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    Opinion of the Chief Energy Expert of the Union of Entrepreneurs and Employers (ZPP): The prospects for the development of wind farms and photovoltaic sources in light of the laws currently under way

    Posted on by Weronika Marzec

    Warsaw, 12 July 2022 

     

    Opinion of the Chief Energy Expert of the Union of Entrepreneurs and Employers (ZPP): The prospects for the development of wind farms and photovoltaic sources in light of the laws currently under way

     

    In spite of the holiday period, legislative work on investment issues in the area of renewable energy sources remains intensive. This is, of course, understandable, as our energy industry finds itself in an extremely difficult position, due to both the geopolitical situation, which is new for our country, and the legislative backlog in the field of energy from previous years.

    On 4 July 2022, the Council of Ministers adopted a draft amendment to the Act on Investment in Wind Power Plants and certain other Acts (UD 207). The draft will now be directed to parliamentary work. This is an amendment to the so-called “10 H” law, introduced in 2016 and essentially preventing the development of onshore wind farm investments. By passing such a controversial law, work on new wind farm projects was made practically impossible, fortunately leaving the possibility to invest in those projects that already had building permits. The deceleration in investment has occurred just now, when essentially all buildable structures have been constructed on the basis of building permits issued before 2016.

    In the meantime, onshore wind power has become the cheapest source of electricity, which becomes particularly relevant in the current situation related to the war in Ukraine. Work on the shape of the amendment took quite a long time and was initially carried out in the Ministry of Development, but it was only after the Ministry of Climate and Environment took over the work that the procedure for the document gained momentum and specific provisions, restoring investment opportunities, saw the light of day. The restoration of investment opportunities for onshore wind energy is very good news, not only for investors, but also for the Polish economy in general.

    The green energy supply deficit is growing and wind farms are the most promising renewable energy technology for investment. However, let us be aware that the provisions of the amendment will not immediately result in an abrupt increase in expenditure. There will remain for some time a distrust of the sustainability of the state’s energy policy in the area of renewables. As a result of the virtual ban on investment in onshore wind energy in 2016, many investors suffered tangible losses, which reverberated negatively for the industry as a whole in Poland, and it must take time to restore confidence in the legal framework guaranteed by the State.

    The law has been refined by the Ministry of Climate and Environment and approved by the Council of Ministers. This is very good news for the Polish economy in general, and the Ministry of Climate and Environment should be commended for its determination in this matter. However, as someone who has been investing in onshore wind farms for twelve years and has some experience of the investment process for this type of energy source, I am concerned whether a rapid increase in investment can be expected in the light of the provisions of this amendment. Probably not, as the level of complications concerning the arrangements related to obtaining a building permit and the uncertainty as to the fate of the project after the arrangements have been made, related to possible public opposition, will discourage some investors from starting new projects. The amendment will certainly make it possible to complete those projects that have a significant degree of progress, for example, having obtained an environmental decision in the past, which remains in force. This is far too little. The requirements of the Polish economy are about 10 GW of new onshore wind projects, from now until 2028.

    An additional factor limiting investment will be the upcoming election period, which will affect the restraint of the institutions set up to issue decisions. Meanwhile, the legislation leaves a considerable gap in interpretation and the possibility of stalling the issuing of decisions.

    In conclusion, the passing of the amendment to the 10 H Act is very positive news proving that our authorities are returning to a green deal policy, giving a wider room for negotiation with the European Commission as to the pace and dimension of Poland’s energy transition. It also reopens investment opportunities for both private investors and state-owned companies in onshore wind energy. However, in my opinion, the regulations will need further liberalisation and fine-tuning if we want these investments to reach the desired scale for the economy.

    When discussing the role of wind power in the Polish energy balance, it is also worth assessing the potential of offshore wind power in the overall supply of green energy for the Polish economy. According to the Polish authorities’ assumptions, at least 6 GW of offshore wind power should be built in the next decade, and further plans even talk about 10 – 12 GW of installed capacity by 2040. Even the former involves a very tight, albeit manageable, implementation schedule. However – subject to close cooperation between legislators, the regulator and investors. We do not see any particular momentum in this area, and we desperately need the energy from such investments. These are fairly stable and affordable sources of energy. With the commitment of the above-mentioned parties, the economy could receive the first megawatt hours from offshore wind as early as 2025, to be followed by a significant upward trend in the subsequent years. Recently, the issue of the European Commission’s notified maximum price for offshore wind energy has come up in industry discussions, which is putting an increasingly heavy burden on investors in the face of changing investment conditions (war, inflation, disrupted supply chains, rising raw material costs, changing reference interest rates, increasing global activation within offshore wind). Especially as regulatory solutions are emerging that potentially put additional strain on project budgets and may lengthen project timelines. An example is the idea of certification of the onshore section of an offshore wind farm infrastructure, which de facto duplicates existing regulations and procedures already present in the area of quality assurance and grid safety. Offshore wind power is an extremely important part of the overall Polish economy due to the creation of a new sector and thousands of jobs, which will increase the potential production capacity of Polish industry. Any legislative barriers should be removed immediately in this sector.

    Onshore and offshore wind power should be complemented by solar investment, as their joint operation results in a more stable energy supply for consumers. Large-scale solar plants are low-complexity investments, with minimal environmental impact, and as desirable as possible in terms of our energy balance. Everything possible should be done to facilitate the rapid development of these investments. These are also socially anticipated projects that do not raise such concerns as wind investments.

    Meanwhile, the draft amendments to the Act on Spatial Planning include proposals to make investment in photovoltaic sources more difficult. This is because the draft stipulates the obligation to locate solar sources with a capacity of more than 1 MW on the basis of an MPZP (Local Development Plan). This is a change that blocks the further development of such renewable sources and is highly detrimental to the Polish economy. The effects of such an obligation could be similar to those caused by the 10 H Act in wind investments. Organisations affiliated to the Coordinating Council for the Development of Photovoltaics, under the Ministry of Climate and Environment, protested against such restrictions and put forward a different proposal – promoting the development of solar sources. The need to draw up a Local Development Plan would arise for investments whose area would exceed 10 ha, which translates – with the use of modern photovoltaic panels – into a farm with a capacity in the range of 12 to 15 MW. And such a farm would already constitute a significant supplier of green energy. A hybrid power plant consisting of a 15 MW solar farm, a 25 – 30 MW wind power plant and stabilised by a 7 – 10 MW gas block is an optimally designed source of low-cost energy. It can be said to be a model example of distributed energy in Polish conditions. The price of energy from such a source should not exceed PLN 300 – 350 per MWh of energy, which suggests the use of such a source for heating. Let us bear in mind that today’s electricity prices in contracts for 2023 have already exceeded PLN 1500 per MWh. The Coordinating Council’s proposal has been supported by some of the state-owned companies, which are proposing even broader facilitation of investments. Companies have post-mining and post-industrial sites on which renewable installations can be built quickly and cheaply, subject to legislative facilitation. Both proposals should be supported as they can significantly facilitate investment in photovoltaic sources which, working together with onshore wind farms, increase the country’s energy security while guaranteeing a sustainable and reasonable level of energy prices. And this, in turn, enables the development of CHP based on green sources. The problems associated with the modernisation of heating industry are currently posing a huge challenge in the energy transition process.

     

    Włodzimierz Ehrenhalt,
    Chief Energy Expert

     

    See: 12.07.2022 Opinion of the Chief Energy Expert of the Union of Entrepreneurs and Employers (ZPP): The prospects for the development of wind farms and photovoltaic sources in light of the laws currently under way

     

    ZPP’s commentary on the conclusions reached at the Lugano conference

    Posted on by Weronika Marzec

    Warsaw, 11 July 2022

     

    ZPP’s commentary on the conclusions reached at the Lugano conference

     

    On 4-5 July 2022, an international conference on the reconstruction of Ukraine was held in Lugano, Switzerland. More than 40 countries and international organisations such as the European Investment Bank and the Organisation for Economic Co-operation and Development (OECD) participated. In total, almost 1,000 delegates attended the conference. Although the war instigated by the Russian Federation is still ongoing, and the timing of the end of the fighting and its outcome is currently impossible to predict, arrangements are already being made as to how Western states can participate in the reconstruction of the state of our eastern neighbours.

    At the conference, the international community condemned Russian aggression against Ukraine and assured of its full support for the country’s independence and sovereignty. Seven guiding principles were also established to address the partnership between Western countries, economic cooperation and investment in the reconstruction of the country, and the internal reforms that Ukraine must carry out in the coming years. These principles include:

    1. Partnership

    The reconstruction process is led by Ukraine and is carried out in cooperation with its international partners. Reconstruction efforts must be based on a solid and continuous process of needs assessment, agreed priorities, joint planning for results, accountability for financial flows and effective coordination.

    1. Focus on reforms

    The reconstruction process must contribute to accelerating, deepening, expanding and ultimately realising Ukraine’s reform efforts along with perseverance in following the path of European development.

    1. Transparency, accountability and the rule of law

    The reconstruction process must be transparent and credible to the Ukrainian people. The rule of law must be systematically strengthened and corruption eliminated. All reconstruction funds must be spent fairly and transparently.

    1. Democratic participation by the public

    The reconstruction process must be a whole-of-society effort, rooted in the democratic participation of the Ukrainian population, including returnees from abroad, taking into account local authorities and effective decentralisation.

    1. Engagement of multiple actors

    The reconstruction process must facilitate cooperation between national and international actors, including those from the private sector, civil society, academia and local authorities.

    1. Gender equality and social inclusion

    The reconstruction process must be inclusive and ensure gender equality and respect for human rights, including economic, social and cultural rights. Reconstruction must benefit everyone, and no part of society should be left out. Social inequality must be reduced.

    1. Sustainable development

    Ukraine’s reconstruction process must be sustainable, in line with the 2030 Agenda for Sustainable Development and the Paris Agreement, integrating the social, economic and environmental dimensions, including the green transition.

    In addition to setting out the above seven principles for cooperation in the reconstruction of Ukraine, the Lugano Conference also agreed on the areas to be entrusted to individual countries for reconstruction. According to the Ukrainian proposal, Poland, together with Italy, would undertake the reconstruction of Donbass. For Polish companies, this would be an opportunity to take part in a very large venture, as the Donbas is one of the regions where the most damage has been done, while at the same time it is an extremely important area economically due to its significant amounts of strategic resources, including coal, iron and so-called “rare earth elements”. The presence of Polish companies in the region would mean expansion into a new market and opportunities for multi-million dollar contracts. However, it is important to highlight a very important issue. The Donbas is one of the main areas of interest for the Russian Federation. The internationally unrecognised (except for Russia) People’s Republics of Donetsk and Lugansk operate in the area. In addition, the current state of hostilities in Ukraine indicates that almost the entire Donbass area is controlled by the Russian Federation. Given the uncertainty that the war brings, it may not be possible in practice for Poland to take part in the reconstruction project in this part of the country, and this may mean that the Lugano provisions will have to be revised. It should also be stressed that the proposal presented in Lugano contradicts media information and communications from Polish government representatives regarding the Polish role in the reconstruction of Ukraine. In fact, worthy of note is the fact that information so far has indicated Poland’s participation in the reconstruction of Kharkiv, whereas the Ukrainian proposal indicates entrusting this task to the United States and Turkey.

    It is also worth mentioning that a large group of Ukrainian entrepreneurs representing almost every sector of the economy were present in Lugano. Participants on numerous panels highlighted the strengths that characterise the Ukrainian economy, such as one of Europe’s most modern banking systems, the high computerisation of public administration (including the existence of an equivalent of the Polish mObywatel system), a dynamic IT sector that is active even during wartime, and finally Europe’s largest agricultural production sector. Ukraine also has a significant pool of well-qualified workers ready to take up employment at any time. This is emphasised by Ukrainian business owners pointing out that the huge internal migration from the areas occupied by Russian troops has resulted in tens of thousands of people in urgent need of work in Ukraine.

    Ukrainian entrepreneurs also identified the most relevant issues regarding Ukraine’s reconstruction process:

    • introducing a zero-tolerance policy for any signs of corruption;
    • ensuring that the competition conditions for the award of contracts related to the reconstruction of the country are completely transparent and fully fair;
    • ensuring that the conditions for investment capital inflows from abroad are as simplified as possible.

    At the same time, Ukrainian business representatives have indicated that, alongside political instability and the risk of the war dragging on for a long time, the biggest challenges at present are:

    • Enormous financial needs regarding the process of rebuilding war damage and infrastructure. These needs significantly exceed the capacity of domestic business, resulting in the need for foreign funding, whether from individual countries, international institutions or private investors. This funding should receive systemic guarantees from the Ukrainian authorities and international actors.
    • The massive scale of damage to the transport infrastructure, which has caused a crisis in the logistics industry and a breakdown in the smooth flow of goods and orders within the country and for export. Participants in the panel discussions highlighted that the average time for transporting goods has increased by more than three times. It is necessary to renew and expand the transport fleet of Ukrainian companies. At the same time, foreign entrepreneurs are reluctant to fulfil orders due to concerns about security, fuel availability and, above all, queues of many days at the borders.
    • A crisis involving the mining and pollution of large areas of the country. It is estimated that ¼ of Ukraine’s land area is currently mined and covered with unexploded ordnance, with significant consequences for many years to come, not least of which is the complete exclusion of these areas from civilian use.

    Many of the participants in the panel discussions are entrepreneurs who have experienced family and business tragedies, lost their assets and the means to run their businesses. They, as well as many of their employees, stood up with guns in defence of the country. Despite the horrific experience of war, however, they emphasise that Ukraine faces a historic opportunity to rebuild and modernise the state and join the Western world. They stressed the importance of international cooperation and pointed out the responsibility that Ukrainian entrepreneurs have in the reconstruction process.

     

    See: 11.07.2022 ZPP’s commentary on the conclusions reached at the Lugano conference

    CIT is a de facto voluntary tax, it is necessary to make comprehensive changes

    Posted on by Weronika Marzec

    Warsaw, 30 June 2022 

     

    CIT is a de facto voluntary tax, it is necessary to make comprehensive changes

     

    The Union of Entrepreneurs and Employers (ZPP) has for many months been investigating the way in which large foreign corporations make CIT payments in Poland. In our previous publications, we have pointed out that the corporate income tax structure allows for far-reaching tax optimisation and favours the activities of the largest entities that are able to carry out such optimisation effectively. As a consequence, CIT has become an almost voluntary levy and many entities pay only symbolic amounts to the state budget, often much less than 1% of the revenue generated in Poland.

    This time, ZPP selected 18 of the largest and most recognisable companies with German roots and operating in our country. Using publicly available data on the website of the Ministry of Finance, we checked what revenues these companies generated, what costs they reported and how much CIT they paid in the period from 2012 to 2020, i.e. the entire period for which the data was disclosed on the MF website. In addition to data on CIT payments, the ZPP also tracked data available on the website of the Office of Competition and Consumer Protection on the amount of state aid granted also in the period from 2012 to 2020.

    Analysis of the data shows that of the 18 companies, only four paid CIT in the period under review in excess of 1% of revenue. Interestingly, none of the surveyed automotive companies paid tax above this threshold. In addition, many of the companies received many times more state aid during the nine years of operation than they paid in income tax to the state budget.

    “For multinational corporations, Poland is a tax El Dorado” says Cezary Kaźmierczak, President of ZPP, “There are, of course, many that contribute very significantly to our budget. Still, many benefit from our infrastructure and access to the Polish market, paying less income tax than some households. That is why we have been proposing for years a simple income tax that would eliminate such situations.”

    For example, Volkswagen Motor Polska paid CIT in the amount of 0.003% (!) of the revenue it generated, while at the same time it received the highest state aid among the surveyed entities. The actual (gross) aid to this company amounted to almost 200 times its CIT, of which the company paid around PLN 1.5 million (nominally, the aid was even higher – PLN 1.5 billion, and therefore 1,000 times the tax paid in the period under review).

    Other companies associated with the Volkswagen Group also paid only symbolic CIT – Volkswagen Group Polska 0.392 per cent, Volkswagen Poznań 0.648 per cent, while Porsche Inter Auto Polska paid a tax of just one-tenth of one per cent of their revenue.

    Some of the surveyed companies also received very significant state aid. In addition to the already mentioned Volkswagen Motor Polska, another Volkswagen company, Volkswagen Poznań, received more than PLN 187 million in real state aid (PLN 644 million in nominal terms). In addition, high gross state aid was received by ZF Automotive Systems Poland (PLN 92 million) and BSH Sprzęt Gospodarstwa Domowego (over PLN 81 million).

    The data we have analysed shows that also for German companies operating in Poland, CIT is paid in most cases at a symbolic amount. Poland certainly suffers from a lack of effective and transparent tax law, in every area. The current system leads to outright bizarre cases, and the lost budget revenue resulting from the CIT gap runs into billions of PLN every year.

     

    30. 06. 2022 ZPP Report: Taxes of German companies in Poland

    Opening of the Representative Office of The Union of Entrepreneurs and Employers in Kyiv (ZPP)

    Posted on by Maja Abramowicz

    Kyiv, 08.07.2022

     

    OPENING OF THE REPRESENTATIVE OFFICE OF THE UNION OF ENTREPRENEURS AND EMPLOYERS
    IN KYIV (ZPP)

     

    The future of Europe today depends on the bravery and perseverance of Ukrainian soldiers, which, in turn, is not only a result of the aid flowing here from all over the world, but also of the resilience and success of Ukrainian business. The opening of a permanent representation office of the ZPP in Kyiv is intended to create new opportunities for active and direct cooperation between Polish and Ukrainian businesses.

    The conference accompanying the opening of the office , was accompanied by a special conference at the Diplomatic Academy at the Ukrainian Ministry of Foreign Affairs. In the opening speech Oleksandr Ban’kov, State Secretary, Ministry of Foreign Affairs of Ukraine noted:

    – Poland ranks first among Ukraine’s trade partners. We must take advantage of these opportunities together, and proceed to build cooperation that will help Polish and Ukrainian entrepreneurs to compete in third markets. The opening of an ZPP office in Ukraine will further this goal. 

    Ukraine now needs at least USD 750 billion to rebuild from the destruction, for which it needs not only financial support, but also the permanent presence of international business, European technology, capital, but also the experience of countries which, like Poland, have gone through a similar path of rebuilding from the devastation of the communist era. Poland’s Ambassador in Kyiv, Bartosz Cichocki, thanking for polish entrepreneurs’ initiative, said:

    – We will not defend this world if we do not rebuild Ukraine. We will not defend it if we do not rebuild it, and we will not rebuild it without initiatives such as this. If not now then when, if not us then who?

    Dozens of civil society organizations, hundreds of volunteers, including numerous state institutions, have been active in Ukraine since the beginning of the war, but as Cezary Kaźmierczak ZPP president pointed out:

    – Governments create the framework for cooperation, we need to fill it with links between our businesses. So that our children and grandchildren have peace once and for all and do not have to fear Russia.

    The Kyiv conference was the second conference organised by ZPP in Ukraine this week. First conference has been held in Lviv On July 6. Both events are to bring together the representatives of leading Polish, Ukrainian business associations,  authorities of both countries helped mapping all needs, opportunities, expectations and priorities of Ukraine’s reconstruction, available support from Europe.

    …..

    ZPP is the fastest growing employer organizations in Poland. Organization brings together 14 regional organizations and 22 trade organizations. As a member of  the Social Dialogue Council in Poland, ZPP uses its influence to promote free market, fair competition, legal stability and economic transparency. ZPP is represented in Brussels through its Representative Office, membership in the European Enterprise Alliance and membership in SME Connect. The union has two representatives in the European Economic and Social Committee.

    The representative office of ZPP in Ukraine will be headed by Nazar Bobitski, a former Ukrainian diplomat and public affairs professional with more than 20 years of experience. His previous positions included posts as ,   Deputy Head of  Mission of Ukraine to the European Union in Brussels for trade and economic cooperation, and a representative of Ukrainian exporters at the EU institutions.

    …..

    Contact:  Phone: +380 67 172 03 64, Email: n.bobitski@zpp.net.pl

     

    See more: 08.07.2022 OPENING OF THE REPRESENTATIVE OFFICE OF THE UNION OF ENTREPRENEURS AND EMPLOYERS IN KYIV (ZPP)

     

    EUROPE – POLAND – UKRAINE: REBUILD TOGETHER. Ukrainian and Polish authorities and entrepreneurs about future cooperation and reconstruction of Ukraine

    Posted on by Maja Abramowicz

    Lviv, 6 July 2022

     

    EUROPE – POLAND – UKRAINE: REBUILD TOGETHER. Ukrainian and Polish authorities and entrepreneurs about future cooperation and reconstruction of Ukraine

     

    The war for a free and fully sovereign Ukraine is still ongoing. Regardless of how long it will take to finally push back the aggressor, in parallel with the struggle on the front lines, we must jointly undertake a  huge effort to rebuild the country, return to the path of prosperity and rapid integration into the European Union.

    With this in mind, the first of a series of conferences in Ukraine organized by the Union of Entrepreneurs and Employers was held in Lviv on July 6. On July 8, another conference will be held in Kyiv, this time combined with the opening of the ZPP office.  Both events are to bring together the representatives of leading Polish, Ukrainian business associations, authorities of both countrieshelped mapping all needs, opportunities, expectations and priorities of Ukraine’s reconstruction, available support from Europe. 

    As noted by Cezary Kazmierczak, chairman of the Polish Union of Entrepreneurs and Employers (ZPP) –  “The only way for our countries to secure themselves against Russia is a strong military. To have a strong army – you need a strong economy to finance it.  Close Polish-Ukrainian business cooperation is one of the means to this end. Animating and developing this cooperation is one of our missions.”

    Among the guests speakers at the conference in Lviv was Andrii Moskalenko, First Deputy Mayor of Lviv  for economic development and H.E. Eliza Dzwonkiewicz, Consul General of Poland to Lviv .

    The Union of Entrepreneurs and Employers (ZPP) is a natural partner in building this extraordinary relationship at this extraordinary time for both countries. ZPP is the fastest growing employer organizations in Poland. Organization brings together 14 regional organizations and 22 trade organizations. As a member of of the Social Dialogue Council in Poland, ZPP uses its influence to promote free market, fair competition, legal stability and economic transparency. ZPP is represented in Brussels through its Representative Office, membership in the European Enterprise Alliance and membership in SME Connect. The union has two representatives in the European Economic and Social Committee.

    The conferences in Lviv and Kyiv, were also the occasion for the official opening of the ZPP representative office in Kiev. Office will provide support to Ukrainian companies that are looking for a way to enter European markets, to open their representative offices in Poland, but is also intended to facilitate Polish companies to establish permanent and direct relations with companies in Ukraine.

    The representative office of ZPP in Ukraine will be headed by Nazar Bobitski, a former Ukrainian diplomat and public affairs professional with more than 20 years of experience. His previous positions included posts as ,   Deputy Head of  Mission of Ukraine to the European Union in Brussels for trade and economic cooperation, and a representative of Ukrainian exporters at the EU institutions.

    ….

    Contact in Kyiv:  Nazar Bobitski: Phone:+380 67 172 03 64, Email: n.bobitski@zpp.net.pl

    Contact in Warsaw: Maja Charenza, Phone: + 48 510 136 429, Email: m.charenza@zpp.net.pl

     

     

    06.07.2022 EUROPE – POLAND – UKRAINE: REBUILD TOGETHER. Ukrainian and Polish authorities and entrepreneurs about future cooperation and reconstruction of Ukraine

    A ZPP commentary: The European taxonomy is staring into an abyss. It’s own power generation sources based on atom and gas are today as important for Europe as before the war, if not more important

    Posted on by Weronika Marzec

    Warsaw, 24 June 2022 

     

    A ZPP commentary: The European taxonomy is staring into an abyss. It’s own power generation sources based on atom and gas are today as important for Europe as before the war, if not more important

     

    In February this year, the European Commission announced that projects based on natural gas and nuclear energy could be considered compatible with the EU’s climate and environmental objectives once the relevant criteria are met. This compromise was intended to support the acceleration of Europe’s departure from electricity produced from coal. On 14 June, the European parliament’s combined committees – Committee on the Environment, Public Health and Food Safety (ENVI) and Committee on Industry, Research and Energy (ITRE) – raised objections to the treatment of these two fuels as sustainable within the framework of taxonomy of green finances. In the first week of July, the EP will resolve this issue, thereby prejudging the direction of the development of energy mix in Europe.

    The objective of the EU taxonomy, and in fact the objective of the sustainability systematics, is primarily to support the cash flow toward sustainable activities. Without investors directing their capital toward greener technologies and business transformation, achieving climate neutrality by 2050 would become an unrealistic commitment. The EU sustainability systematics offers a uniform interpretation on the basis of which entrepreneurs can invest in projects and economic activities that generate positive impact on the climate and the environment. Taxonomy also imposes additional disclosure obligations on financial market participants in order to make it easier to assess projects against the criteria set.

    While climate objectives are considered common to the EU as a whole, the energy mix of individual countries varies, and its shape can be decided by the Member States individually. The huge differences in the start point in terms of energy sources between countries have led to a compromise whereby gas and atom were to be used as transitional and stabilizing fuels for electrical power systems. In the opinion of the Union of Entrepreneurs and Employers (ZPP), this provision was a widely-expected and fair approach, giving the opportunity for countries with a carbon mix to lay a reasonable path to becoming decarbonized.

    Moreover, as the European Commission has underlined in the justifications to the complementary delegated act on climate change systematics, including atom and gas in sources covered by EU support. Achieving climate neutrality by 2050 will require a large number of private investments. The EU sustainable systematics aims to target private investment toward the actions that are necessary to achieve climate neutrality. Taking into account scientific opinions and current technological developments, the Commission believes that private investment in natural gas and nuclear activities plays an important role. The delegated act supports the European economy in a fair energy transition. Strengthening private investment in transformation is key to meeting our energy targets. – claimed EC.

    Projects in the nuclear field, which have been mentioned by the EU taxonomy, are:

    • pre-commercial stages of advanced nuclear power generation technologies with minimum fuel cycle waste;
    • the construction and safe operation of new nuclear power plants for the generation of electricity and/or heat, including for the production of hydrogen, using the best available technologies;
    • production of nuclear electricity from an existing installation.

    The eligibility of the identified activities as sustainable was subject to obtain a building permit by 2045. Investments should also meet the requirements of nuclear and environmental safety and, since 2025, accident-proof fuel is to be used in nuclear installations. The investor must also demonstrate that the nuclear waste will be disposed of without damaging the environment.

    For gas projects, the document lists:

    • the production of electricity from fossil gas fuels;
    • high efficiency cogeneration of heat/cooling and fossil gas fuels;
    • production of heat/cooling from fossil gas fuels in an efficient heating and cooling system.

    In order to qualify as a climate change mitigation activity, the European Commission has indicated that the life cycle emission threshold should be below 100gCO2e/kWh and for installations for which construction permits were issued before 2030 – below 170gCO2e/kWh. Installations should also be designed and constructed in such a way as to use renewable and/or low-carbon gas fuels. The transition to full use of renewable and/or low-carbon gas fuels was expected to take place by 31 December 2035, so natural gas was to be considered as a bridge/transition fuel.

    It was assumed that gas projects would be funded by the EU by 2030 and nuclear projects by 2045, with EU-supported gas installations having been able to use over time “green” hydrogen, produced with the support of renewable energy sources, thus gas fuel was clearly supported in this case on a conditional basis. Among the EU countries that opposed to such taxonomy, there were countries such as Germany, Austria, Luxembourg and Denmark; in turn France, Poland, the Czech Republic, Slovakia, Slovenia, Romania, Finland and Hungary have strongly supported this shape of the EU taxonomy. The dispute was also of a financial (apart from ideology) dimension, as it concerned about EUR 17.5 billion from EU funding programs that could have been acquired or lost by nuclear and gas projects.

    Since the new taxonomic wording was to enter into force from 1 January 2023, a large proportion of private investors, whose involvement is important for the EU legislator in this case, have already been able to include gas and atom projects in investment strategies. It should be suspected that part of the investment decisions and actions have already been taken due to the severe time pressure from climate objectives. Infrastructural investments in energy are not only capital intensive but also spread over the years. They require a number of administrative permits, but also often partnership or consortia agreements. This kind of preparation in many companies started already in February this year and gained momentum in the face of Russia’s invasion of Ukraine, for the obvious need to become independent of Russian hydrocarbons as soon as possible.

    It is therefore totally incomprehensible that the position of the ENVI and ITRE committees may block a significant number of private investment streams that have already been allocated. It is true that the direction indicated by the two parliamentary committees will be decided in the next weeks in the EU. The EU co-legislators, namely the European Parliament and the Council, had 4 months to examine the document and express their objection. In order for this objection to be binding, the Council would have to obtain a negation of the act by an enhanced qualified majority, which means that at least 72% of the Member States – at least 20 Member States – representing at least 65% of the EU population would have to object to the delegated act. In turn, the European Parliament may object, if a majority (i.e. 353) of Members vote against it in a plenary meeting. The vote on the leaving of gas and atom in the EU taxonomy is scheduled between 4 and 9 July.

    Russian policy has forced Europe to redefine both energy security and the current needs for green transformation. Following the rather demanding Fit for 55 package, the REPowerEU program is presented, which envisages an even more intensive investment in RES development, energy efficiency improvements and the reduction of consumption of fossil fuels or energy in general. In the case of gas, there is already a clear decline in the consumption of this fuel in industry. Although this is primarily due to the high prices of this fuel which have been in existence since 2021, the war in Ukraine and Russia’s reduction in gas supply to the European market have exacerbated this. The side effect is, however, that the prospect of carbon leakage has extended considerably and the current demand for this raw material is breaking records, as a result of the huge number of carbon blocks that work in recent months in Europe. This phenomenon is very apparent among others in Germany, which is the most blatantly defending climate objectives and which also have nuclear power, and yet still trigger more coal blocks in recent times.

    The EU taxonomy was to promote activities for which there are no yet alternative low-carbon solutions that are technologically and economically feasible, but support the transition to a climate-neutral economy or contribute to climate change mitigation. In this sense, these projects were to be considered compatible with EU objectives and indirectly supporting the implementation of low-carbon solutions.

    In the opinion of the Union of Entrepreneurs and Employers, the rejection by the European Parliament of the sustainability systematics adopted by the European Commission on 2 February will have a negative impact on many energy transformation processes. Many investments in infrastructure that was intended to bridge the path to climate neutrality will be hampered and, in the absence of sufficient capacity, the least efficient carbon blocks will be integrated into the system. While we see a clear need to review and maintain European coal assets as long as it is necessary to guarantee energy and heat to EU citizens, such a role for conventional energy should only be stabilizing and, where we have the possibility to replace the exploited and inefficient installations with new powers that are slightly more sustainable, it is the direction where community or state resources should be channeled.

    Private investors need a transparent policy in this respect. They cannot learn every few months about such important changes in EU priorities, such as the inclusion or exclusion of gas and atom from taxonomy. This leads to far-reaching confusion and increases the assessment of the risk of investments that may not be made as a result. As a result of this situation, already today, the demanding climate targets will become completely unrealistic and are only present on the paper of EU declarations; such a situation will in turn undermine the authority of the analyzes and findings at European level. This is a highly dangerous direction for the unity of Europe which, in the present geopolitical situation, needs mutual understanding, operational efficiency and good cooperation between administrations and the home business.

     

    See more: 24.06.2022 A ZPP commentary: The european taxonomy is starting into an abyss. It’s own power generation sources based on atom ans gas are today as important for Eyropean as before the war, if not more important

     

    “EUROPE-POLAND-UKRAINE. REBUILD TOGETHER”. New ZPP program in support of the reconstruction of Ukraine

    Posted on by Weronika Marzec

    Warsaw, 20 July 2022

     

    “EUROPE-POLAND-UKRAINE. REBUILD TOGETHER”
    New ZPP program in support of the reconstruction of Ukraine

     

    The Union of Entrepreneurs and Employers (ZPP) is launching the program “Europe – Poland – Ukraine. Rebuild together”, which aims to build and strengthen relations between European, Polish and Ukrainian business communities and to prepare a framework for cooperation in the future reconstruction of Ukraine’s state and economy. We invited leading business organizations in Ukraine to cooperate with the project: European Business Association (EBA), Union of Ukrainian Entrepreneur (SUP) and the Ukrainian Chamber of Commerce.

    The program will consist of a number of simultaneous projects. A series of sectoral consultation meetings was launched last week to identify and link together representatives of the sectors crucial for the reconstruction of the Ukrainian economy. Three events will take place in Warsaw in June, and in July we organize a consultation round in Ukraine – in Lviv and Kiev.

    In parallel, actions will be directed both at supporting Ukrainian firms in relocation to Poland and strengthening cooperation between Polish and Ukrainian businesses, as well as at assisting workers – immigrants from Ukraine – to find their place on our labor market and increase their competences.

    The first phase of the program will be summarized at an international conference, which will take place in Warsaw early October. The event will be attended by representatives of the governments, ministries and parliaments of Poland and Ukraine, as well as experts and representatives of companies from industries directly interested in cooperation. The prospects for economic development in Ukraine and its impact on the global economy will be discussed. We will also discuss the needs and expectations of the Ukrainian side in particular sectors, as well as concrete opportunities for Polish business to participate in the reconstruction of Ukraine.

    Marcin Nowacki, Vice President of ZPP comments: The reconstruction of Ukraine is one of the key challenges, but also the opportunities that we must face as the European Union and directly Poland. It is very important to build partnership, knowledge and understanding of the Ukrainian market and the needs of Ukrainian companies today. We hope that this work, which we are now undertaking in Poland, and which our Ukrainian partners also undertake, will build cooperation and a group of companies that will actively participate in the reconstruction of Ukraine. In July, we will be present personally in Lviv and Kiev, because we want to give a clear signal that our Ukrainian partners can count on our assistance not only in the most difficult times, but also in the further structural reconstruction of their economy.

    Last week, Nazar Bobitski, a specialist with many years of diplomatic experience in Kiev and Brussels, was appointed as adviser to the management of the ZPP and as the representative of the Union in Ukraine. He leads the work of the ZPP office in Kiev, which will coordinate and support Polish and Ukrainian business contacts.

    About the details of the “Europe – Poland – Ukraine. Rebuild together” program and other pro-Ukrainian and pro-business activities we will keep you informed on an ongoing basis. Please contact us at: biuro@zpp.net.pl.

    Position of the Union of Entrepreneurs and Employers (ZPP) on the Data Act

    Posted on by Weronika Marzec

    Warsaw, 21 June 2022

    Position of the Union of Entrepreneurs and Employers (ZPP) on the Data Act

     

    The European Union has made its strategy – Shaping Europe’s digital future – one of its top priorities. One element of the initiative is the European Data Strategy. The strategy aims to create a single data market in the European Union, which will increase Europe’s global competitiveness in access to data use in the economy and ensure control over entities generating data. Moreover, it is based on putting people first in technology development, guaranteeing users’ rights in the digital world, and protecting and promoting European values.

    On February 23, 2022, the European Commission presented a draft regulation on harmonized rules on fair access to and use of data. The regulation, also known as the Data Act, is the second piece of EU law proposed under the European Data Protection Strategy alongside the proposed regulation – the Data Governance Act.

    The project aims to make Europe a global leader in tapping the constantly growing potential of the data economy. Data-based solutions can bring tangible benefits to businesses and consumers in the European Union. Increasing the efficiency of data use may lower the costs of creating new products and providing services and thus increase their availability. It is also possible to improve sustainability and energy efficiency and shift to fewer emissions and more efficient transport systems, which will help meet the pro-climate goals set in the European Green Deal.

    The Data Act regulates the legal status, technical conditions and economic issues, which are the basis for the use of data. It aims to unlock the untapped potential of industrial data, 80 per cent of which remains unused by the European Commission.[1] The Commission assumes that by 2028, the value of GDP generated by using data under the new regulations will increase by EUR 270 billion.[2]

    The Union of Entrepreneurs and Employers (ZPP) assesses positively the provisions encouraging producers to invest in generating higher quality data. We believe this is essential to increase business competition and consumer welfare in the European Union.

    However, we note that the project did not altogether avoid its shortcomings. The provision that grants governments and the EU public institutions the right to access specific enterprises in “exceptional need” deserves criticism. According to Chapter II of the draft regulation, the obligatory and free access of public entities to enterprises’ data should be conditional on the existence of a “public emergency”. Its definition can be found in article 2, paragraph (10) of the draft regulation.[3]

    ‘public emergency’ means an exceptional situation negatively affecting the population of the Union, a Member State or part of it, with a risk of serious and lasting repercussions on living conditions or economic stability, or the substantial degradation of economic assets in the Union or the relevant Member State(s);

    The above definition provides an extensive interpretation framework for qualifying a given situation as a state of “public emergency”. Consequently, there may be a high risk that a public authority’s position in requesting ‘exceptional need’ data will be misused. Such a solution will lead to lower legal certainty and may expose enterprises to damages caused by compulsory and free disclosure of collected data.

    The Data Act, in Article 20, introduces a redress mechanism in cases of exceptional data transfers by a private entity. However, this mechanism is based on a general formulation that will require a complex assessment each time the additional costs are incurred for the entrepreneur. Such a procedure will extend the process of examining the submitted applications and does not guarantee the coverage of the company’s losses caused by the activities of a public authority.

    Summing up, ZPP supports the increase in the use of data collected in the European Union and the levelling of conditions for their fair use. However, as proposed, the Data Act has some legal shortcomings that may lead to a weakening of the position of enterprises vis-à-vis public entities and introduce legal uncertainty in the area of law enforcement.

    We call on European legislators to keep a proportion of the proposed regulation by limiting the disclosure of data to public authorities only to what is strictly necessary and by preventing the creation of rules that could restrict the development of ambitious SMEs. During the inter-institutional negotiations, we consider it necessary to develop solutions that will not contradict the current and future legislative acts in the field of the digital economy.

    ***

    [1] https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1113

    [2] https://ec.europa.eu/newsroom/dae/redirection/document/83541

    [3] https://ec.europa.eu/newsroom/dae/redirection/document/83521

     

    See more: 21.06.2022 Position of the Union of Entrepreneurs and Employers (ZPP) on the Data Act

    Conclusions from the latest ZPP report monitoring the EU-ETS market – the participation of speculators in this market is underestimated

    Posted on by Weronika Marzec

    Warsaw, 6 June 2022 

     

    Conclusions from the latest ZPP report monitoring the EU-ETS market – the participation of speculators in this market is underestimated

    The European Union Emissions Trading System (EU-ETS) was launched in 2005 and was updated several times in subsequent years. The existence of this market was supposed to be an incentive for the Member States to choose more sustainable energy sources and decarbonise the European economy. As part of the Fit for 55 package, the European Commission has adopted a legislative proposal to revise the EU Emissions Trading System (ETS) with the intention of adapting it to meet the objective of a 55 % reduction in net greenhouse gas emissions in the EU by 2030 (compared to 1990 levels).

    At the same time, the price dynamics for European Union Allowance (EUA) have increased significantly over the past few months. The price of emission allowances (EUA price) sold under the EU Emissions Trading System (ETS) has risen from under EUR 30 per metric tonne of coal in 2020 to over EUR 90 by the beginning of 2022.

    The Union of Entrepreneurs and Employers has, over the past few quarters, systematically prepared and circulated among the organisation members a report aimed at a cyclical analysis of the specifics of transactions on the EU-ETS market, including in terms of speculator participation.

    In March this year, the European Securities and Markets Authority (ESMA) – following numerous critical opinions regarding the speculative rising of EUA prices on the EU-ETS market – issued a report on the state of the carbon market in the European Union. According to the report: “The analysis has not identified any serious shortcomings in the functioning of the EU market for emission allowances, based on the available data. However, the market analysis conducted by ESMA has led to a number of recommendations to improve the transparency and monitoring of this market.“

    And while the conclusions of the ESMA report are not satisfactory for those in favour of excluding speculators from the EU-ETS market, the authors themselves acknowledge that recently there is a growing interest in this market on the part of entities such as investment funds. Among other things, it was their speculative activities that have led to an intense increase in the price of this instrument over the past several months, which in turn has translated into a dramatic rise in energy prices.

    The ZPP report entitled “EUA: PRICE BUBBLES AND THE COMPETITIVENESS OF POLAND AND THE EUROPEAN UNION” clearly shows that the EU-ETS market is subject to a very high risk of price bubbles. The microeconomic characteristics of the market for CO2 emission allowances have not changed during the past year. The same flaws and weaknesses that have been highlighted for a year are still present. However, it is worth noting the change in narrative that has taken place over the last few months. In the spring of 2021, the possibility of price bubbles forming on EUAs was mentioned by a few, and their voices were ignored by the energy mainstream. Today, the subject is regarded quite differently by the public opinion, with more and more experts noting that this phenomenon is now real.

    The European Parliament is holding a debate on the possible exclusion of financial entities from the EU-ETS, which is supported directly by ZPP through Vice-President Marcin Nowacki’s involvement in the work of the European Economic and Social Committee (EESC).

    The report is the last in a series of quarterly monitorings of the situation on the market for CO2 emission allowances. This is the fourth version of the document, distributed exclusively to ZPP members. The current edition includes updated econometric modelling for Q1 2022. In the conclusions, we additionally focused on how the formation of price bubbles influences the competitiveness of Poland and the EU. We will continue monitoring the topic and following market behaviour and regulations in this area. We therefore encourage you to stay in touch with us. If you are interested in the report or the issues it addresses, please send a message to biuro@zpp.net.pl.

     

    The minimum CIT must either be radically simplified or abandoned – commentary of the Union of Entrepreneurs and Employers

    Posted on by Weronika Marzec

    Warsaw, 16 May 2022 

     

    The minimum CIT must either be radically simplified or abandoned – commentary of the Union of Entrepreneurs and Employers

     

    The process of ‘fixing’ the Polish Deal has been underway for several weeks. In recent weeks, we have been discussing the proposals for PIT changes put forward by the Ministry of Finance but we already know that in the near future we can expect a draft of amendments to CIT. Out of those, the topic of the so-called minimum CIT is particularly controversial. In our view, the situation is very simple – this solution should either be radically simplified or abandoned altogether.

    The Union of Entrepreneurs and Employers has been promoting the idea of abolishing CIT and replacing it with a simple revenue tax for years. We are unable to understand why we insist on keeping a system whereby the tax may simply not be paid, as exemplified by certain multinational corporations that successively pay CIT at an absolutely marginal rate. In the course of the discussion on the Polish Deal, in response to the plan for total financing of this reform by increasing the burden on Polish business and the middle class, we have proposed a solution consisting in the introduction of a uniform, universal minimum CIT of 1% of revenue. The Ministry of Finance has decided to take inspiration from our idea and include it in the forthcoming draft, yet in a completely altered version, completely incompatible with the original concept. 

    Our idea for a revenue tax – regardless of whether it would replace CIT (in the ideal scenario) or whether it would provide a systemic guarantee that the corporate tax will be paid to the budget at a fair rate –is extremely simple. We are in favour of a universal mechanism covering all taxpayers, with no exclusions or exemptions. Similarly, the very method of calculating the amount of tax should be maximally simplified – 1% of revenue, without reliefs or any separate, special accounting methods.

    Meanwhile, the Ministry has proposed a very complex minimum tax design under which the tax base is the sum of a part (4%) of revenue other than revenue from capital gains and, inter alia, debt financing costs incurred on behalf of affiliates exceeding 30% of EBIDT. The subjective scope of the minimum CIT means that it is not a universal tax and, in addition, the legislator has included the possibility of applying reliefs and deductions that reduce the tax base, which has further increased the complexity of the provisions in question.

    Moreover, the tax calculation mechanism thus constructed generates a number of initially unintended consequences – as is usually the case with such complex solutions. We drew attention to this during the legislative process – complicating the regulations on minimum CIT will reduce their effectiveness and, even worse, contribute to a deterioration in the competitive position of entities that will be effectively covered by the solution. The market signals that reach both us and the Ministry of Finance clearly indicate that these concerns are now materialising and there is a serious risk that the minimum CIT in the current form will hit Polish business, not being an effective tool against aggressive optimisation.

    The idea behind the proposal to introduce a minimum CIT was to take effective action against international tax optimisation schemes which thus far allow some companies to pay marginal CIT in Poland. The solution adopted by the Ministry of Finance had no chance of achieving this objective. In view of the above, we see two possible ways out of the situation. The first is to radically simplify the design of the minimum CIT so that it becomes a universally binding mechanism whereby CIT paid in a given year cannot be lower than 1% of revenue achieved. The second is to abandon it altogether – introducing small adjustments and corrections is the easiest way to add to the chaos.

     

    See: 16.05.2022 The minimum CIT must either be radically simplified or abandoned – commentary of the Union of Entrepreneurs and Employers

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