Europe and Poland face one of the most significant challenges of our generation – achieving climate neutrality by 2050. 

At the heart of this historic transformation lies the decarbonisation of two key sectors: road transport and buildings. Buildings in the European Union currently account for 36% of greenhouse gas emissions and as much as 40% of primary energy consumption, with Poland mirroring this unfortunate average. 

In response to this situation, the EU is launching a new generation of policy instruments designed to radically accelerate emission reduction. The  ETS2 system and the Social Climate Fund (SCF), are envisaged to become the foundation of a just climate transition across the Union. 

In Poland, crucial consultations on the Social Climate Plan have begun, which will determine the financing of the fight against energy and transport poverty while decarbonising these pollutant sectors. Poland is the largest recipient of the SCF, receiving 11.4 billion euros (17.6% of the fund). At a carbon price of €45 per tonne from 2027 to 2032, Poland should receive 14.4 billion in ETS2 revenue. 

Poland’s decarbonisation challenge

The Emissions Trading System for buildings and road transport (ETS2) is a new European climate instrument that, for the first time, introduces charges for CO2 emissions in sectors not previously covered by the EU ETS system for electricity and heat generation, industrial manufacturing and aviation sectors (ETS1). In addition to buildings and transport, smaller industrial installations will also be covered by the new system. 

The system will operate the proven ‘polluter pays’ principle, and the obligation to pay will fall on fuel suppliers. However, basic market principles suggest that fuel suppliers, protecting their margins, will pass additional costs on to end consumers. Households and small businesses will be most vulnerable, and risk being particularly exposed to the financial consequences of the new system.

Poland, as one of the largest EU economies and simultaneously one of the largest CO2 emitters, faces a particularly difficult task, given its reliance on coal as its primary energy source. 

In 2023, coal still constituted as much as 61% of Polish electricity sources, drastically exceeding the EU average of just 12%. Despite a decline in coal’s share and an increase in renewable energy sources to 21% of electricity production, Poland’s transport sector shows a worrying increase in CO2 emissions. Coal has a worrying impact on air pollution, leading to 47,000 premature deaths in Poland each year. 

It is worth noting that ETS2 will operate within a key environmental filter, essential for receiving funds from the Social Climate Fund and for implementing projects under ETS2 – the “do no significant harm” (DNSH) principle. This principle excludes funding for activities that could seriously harm any of the six EU environmental objectives, including preventing pollution, greenhouse gas emissions, or protecting biodiversity. Every investment must undergo a detailed assessment of its impact on European environmental objectives. It is important to emphasise this as in the past, the funds obtained from the sale of CO2 emission allowances under the EU ETS system were misused in Poland.

Crucially from a geopolitical perspective the ETS2 system can become an important tool in the EU’s process of becoming independent from imports of Russian and other fossil fuels. However, its implementation must take into account issues of social justice, especially concerning the most vulnerable households and small businesses. The application of appropriate supporting policies is essential to ensure that the energy transition is not only environmentally effective but also socially fair.

Is Poland ready for ETS2? 

Before we repeat popular arguments that Poland is not financially prepared for climate challenges, it is worth analysing the specific support mechanisms that the European Union has prepared for our country. 

In response to growing public concerns related to the introduction of the new ETS2 emissions trading system, the European Commission is launching the Social Climate Fund (SCF). This strategic instrument aims to protect the most economically vulnerable social groups from the negative effects of rising energy and fuel prices. Access to SCF resources requires member states to prepare detailed Social Climate Plans, which must be submitted to Brussels by the end of June 2025. Currently, this process is at the stage of national consultations. It is worth emphasising that similar challenges and delays are also occurring in other EU member states. The Polish government is working intensively on preparing the document and is faring well compared to other countries, which gives optimism regarding the further progress of work. 

Poland, as the largest beneficiary of this program, is expected to receive approximately €11.4 billion (equivalent to about 50 billion PLN) in the 2026-2032 perspective. If ETS2 starts operating as planned in 2027, and emission allowance prices develop according to European Commission forecasts, our country should obtain a total of approximately €37 billion from the entire system.

Of this amount, the aforementioned €11.4 billion – constituting approximately 30 percent of the total sum – will flow to Poland precisely through the Social Climate Fund. The remaining revenues from the sale of emission allowances under ETS2 will amount to approximately €25.5 billion of the Polish budget. These direct revenues can naturally cover the mandatory national co-financing contribution of €3.8 billion euros (representing 25 percent of the required co-financing). 

The total allocation of funds, including the national contribution, will reach €15.2 billion euros, and after deducting it, Poland will have approximately €22 billion at its disposal from ETS2 allowance sales in the years 2027-2032. The Social Climate Fund will commence operation as early as 2026 – one year before the launch of the ETS2 system, which by 2030 aims to reduce emissions by 43 percent compared to 2005 levels.

In summary, before we echo sceptical voices about Poland’s lack of financial readiness for the energy transformation, let us look at the real mechanisms and financial strategies planned for the coming years – taking into account both the social benefits in terms of reducing transport and energy poverty, and the concrete financial opportunities that lie before our country.

Debunking populist myths

Before the Polish political class declares to the world that society is not prepared for the introduction of the ETS2 system, it is worth conducting a thorough analysis of the reasons for this reluctance. 

For years, we have observed an ‘instinctive’ resistance in Poland to EU emissions trading mechanisms, but also to the entire energy transformation process – however, this phenomenon is primarily political, and not social, in origin. A key challenge for the current ruling administration remains to develop an effective communication strategy, especially in the context of the Polish political scene, where the level of trust in public institutions hovers around historical lows, and citizens regularly signal a deficit of reliable information from the authorities.

In the current political situation, there is no shortage of paradoxes that should arouse the interest of any observer of the Polish public scene. Instead of conducting a transparent information campaign, part of the political establishment reproduces manipulative claims about society’s supposed reluctance to climate change – a practice reminiscent of the mechanisms known from the infamous ’light bulb campaign’, which deliberately presented EU regulations as the main cause of rising energy costs for households. 

The 2022 campaign was, in reality, an attempt to manipulatively shift responsibility for the lack of political will to properly finance the energy transformation. A control carried out by the Supreme Audit Office revealed unpleasant facts: of the 94 billion PLN obtained in 2013-2023 from the sale of CO2 emission allowances, only 1.3% was actually allocated to activities serving to reduce greenhouse gas emissions, while the vast majority of these funds flowed into the state budget without a specified purpose.

Analysing the current administration’s rhetoric on ETS2, it is hard to avoid the impression that a transparent communication strategy regarding Polish climate policy and clear priorities for utilising ETS revenues have yet to be developed. Achieving socially just decarbonisation of the transport and building sectors requires systematically debunking widespread myths, including the particularly strong belief that the introduction of ETS2 automatically means a drastic increase in energy bills for ordinary citizens. 

This process certainly will not be simple, but the system contains built-in mechanisms to safeguard against excessive cost increases – a price safety mechanism at €45 per tonne of CO2 has been adopted, which, if this threshold is exceeded, introduces an additional pool of allowances, thereby protecting households and small businesses from shock price rises. Additionally, member states are granted the right to use the aforementioned remaining portion of ETS2 revenues for urgent supporting actions – from upgrading heating systems to the development of zero-emission transport.

Stimulating green investments

The ETS2 system introduces a transparent mechanism for valuing the external costs of environmental pollution, thereby stimulating investments in clean energy technologies – an absolutely crucial element for achieving Europe’s climate neutrality goal by 2050. In public statements by politicians concerning the need to delay the introduction of this mechanism, there is a striking lack of perspective on the system’s objectives and the benefits it offers to society and the economy. The mechanism will be introduced regardless of ongoing political discussions, and the currently entrenched negative opinions about ETS2 will be extremely difficult to shift in the future. Such an approach can be interpreted as a form of discouraging citizens from European integration – a strategy that should not characterise a responsible government in a democratic EU member state.

Another misstep is treating the Social Climate Fund as the only available source of financing for the decarbonisation of transport and buildings. At a set price of €45 euros per tonne of CO2, member states will gain access to over €200 billion in the years 2027-2032 for social and climate-related activities – an amount significantly exceeding the total SCF. 

There is also a widespread misconception of ETS2 as another tax; however, unlike taxes, which are fixed, the price in an emissions trading system reflects dynamic changes in the demand for pollution allowances as a result of progressive emission reductions. It is also crucial to understand that ETS2 revenues return in full to member states, rather than funding the central EU budget. Who will communicate this, and do so effectively? Without transposition of the ETS2, Poland will not receive its SCF allocation.

In light of the experience with the manipulative ‘light bulb campaign’, systematic educational activities and transparent communication become particularly important in combating anti-EU disinformation. 

It is worth emphasising that the ETS2 system was adopted by democratically elected members of the European Parliament and accepted by heads of state and government in the European Council – thus, it has full democratic legitimacy. 

Considering a wide-ranging educational campaign, on a scale even exceeding the well-known nuclear energy promotional campaign by the Atomicki family, could effectively raise the level of public awareness regarding the importance of decarbonising transport and buildings, as well as the entire energy transformation process. Transparent communication is, therefore, a necessary condition for building public support for essential systemic changes.

Getting through to decision makers

Poland’s Ministry of Funds and Regional Policy has launched public consultations on the Social Climate Plan, which defines the expenditure of funds from the EU Social Climate Fund – this is a breakthrough moment in Polish energy policy, especially for millions of Poles struggling with electricity and fuel bills. Submissions via the form can be made on the Ministry’s website. 

For Poland, where for decades energy was centrally managed by large corporations, the Fund opens the door to citizen energy – a system in which local communities produce and manage their own energy. It is crucial that the government, in documents submitted to Brussels, includes specific support for energy communities – a form of organisation that the European Union itself recommends as an element of the Social Climate Fund. 

This is indeed happening, as thanks to the involvement of the Polish Green Network, the draft Social Climate Plan will be submitted to the European Commission with a proposal for pilot support for energy communities. This is clear proof that active participation in consultations and dialogue with decision makers brings tangible results.

Increasing the energy efficiency of buildings, especially municipal ones in rural and urban-rural areas, has become an urgent necessity in the face of rising energy prices. The Social Climate Fund can finance the replacement of coal furnaces with heat pumps and other comprehensive upgrades to heating systems – investments that many local governments simply cannot afford. In addition to local-level advisory services – close to citizens – professional central support from experts in technical, legal, and educational matters will also be necessary for projects to truly succeed.

However, a much larger debate lies ahead about how to distribute the additional billions from the CO2 emission charges system in transport and heating that will not go to the Social Climate Fund. Across Europe, there is increasing talk of introducing so-called climate dividends. 

These direct payments to households would not only return part of the transformation costs to citizens but also build public support for climate policy at a time when many people fear further price increases. Such payments could be a response to arguments from the coal lobby and groups spreading disinformation about climate policy. If large corporations received free pollution allowances for years, it seems fair that citizens also deserve support mechanisms in the transition to clean energy. One thing is certain – the idea of climate dividends requires thorough economic and social analysis, and a debate on this topic must take place at the national level very soon.

National plans for spending climate funds, which the government must submit to the European Commission by mid – 2026, represent a historic opportunity to rethink how common money is used – success will depend on the cooperation of social policy experts and climate and communication specialists between society and the government.