PLN 200 billion from the EU ETS for Poland – a figure that goes unmentioned. Reform of the system offers an opportunity to maximise the benefits
Funding from the EU ETS in Poland has totalled over 200 billion zlotys since 2012, with a further PLN 200 billion available to the government until 2032. And we can secure even more in EU negotiations – according to a report by the Reform Institute ‘Overt costs, hidden benefits. The Financial Balance Sheet of Poland’s Participation in the EU ETS”. In this new publication, the authors highlight the system’s significance for public finances and analyse the balance of benefits and costs of the EU ETS. A shrewd approach to negotiations on reforming the system and the establishment of the Energy Transition Fund are among the most important steps Poland should now take.
The EU ETS: a significant source of funding for Poland
Contrary to opinions circulating in the public debate, the European Union Emissions Trading Scheme (EU ETS) is not merely a burden on Polish companies, but also a significant financial boost for the economy and the state budget. In 2024, funding from this scheme accounted for the equivalent of approximately 45 per cent of expenditure on the ‘Family 800+’ programme. Between 2019 and 2024, however, its value averaged around 7 per cent of total annual investment expenditure in Poland.
“Most of the revenue from the EU ETS for Member States comes from national auctions. These funds should be allocated to measures related to the climate and energy transition or – where necessary – to support energy-intensive industries in the face of rising energy costs. However, we often forget that the EU ETS finances EU funds of which Poland is one of the largest beneficiaries – including the Modernisation Fund and the National Recovery Plan (KPO) in the part relating to the REPowerEU plan” – explains Dominik Madej, co-author of the Reform Institute’s publication.
National auctions within the scheme and EU funds financed by the EU ETS have generated over PLN 200 bilion in revenue for Poland between 2012 and 2025.
Although this revenue does not account for a large proportion of total government expenditure, it has a noticeable positive impact on the state of public finances in Poland, including the level of the annual budget deficit.
When compared with the main taxes, in 2024 funding from the EU ETS amounted to the equivalent of 10 per cent of VAT revenue, 30 per cent of personal income tax (PIT) revenue and nearly 50 per cent of corporation tax (CIT) revenue. In contrast, when compared with expenditure, it has in recent years exceeded Poland’s spending on many individual sectors, including:
- agriculture, forestry, hunting and fisheries,
- housing and local government,
- unemployment benefits
- and housing benefits.
An incomplete picture of the EU ETS balance sheet in Poland
Depending on the methodology used, Polish companies have spent approximately PLN 13–27 billion more on the purchase of emission allowances over the last five years than the total financial benefits Poland has received from the EU ETS.
“However, this difference does not stem from other countries receiving more allowances to sell than Poland, but from the operation of the pan-European Market Stability Reserve (MSR) mechanism, which was created to address the problem of oversupply in the ETS market. The so-called ‘ETS gap’ exists across the entire system – Member States and the European Commission are currently selling fewer allowances than the demand from European companies. The beneficiaries are those companies that have prepared for the long-term transition and invested in a stockpile of allowances. Moreover, in line with the European Commission’s latest proposals, all allowances channelled into the reserve in future will ultimately be returned to the system, increasing Poland’s future revenue from the EU ETS” – comments Aleksander Śniegocki, President of the Reform Institute.
Maximising the benefits requires an active government policy
The EU ETS remains a key tool for achieving emission reduction targets by supporting the development of clean technologies to reduce the consumption of fossil fuels, of which Europe is a net importer. The European Commission recognises, however, that it must be more predictable and tailored to the situation of European industry. It will therefore present proposals for adjustments as early as mid-July. This is a crucial moment that will determine the future balance of benefits and costs for Poland.
From Poland’s perspective, decision-makers should also seek to ensure the continuation of the Modernisation Fund beyond 2030, of which our country is one of the main beneficiaries (receiving over 34 per cent of the funds) and which provides funding for investments in the National Fund for Environmental Protection and Water Management’s (NFEPWM) priority programmes. It would also be worthwhile for Polish representatives to negotiate favourable terms under other instruments, including access to the new ETS Investment Booster. Engagement in this process will bring tangible benefits for our country, in contrast to unproductive discussions about suspending the EU ETS or Poland’s withdrawal from the system.
“In addition to its negotiating activities at EU level, Poland should establish the long-awaited Energy Transition Fund. This will improve the efficiency and transparency of spending hundreds of billions of zlotys from the EU ETS in Poland. This is crucial for building the trust of citizens and businesses not only in the system, but also in economic policy that is consistent with climate and energy objectives” – recommends Michał Wojtyło, senior public policy analyst at the Reform Institute.
A detailed analysis of the historical and future balance of benefits and costs of the EU ETS for Poland can be found in the Reform Institute’s new report, ‘Overt Costs, Hidden Benefits: The Financial Balance of Poland’s Participation in the EU ETS’.
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