The European Commission lately undertook actions that aim at significant reductions of CO2/green house gas emissions in Europe. Yet, this policy can be challenging to implement for most of the new EU member states, since those countries are much more dependent on traditional heavy industry branches and coal power plants than their west European partners and at the same time their catching-up process with the most developed economies is far from being finished.
Therefore the European climate action agenda is criticized and debated in those countries, and particularly in Poland which belongs to the most coal based economies in Europe.
In order to assess the macroeconomic impact on Polish economy of the diversified package of about 120 different GHG mitigation levers, which were identified in the bottom-up sector analysis, this paper constructs a large scale, multi-sector dynamic stochastic general equilibrium (DSGE) model of Polish economy.
The following findings were indicated:
as long as most of green house gas mitigation options are more costly that their “less green” counterparts, their implementation will unavoidably generate fiscal costs for the economy
in the fiscally constrained environment, Poland cannot afford to invest in the high cost, low carbon technologies
optimal energy mix that at the same time guarantees desired mitigation, produces enough energy for the growing economy, and is the cheapest although technologically viable option should include coal, gas, wind, water and nuclear power plants
Poland’s overall 2020 targets probably will not be hard to meet, but due to forecasted strong economic growth one should expect that further significant carbon abatement would require much more demanding policy measures in the future
Although additional fiscal costs will be necessary to implement green house gas mitigation policies, according to the authors these costs should be outweighed by the positive influence of these policies on economic growth through higher fuel and energy efficiency.