ETS2 is the EU’s CO2 emissions trading scheme covering emissions from the combustion of fossil fuels in the road transport sector, building heating, and small industrial and energy installations. The launch of the system is planned for the start of 2028.

The system creates additional price incentives to reduce fossil fuel consumption and encourage investment in zero-emission technologies in sectors where the European Union’s progress in the energy and climate transition has so far been too slow. The additional cost resulting from the purchase of allowances will be passed on to end users – citizens and businesses – through fuel prices.

ETS2 revenues provide Member State governments with additional funds to support investment and to protect those most vulnerable to rising fossil fuel prices. We estimate that the implementation of ETS2 in its current form will generate revenue for the Polish budget of approximately PLN 124 billion (around EUR 28 billion) by 2032, of which PLN 48 billion (EUR 11.4 billion) will come from the Social Climate Fund and up to PLN 76 billion (around EUR 17 billion) from national CO2 emission allowance auctions.

What can be found in the report?
In the report, which aim is to deepen and broaden the discussion about ETS2 in Poland, we analyse:

• ETS2 – the recent developments in the EU and the possible future changes in the system.
• Distribution of ETS2 costs in Poland and impact of ETS2 on fuel prices, including identification of vulnerable groups.
• Expected volume of ETS2 revenues available to Polish government and a wide range of its possible uses.

In our recommendations, we emphasize the need in Poland for:

• Transparent and strategic management of ETS2 revenues in dialogue with stakeholders through the establishment of an Energy Transition Fund and the development of a multi-year plan for spending revenues from the EU ETS and ETS2.
• Finalisation and adoption of the Polish Social Climate Plan.
• Accelerating the phase-out of coal heating in households.
• Accelerating plans for the decarbonisation of transport by 2040.

Regarding the EU level discussions on ETS2, we propose:

• Increasing the predictability of ETS2 implementation.
• Extending and increasing the availability of EU funds for the just and fair transition, including the continuation of the SCF beyond 2032.
• Establishing a hard price cap.
• Targeted and temporary reduction of the burden on coal heating and linking it to investment commitments.

As a follow-up to the report’s recommendations 19 civil society and industry organisations called on the Polish Prime Minister to set out clear rules for spending ETS2 revenues and to urgently adopt the Polish Social Climate Plan.

We invite you to read more in the Reform Institute report “Fair and ambitious modernisation of Poland. How to spend billions from ETS2 effectively?” available below.