In the most brutal of worlds, back in the 1980’s when the MIT school of free-market economics was given free reign, the notion of letting the market regulate itself was very tempting.
The “Rzeczpospolita” daily reported on Friday that the Polish government was mulling over a support scheme intended to shield households from...see more
Here we have a prime example. Electricity bills are set to go up on the back of rocketing coal prices. Meanwhile, Poland is the smog capital of the world with 36 cities occupying the top 50 polluted places in the world this year, according to the WHO list published in May. Therefore, if you allow the price of electricity to rise, the largest consumers will economise on fuel use, demand will fall and the price will stabilise and the result will be a cleaner environment.
The only thing is that the world doesn’t work like that. During the dog days of it’s financial woes, Greece discovered what happened when energy bills rocketed. People unable to pay energy bills started burning rubbish rather than turning on electric heating. Large companies unable to meet energy bills cut production, laying off staff, leading to further economic distress.
Poland is doing considerably better than Greece, so in the short term the country can afford a subsidy to fuel bills of the least well-off, in order to ease them through this period.
In the long term, however, Poland has to wean itself off coal, which is used for the generation of 80 percent of its electricity, which it has planned to do by 2050. Energy Minister Krzysztof Tchórzewski pointed to energy firm Tauron negotiating the purchase of five wind farms, which would produce 200 MW of power. Renewables costs are less sensitive to the business cycle. A better use of the one third of the carbon emissions tariffs in the long term would be encourage more investment in that field. Only, the economy has to survive until then.