over the past decade led to almost 600 million tonnes CO₂ of additional avoided emissions in 2018 compared to the 2010 levels.*** This was primarily attributable to the shale revolution in the United States, which completely transformed the energy sector in North America. However, according to IEA, the vast majority of the potential to further phase out coal in favour of natural gas lies in Europe****. In the United Kingdom, coal-to-gas switching has contributed to reducing emissions from the energy sector by as much as 50% over the last decade*****. Importantly, as long as the electricity storage technology does not reach maturity, enabling the construction of large-scale low-cost storage facilities, natural gas will be playing a key role in balancing the energy system, which relies more and more heavily on zero-emission, but ‘uncontrollable’ renewable energy sources******.

Switching from coal to gas is necessary not only to protect climate, but also to improve air quality in Poland. According to the authors of the ‘Clean Air’ government programme, each year around 45,000 people in Poland die of diseases caused by air pollution, more than seven times the number of those who die as a result of passive smoking*******. Smog is primarily caused by the accumulation of particulate matter, mainly produced from coal combustion and virtually absent in natural gas combustion********. Thus, to combat smog, the Polish government has launched initiatives to stop burning coal in households in urban and rural areas, respectively, by 2030 and 2040********* Obsolete and inefficient coal-fired furnaces will therefore be replaced with low- and zero-emission ones – with a simultaneous expansion of the distribution infrastructure, natural gas will become an alternative to individual households and municipal heating systems alike.

In view of the above, the role of natural gas as a ‘transition fuel’ in Poland’s energy transition, helping reduce climate and environmental impacts, appears critical today. PGNiG, as the largest player on the Polish gas market, has been engaged in this process for many years, not only by facilitating the transition of the country’s power generation sector towards carbon-neutral, but also by taking steps to steadily reduce its own negative impact on the ecosystem.

* Ministry of Climate and Environment, Poland’s Energy Policy until 2040, Warsaw 2021, p. 35.
** International Energy Agency, The Role of Gas in Today’s Energy Transitions, Paris 2019, p. 7.
*** Ibidem, s. 10.
**** Ibidem, s. 65.
***** Ibidem [X]
****** ‘Clean Air’ Programme, About smog
******* International Energy Agency, The Role of Gas…, p. 33.
******** Ministry of Climate and Environment, Poland’s Energy Policy until 2040, Warsaw 2021, p. 74.