Warsaw, 5 December 2022 

 

Commentary of the Union of Entrepreneurs and Employers on the Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions. Digitalising the energy system – EU action plan

 

• The European Commission has stepped up its efforts to develop a common European energy data space;
• with the implementation of an appropriate energy data sharing framework, we could gain more than 580 GW of flexible energy resources by 2050;
• the implementation of the digitalisation will improve the demand for flexibility in the EU’s electricity grids.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Digitalising the energy system – EU action plan is a long-developed action plan, formulated and recently submitted by the European Commission for consultation, and intended to define actions for the coming years in the area of digitalisation of the European energy system. The Ministry of Climate and Environment is coordinating the preparation of the Polish government’s position on the proposals set out in the communication. Comments on the document had to be submitted by 23 November this year. We hope, however, that these are not the final provisions of the document, and it will be widely consulted with the public.

According to the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Digitalising the energy system – EU action plan the EU’s overarching goal for the coming years is to become independent from non-EU fossil fuels. According to the Commission, the only way to achieve this goal is

• to install photovoltaic panels on the roofs of all commercial and public buildings by 2027 and on all new residential buildings by 2029,
• to install 10 million heat pumps in the next five years,
• to replace 30 million cars on the road with zero-emission vehicles by 2030,
• to reduce greenhouse gas emissions by 55% and to achieve a share of renewables in the energy consumed of 45% in 2030, among other things.

All these objectives can only be achieved if the energy system is ready for it. Energy efficiency, resource efficiency, decarbonisation, electrification, sector integration and decentralisation of the energy system require a massive digitalisation effort. Without digitalising the energy system, it will be difficult, if not impossible, to achieve the goals set by the European Green Deal and the European 2030 programme ”Path to the Digital Decade”.

Between 2020 and 2030, around EUR 584 billion will need to be invested in the electricity grid, particularly in the distribution system. A substantial part of this investment will have to focus on digitalisation, as digital communication with energy consumers will help avoid the need for USD 270 billion investment in new electricity infrastructure.

Modern technology will help to visualise our energy consumption in real time and get tailored advice on how to reduce it. Digital tools can automatically control room temperature, charge electric cars and manage appliances so that energy is used at the same time when prices are at their lowest, while maintaining an optimal and healthy environment at home or at work.

Already 51% of all households and SMEs in the EU use smart electric meters.

The use of data across the energy value chain and linking this data with weather models, mobility patterns, financial services and geographical location systems through increasingly powerful computing capacity will enable the provision of innovative services at new levels of precision and adequacy and contribute to economic growth and job creation in the EU.

With the implementation of an appropriate framework for sharing energy data, more than 580 GW of flexible energy resources that take full advantage of digital solutions could participate in wholesale markets by 2050. It is estimated that this would cover more than 90% of the overall demand for flexibility in the EU electricity grids. Enabling smart and bi-directional charging of electric vehicles, the participation of virtual power plants in energy markets, and harnessing the potential of energy communities, smart buildings and smart heating with the use of heat pumps could contribute most to meeting this demand. In addition, car batteries can be used to store surplus energy and make it available when needed. This is achieved by keeping track of when the vehicle is in the garage, predicting periods of non-use and calculating how much spare capacity can be made available.

The aim of EU actions is to establish a common European energy data space and to ensure its robust governance in the form of a coordinated European framework for sharing and using this data. The preparatory phase is expected to be completed by 2024, with implementation starting immediately afterwards.

The EU’s research, innovation and digitalisation programmes will continue to play a key role in this context. Therefore, the Commission intends to support – through the “Digital Europe” programme – the implementation of a common European energy data space. Actions in this area will build on the demonstrations made by a number of projects funded by “Horizon Europe”.

To further support the digitalisation of the energy sector, the Commission will officially re-establish the existing Smart Grid Task Force (SGTF). Under this smart energy expert group, the Commission will set up, by March 2023 at the latest, the “Data for Energy” (D4E) working group. This group will include the Commission, Member States and relevant public and private stakeholders to contribute to the creation of a European framework for energy data sharing.

The Commission announces in “Digitalising the energy system – EU action plan” that it intends to support EU Transmission System Operators (TSOs) and Distribution System Operators (DSOs) in the creation of a digital twin of the European electricity grid, an advanced virtual model of the grid. The purpose of the digital twin is to make the grid, and with it the energy system as a whole, more efficient and smarter.

The sustainable design of digital devices and clear information on their environmental footprint and reparability and recyclability can, on the one hand, contribute to reducing the use of raw materials and facilitate a shift towards circularity, but on the other hand, can put an additional burden on fossil fuel-based economies.

Collective energy schemes that involve a whole community, village or town can allow such consumers to connect and scale-up their potential interaction with the electricity system. Such schemes can enable communities to, for example:

• better monitor their performance as measured by energy consumption or
• share photovoltaic panels or otherwise engage in power sharing or peer-to-peer trading of electricity generated by joint investment projects, which can reduce their dependence on high electricity prices set in the wholesale market.

The proposed framework for an Ecodesign for Sustainable Products Regulation[1] is aimed at:

• establishing EU regulations to ensure that only “circular” products (i.e. products that are more durable, can be easily reused, repaired and recycled, and are made up of recycled materials as far as possible) are placed on the EU market;
• creating a framework for digital product passports containing information on energy-related aspects (carbon footprint), among other things; and
• setting mandatory minimum sustainability requirements on public procurement of products, for a selection of product groups including electronic and ICT products. To address the energy consumption of working ICT devices, the Commission will develop an energy labelling scheme for computers that takes into account the different uses of computers, such as (i) office work, (ii) gaming and (iii) graphic design and video editing, respectively.

The Commission will aim to establish an EU Code of Conduct by 2025, based on the work done to measure the environmental impact of electronic communications services. The EU’s Code of Conduct for the Sustainability of Telecommunications Networks can help guide investment in energy-efficient infrastructure.

Bearing in mind the content of the document submitted to the Union of Entrepreneurs and Employers for consultation, on 23 November this year we sent our proposals to the Department of Informatisation of the Ministry of Climate and Environment. We pointed out that such a wide-ranging document setting out policy directions cannot be over-regulated in terms of the energy transition, as the Polish energy market has its own specific characteristics that distinguish it from other countries on the old continent. On the positive side, there is a proposal to involve entrepreneurs in the work of future advisory bodies. We also emphasised the need to develop electricity grids in the context of problems with connecting new power generation installations.

***

[1] Proposal for a regulation establishing a framework for the setting of ecodesign requirements for sustainable products and repealing Directive 2009/125/EC, COM(2022) 142 final.

https://eur-lex.europa.eu/legal-content/PL/TXT/?uri=CELEX:52022AE0598

Warsaw, 10 November 2022 

 

Commentary of the Union of Entrepreneurs and Employers (ZPP) on the necessary reduction of expenditure on social and welfare programmes in hard economic times

• Due to the increasingly difficult situation of public finances, the government should aim to redefine the direction of its social policy. The abolition of benefits such as the thirteenth and fourteenth pension, the launching of the “Dobry Start” (Sure Start) programme and the reorganisation of the “Rodzina 500 plus” (Family 500 plus) programme could contribute to a significant reduction in budget spending and constitute a key source of desired savings.
• Returning to the original form of the “Rodzina 500 plus” programme, excluding the payment of the benefit for every first child without setting an income threshold, could reduce the budget costs of the programme by about PLN 20 billion per year.
• The abolition of the so-called thirteenth and fourteenth pension can lead to a direct reduction of expenditures related to the pension system by almost PLN 25 billion a year.
• Moreover, the effectiveness of any other social and welfare programmes should also be thoroughly assessed.

Rising inflation and the instability of the economic environment caused by the negative economic consequences of the pandemic and Russia’s armed aggression against Ukraine and the related energy crisis should force the government to redefine the direction of its fiscal policy.

Although the Ministry of Finance reported a budget surplus for the period from January to September 2022 in the amount of PLN 27.5 billion, it should be remembered that a significant proportion of expenditures is charged to non-budgetary funds. And thus, based on Poland’s fiscal notification presented by Eurostat, the general government deficit in 2022 will be approx. PLN 141.4 billion compared to approx. PLN 48.195 billion in 2021. The deficit of the central government subsector will increase from PLN 49 billion in 2021 to PLN 135.9 billion this year. The local government surplus will also be lower – PLN 6.52 billion in 2022 compared to PLN 14.92 billion in 2021. The deficit of the social security funds subsector is expected to be PLN 12.84 billion. The cost of aggregate debt servicing for the public finance sector will also be high and will amount to 1.75% of GDP, i.e. almost PLN 53 billion.

The government seems to assume that adjustments to fiscal policy should involve instruments that have as little direct impact on the sphere of social benefits as possible. According to reports, the Prime Minister issued a working order for the introduction of a programme of budget cuts in ministries, which is expected to result in savings of about PLN 10-15 billion – it is still a negligible amount with respect to real needs. Reducing expenditures on social programmes seems to be the most natural and desirable response today, which should be reflected in the decisions of state authorities, especially given the fact that the most important social programmes have cost us around PLN 250 billion since 2016.

In February 2022, even before Russia’s invasion of Ukraine, the Union of Entrepreneurs and Employers (ZPP) urged the decision-makers to adopt a “conservative turn in social and budgetary policy” in the face of potential economic risks that make it much more difficult to stimulate economic growth with consumption, which is misguided in its nature. Already at that time, ZPP warned that, in the near future, high expenditure on social benefits could become cumbersome from a budgetary point of view. Cuts in spending on social programmes are today the surest way to restore the sustainability of the public finance sector. Plans to redefine the policy directions in other areas are subject to considerable risk resulting from uncertain estimates and forecasts, which are made in times of pandemic and war.

“Rodzina 500 plus” programme

As far as social spending is concerned, the flagship programme of Zjednoczona Prawica – “Rodzina 500 plus” (Family 500 plus) has been the biggest strain on the budget for years. By the end of 2021 alone, it cost us about PLN 180 billion. As at today, the annual cost of the “Rodzina 500 plus” programme is PLN 41 billion. This is more than twice as much as the cost of the programme in its original version – at the time, the then Ministry of Family, Labour and Social Policy reported that the cost of the programme would be PLN 21 billion.

In this context, it is worth recalling that in the original version of the “Rodzina 500 plus” programme, benefits were provided with respect to the second and each subsequent child to recipients whose income per household member did not exceed PLN 800 or PLN 1,200 in the case of a child with a disability.  In the second half of 2019, the income threshold was abolished, and the benefit was extended to every child, which led to an increase in expenditure on the programme to PLN 41 billion per year.

Restoring the original version of the programme, i.e. restoring the income threshold and excluding every first child from the benefit, would result in savings of about PLN 20 billion per year and a more targeted flow of funds under the programme.

Potential plans to index the benefit in its current form should also be abandoned. The Pollster research institute asked Poles in a survey commissioned by se.pl in October this year whether the government should increase the “Rodzina 500 plus” benefit to PLN 800. Fifty-one per cent of the respondents answered unequivocally “no”, 12 per cent answered “hard to say”, and 37 per cent of the respondents were in favour of an increase in the benefit. The results of the survey show a change in the way Poles think about budget spending. The majority of the respondents are aware of the fact that the costs of indexation of the “Rodzina 500 plus” programme would be borne by everyone, and that any attempt to “catch up with inflation” by indexing social benefits is too costly and counterproductive from the point of view of an already strained state budget. The results of the survey are also a signal for the ruling party, which should not see an increase in this benefit as an opportunity to extend the electorate – this is particularly important in the context of next year’s parliamentary elections.

Allowance for pensioners

The desire to maintain the so-called thirteenth and fourteenth pension is an incomprehensible move from the point of view of the difficult economic situation in recent years. It is worth recalling that the second pension was originally intended to be a one-off allowance, but – according to the government’s announcement – it is also to be paid in 2023 at an indexed, higher rate. According to the Ministry of Family, Labour and Social Policy, in 2022 alone, the cost of the fourteenth pension is expected to be PLN 11.4 billion. In 2023, it will be higher, as the minimum pension rate will also be adjusted. The popular thirteenth pension will cost us about PLN 13.1 billion in total in 2022.

In October 2022, inflation in Poland stood at 17.9 per cent and was the highest from December 1996. Despite regular increases, instead of reforming the ossified pension system, the government has only exacerbated its problems in recent years. The introduction of the thirteenth and fourteenth pension and the increase in the retirement age have dramatically increased costs generated by the pension system. It is also difficult to find an economic justification for further transfers. We should still consider them in the context of purely politically motivated actions.

According to the Union of Entrepreneurs and Employers, the “belt-tightening” policy should largely apply to the pension system. From the outset of the discussion on the introduction of additional allowances in the form of the thirteenth and fourteenth pension, we believe that they unnecessarily strain the budget and are used to achieve political goals with respect to an arbitrarily designated group of the electorate; therefore, once again we emphasise the urgent need to abolish both allowances, namely the thirteenth and fourteenth pension. It should be noted that compared to the group of OECD countries, the Polish pension system is one of the most expensive systems, consuming more than 10% of GDP annually.

“Dobry Start” programme

“Dobry Start” (Sure Start) or “wyprawka” (school starter kit) or “300 plus” is another social programme that is excessively costly from the point of view of budgetary burdens. The essence of the programme is the annual payment of a one-off benefit to parents of school-age children up to 20 years of age or up to 24 years of age in case of children with disabilities.

The annual cost of the programme is almost PLN 1.45 billion, amounting to a total of almost PLN 7.5 billion from the start of the programme until the end of 2022. Based on the latest data on the condition of the public finance sector, it would be reasonable to abandon the programme in subsequent editions, which would give real savings of around PLN 1.45 billion per year.

Other relevant social and welfare programmes

The “Rodzinny Kapitał Opiekuńczy” (Family Care Capital) programme, which is a new benefit proposed in the Polish Deal, costs the budget PLN 3.15 billion per year. Moreover, parents of children aged between 12 and 35 months are entitled to a benefit of PLN 12,000 for their second and subsequent child. The allowance is paid in monthly instalments. The aim of the benefit is to encourage parents to return to the labour market, but it is difficult to determine its effectiveness due to the short duration of the programme. However, the introduction of an income threshold should be considered, which could significantly reduce the amounts of the payments and relieve the state budget.

“Mama 4 plus” (Mother 4 plus), the tourist voucher and other similar programmes represent a relatively small budgetary burden.

Conclusions

Abandoning some of the budgetary burdens associated with spending on social programmes or changing the criteria for some of the existing programmes will make it possible to save funds in the short term, which is necessary in light of the current crisis. If we return to the original version of the “Rodzina 500 plus” programme and give up the thirteenth and fourteenth pension, as much as PLN 40 to 50 billion per year will remain in the budget.

The government should also make every effort to change the tax system in order to give entrepreneurs a sense of stability and ensure an increase in the level of investment. The savings of PLN10-15 billion achieved by the government’s policy of cuts in ministries is a significant value but insufficient in the face of current challenges – after all, the anti-inflation shield alone is worth three times as much.

 

More: 10.11.2022 Commentary of the Union of Entrepreneurs and Employers (ZPP) on the necessary reduction of expenditure on social and welfare programmes in hard economic times

Warsaw, 22 September 2022 

 

Commentary of the Union of Entrepreneurs and Employers (ZPP) on the economic activity of Ukrainians in Poland – 2022, an absolutely record year

Certainly, the beginning of the year was not successful for Polish entrepreneurs. In February, almost 5,000 fewer new businesses got registered than a month earlier. However, in March, Ukrainians arrived “to help” and they felt so confident in Poland that they greatly contributed to exceeding the January’s threshold. By 2021, in Poland, there were 7,117 registered businesses managed by Ukrainian citizens.  In 2022 alone, and only until September, Ukrainian citizens submitted 9,374 applications to set up a business.

Total applications to establish a business in Poland
 Monthly data for 2022

January                26,567
February              21,792
March                   26,962
April                     25,806
May                      27,369
June                     27,250
July                      25,539
Source: CEIDG, InfoCredit

Based on the data collected by the InfoCredit analytical company, a large percentage of Ukrainians associate not only their family future but also their business activity with in Poland. Proximity to the home left behind certainly makes a difference in settling in, and professional fulfilment is reflected not only in full-time work but also in newly established businesses. The removal of employment barriers is definitely motivating for Ukrainians, as currently no work permits are required. There is only a procedure in place to notify the district employment office that a given person got employed.  By August, almost 390 thousand persons from Ukraine got employed under the simplified procedure. By the middle of the summer holidays, over 770 thousand Ukrainians  were legally employed in our country.

As the Border Guard indicated on Twitter on Sunday, women and children constituted the vast majority of the 6.36 million people who have crossed our southern-eastern border.

That structure of Ukrainians settling down in Poland corresponds to the type of businesses most frequently opened, which are hairdressing and beauty therapy. But not only. This year, also IT specialists found employment in Poland. Compared to previous years, a large amount of activity was also noticed in construction and transport.

Large cities are the main target

This year, the largest number of businesses was established by the citizens of Ukraine in Mazowsze (2,262), as well as in Dolnośląskie (1,473) and Małopolskie (1,285) voivodeships.  Pomorskie Voivodeship was on 4th position, and Wielkopolskie Voivodeship on 5th  (1,040 and 701 respectively). In the voivodeships located in eastern Poland, the number of businesses established by our visitors was smaller. It was 209 businesses in Podkarpackie Voivodeship, 253 in Lubelskie Voivodeship and only 59 in Podlaskie Voivodeship, less than in Warmińsko-Mazurskie Voivodeship (61).

It seems that our visitors set up the most businesses in places where there is the best opportunity to gain new customers. Not surprisingly, their most popular destiny was Warsaw and the largest cities. The distance from the border was irrelevant here. What mattered was an attractive market, a chance to make a good living and find accommodation to stay.

The main destination, taking business and income opportunities, was Warsaw. This year, in the capital, the visitors established 1,764 new businesses.  Kraków came second (1,042 new businesses), slightly ahead of Wrocław (1,040). In Gdańsk and Poznań, 434 and 417 new businesses were established, respectively. Szczecin was much ahead of Łódź (314 and 237, respectively). Out of the above-mentioned cities, the biggest jump in the number of new businesses was recorded in Wrocław (from 635 before 2022 to 1,040 this year), in Kraków (from 697 to 1,042) and in Gdańsk (from 200 to 434) – adds Jerzy Wonka, the President of the Management Board of InfoCredit.

Economic activity, despite increasing burdens and constant changes in tax regulations, is still the simplest form of business. With a PESEL (Polish Resident Identification Number) assigned, with the help of volunteers and the support of officials, it can be established almost immediately. The cooperation of Polish and Ukrainian business in the process of the reconstruction of the neighbour country is still a topic of the future. Today, our visitors are trying to make their way in our country, also in business, as they want to be independent.

 

See: 20 September 2022, Commentary of the Union of Entrepreneurs and Employers (ZPP) on the economic activity of Ukrainians in Poland – 2022, an absolutely record year

Warsaw, 26 July 2022 

 

ZPP’s commentary on desirable joint actions of European countries related to the energy threat

 

The war in Ukraine has formed an entirely new geopolitical situation, and therefore the primary task of all European decision-makers is to ensure sustainable energy independence for the countries of the Old Continent, based on the assumption of a temporary inability to import energy resources.

Further complications of the international situation should be taken into account, including, for example, provoking further conflicts that prevent or impede the import of energy resources, in an unpredictable time frame. Today, a war in any part of the world involving a NATO member will be a global event with consequences that are difficult to foresee.

Having regard to the above, the energy, transport and storage systems of European countries should also take into account such a crisis situation. We should have a precise plan to enable the economies of individual European countries to quickly switch to operation under conditions of resource independence, which, in turn, would probably involve temporary restrictions on the free consumption of energy resources.

In view of the above, we believe that a body should be established that would create solutions related exclusively to ensuring energy and resource security, common for all Member States of the European Union.

This body should prepare a programme to ensure total energy independence of EU countries, including from imports of energy resources. This document should consist of, inter alia:

1. Balance of existing resources, including but not limited to oil, gas, coal, biomass, renewables, nuclear, etc.
2. Balance of potential resources – cots of exploration, prospecting and extraction of conventional sources; potential availability dates of conventional and other sources (RES, nuclear).
3. Programme for the development of individual energy sources in Europe, spread over a timeline.
4. European programme for the development of transmission networks, national programmes for the development of high, medium and low voltage networks.
5. Distribution of tasks related to ensuring total energy independence between individual European countries.
6. Financing system for the programme of European energy independence.
7. System of military protection of energy sources and transmission lines of European countries.

The development of such a programme and its systematic introduction into the economic cycle of the EU, together with an active programme of joint purchases of resources from non-European countries, would not only allow the optimisation of prices but also ensure the stability of supply.

All activities related to the creation of a common energy market should be accelerated – for example, establishing a fund for the modernisation of transmission networks and the establishment of cross-border interconnections.

The scenario described above should be a programme axis for the development of a new European energy security system.

The basis for the energy security of a State is the proper development of energy networks. Nowadays, Poland has limited cross-border transmission capacity, and this is a key element of common European energy policy. In the coming years, Polish exporters to European markets may also face the need to purchase green energy, which, in turn, would require Poland to join the European Guarantee of Origin scheme (AIB).

The modernisation and development of low and medium voltage networks will determine the form of development of distributed energy, i.e. the foundation of the contemporary energy security of each country.

The European Commission has recently presented another report on the implementation of the Energy Union project that proposed, among other things, new targets for cross-border interconnections between EU countries.

So far, the country that is the furthest from achieving the targets set by the EC is Poland which has the least developed infrastructure in this respect. In presenting the report on the implementation status of the Energy Union, the representatives of the Brussels administration stressed the need to develop cross-border interconnections between individual EU countries, setting a target of at least 15% share of cross-border interconnections in the energy systems of individual EU countries.

The Commission plans to promote strengthening energy links between individual EU countries by financially supporting the cross-border interconnections which were compiled in a list of so-called Projects of Common Interest (PCS). It is estimated that the share of cross-border interconnections in the Polish electricity system is only 4%. This is the lowest level in the entire European Union. 

Only intensive development of cross-border interconnections can guarantee our participation in the pan-European security system. Having a fully liquid energy and gas market in Europe would naturally also result in the harmonisation of the prices of these utilities across the Community. For consumers, the current energy crisis entails periodic intense increases in energy and gas prices; however, in the long term, Poland’s presence in the common market definitely brings more benefits for our country than any variant of energy isolation.

 

See: 26.07.2022 ZPP’s commentary on desirable joint actions of European countries related to the energy threat

 

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

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

 

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

Warsaw, 10 May 2022 

 

Commentary of the Union of Entrepreneurs and Employers (ZPP) on the proposal for establishing minimum gas storage obligations

 

EU leaders met at an informal meeting of heads of state and government in Versailles on 10 – 11 March 2022. The main reason was the response to the Russian invasion of Ukraine. The leaders adopted the Versailles Declaration which sets out a joint EU action plan for bolstering defence capabilities, reducing energy dependencies; building a more robust economic base and supporting investments. As a result of the above, on 22 March 2022, the European Commission proposed a regulation to establish minimum gas storage obligations (Gas Storage Regulation). On 23 March 2022, the Committee for Industry, Research and Energy (ITRE Committee) of the European Parliament adopted the above-mentioned regulation and called for the application of the urgent procedure to the project, which will be voted on in a plenary session from 4 – 7 April 2022. The rapporteur of the draft regulation in the European Parliament is Professor Jerzy Buzek. The appointed rapporteurs in the European Economic and Social Committee were Marcin Nowacki, Vice-President of ZPP, and Mateusz Szymański from the “Solidarity” trade union.

Under the new rules, EU Member States will have to ensure that their gas storage facilities will be filled to a minimum of 90 per cent by the first day of November each year. The exception would be 2022, when the target would be 80 per cent. In addition, the intermediate targets would guarentee that the tanks are filled all year round. Another provision is the mandatory certification of storage system operators to reduce the risks arising from the influence on critical infrastructure. The third arrangement is an incentive for further use of storage capacity and possible exemptions from transmission tariffs at entry or exit points of storage facilities.

The Union of Entrepreneurs and Employers supports the proposal for the regulation as a tool which can really contribute to the increased energy security of the EU. We particularly commend the fast reaction rate and work progress of the EU institutions. At the same time, ZPP calls for the following points to be added to the draft regulation.

Firstly, in our view, it is necessary to introduce a short-term investment vehicle in order to develop a hydrogen-ready infrastructure. The success of the common gas storage policy depends largely on the ability to transport gas efficiently. Therefore, in order to increase Europe’s energy security in the long term, investments in infrastructure are necessary, including infrastructure suitable for hydrogen transmission, and especially interconnectors and storage facilities. This postulate is particularly important given that the recently completed revision of the TEN-E Regulation ended the possibility of supporting investments in gas infrastructure.

Infrastructure investments will enhance EU energy security in the long term but due to the long implementation period, they will not solve the problems caused by Russian aggression right here and right now. Therefore, in the short term, the EU should consider cooperating with non-EU countries bordering the EU on the use of existing gas storage facilities. In our opinion, cooperation with non-EU countries, in particular Ukraine, can quickly lead to adequate gas storage filling levels and should therefore be given high priority.

Next, ZPP calls for the expansion of the burden-sharing mechanism proposed by the Commission and for the supplementation of the Regulation with plans for the individual Member States, which would take account of the size of storage facilities, consumption in a given country and the warehouse’s capacity to serve other countries in the region, so as to avoid unbalanced sharing of burdens, risks and costs. We fear that a lack of proper coordination could lead to high gas price fluctuations in some Member States.

ZPP supports the introduction of mandatory certification of storage system operators. Despite the short deadlines provided for in the Regulation and because of the possibility of appealing against an administrative decision, it will take several years to issue a final decision revoking the licences of storage facility operators. Therefore, we note that the mandatory certification of storage system operators is a measure which will improve EU energy security in the long term, and not in the short term. In light of the above, we consider it necessary to adopt an early implementation mechanism which will allow national regulatory authorities to start their preparatory work on the mandatory certification process as soon as possible. At the same time, we call on the EC to quickly issue guidelines that will ensure uniform implementation of the provisions of the Regulation by all Member States.

See: 10.05.2022 Commentary of the Union of Entrepreneurs and Employers (ZPP) on the proposal for establishing minimum gas storage obligations

Warsaw, 15 April 2022

 

Commentary of the Union of Entrepreneurs and Employers (ZPP) on the progress of work
on the Digital Services Act

 

Digital Services Act (DSA) will soon amend the E-Commerce Directive that has been in place for more than 20 years. Work on the new regulation has been ongoing continuously since late 2020. The trilogue – a trilateral negotiation between key EU institutions – is expected to conclude early this month. However, we are now seeing the emergence of numerous proposals that were not included in the negotiators’ original mandate.

The disproportionality of the crisis response mechanism

Among the most recent proposals is the Crisis Response Mechanism (CRM), which was created to enable institutions to counter Russian disinformation attacks efficiently. We welcome that the EU institutions take decisive steps to fight against Russian propaganda. Nevertheless, we have some doubts as to whether introducing the proposed provisions in DSA at this stage of the negotiations is the best way to tackle this problem.

At the request of the French Presidency, the Commission has proposed introducing provisions that could force large technology companies to quickly adapt their platforms and increase the number of staff moderating content during major crises such as natural disasters, terrorist attacks or war. The new DSA Article 25(a) would empower the Commission to require specific actions only based on a recommendation from a Council of European National Regulators. Paris has suggested that a two-thirds majority of regulators would be needed. Technology companies’ efforts to tackle disinformation or problems related to a specific crisis would be legally limited to three months. At the same time, the Commission would have to keep its decisions transparent.

This proposal has been protested against by 24 citizens’ organisations, who point out in their open letter that the European Commission should not be empowered to declare an EU-wide state of emergency unilaterally. Furthermore, these organisations note that the CRM is far from respecting international human rights standards of legality, legitimacy, necessity and proportionality, and they call for reformulation.

Moreover, the new Article 25a of DSA is intended to empower national digital coordinators to require smaller platforms to comply with risk mitigation obligations that usually fall on very large platforms only. Such a provision appears to place a disproportionate burden on smaller platforms, whose ability to comply with the requirements mentioned above will be limited in practice, especially in the short term.

Ultimately, attempts to combat Russian disinformation may be undermined by other provisions found in DSA. Article 15(2) requires platforms to provide information on the facts and circumstances as well as the means used whenever content-related activities are undertaken. This will provide disinformation actors with full knowledge of how platforms combat disinformation and reduce the visibility of harmful content. As a result, in an effort to increase transparency, DSA will make it easier for bad actors to fool security systems and, consequently, more complex to fight disinformation. In the current situation, the EU institutions should create instruments that allow platforms to fight against disinformation actions carried out by third countries on a massive scale, rather than introducing new solutions to a horizontal regulation such as DSA at such a late stage.

Return of the ban on targeted advertising

In a plenary vote in the European Parliament, MEPs rejected a complete ban on targeted advertising. As a result, they voted to restrict the targeting of minors and targeting using sensitive data. We welcomed the EP decision. We believe it strikes the right balance between user protection and business rights. A total ban would have hit SMEs, depriving them of a cost-efficient way to reach their customers and severely limiting their growth opportunities. Therefore, we watch with concern the amendments tabled by MEPs aimed at achieving a de facto ban on targeted advertising.

Before discussing the EP’s latest proposals, it is first necessary to draw attention to the so-called ‘known minor problem’. Platforms would have to verify minors’ age to be able to restrict the use of targeted advertising. In the absence of general age verification on the Internet, platforms have to process user traffic data to determine age based on activity. Paradoxically, a ban on targeting could, in theory, lead to more tracking of children’s online activities.

To address this issue, the EP proposed an amendment to Article 24(1)(b), which states that ‘compliance with the obligation set out in the first subparagraph shall not entail the processing by online platforms of additional personal data on minors in order to verify the age of the recipient of the service’. Whilst we recognise the need to promote child safety through data minimisation, we believe that a provision worded in this way will be difficult to implement in practice and will reduce targeted advertising across all age groups. We propose that the provision be amended to prohibit excessive, rather than an additional, collection of personal data for age verification purposes.

Moreover, MEPs propose to extend the ban if the platform has doubts about whether the recipient is a minor (Article 24(1)(c)). This also means expanding the prohibition to the user when age verification is not possible. Given the current state of technology, such a provision could lead to a de facto ban on personalised advertising. This provision should be limited to cases where the platform has serious grounds, not just doubts, to believe that the recipient is a minor to avoid negotiators walking out their mandate. A provision worded in this way will simultaneously protect minors.

Extension of know-your-business-customer

As a final point, attention should be drawn to the proposal to extend the know-your-business-customer rule, which obliges Internet Service Providers (ISPs) to collect information that identifies business users in order to verify their identity. KYBC aims to improve online security by halting certain entities from using legitimate services to conduct illegal business anonymously. Assuming that the list of information required to be obtained from ISPs is proportionate and not an unreasonable administrative burden, the proposal should be viewed positively. However, during the January negotiation rounds, it was proposed to extend this principle to all types of ISPs, thus covering market places and social media, instant messaging, or streaming services.

In order to understand the implications of the KYBC extension, it is important to remember that DSA, like the E-Commerce Directive, is based on a prohibition of general internet monitoring. Such an injunction has been rejected from both the E-Commerce Directive and DSA, as it undermines fundamental values such as freedom of expression and could lead to censorship (i.e. excessive blocking or removal) of lawful content. Extending the KYBC to all intermediate service providers means extending it to all content that appears on the Internet. Therefore, it is hard to imagine in practice how the application of such a rule would take place without general monitoring of the Internet while still meeting DSA’s stringent requirements for human factors provision.

The Union of Entrepreneurs and Employers actively participated in the work on the Act and, from the very beginning, called for solutions that would not overburden digital businesses. At the end of DSA negotiations, we maintain this call and urge policymakers not to place impossible demands on digitally active companies.

 

See more: 15.04.2022 Commentary of the Union of Entrepreneurs and Employers (ZPP) on the progress of work on the Digital Services Act

Warsaw, 17 March 2022 

 

Business commentary and recommendations on the economic risks associated with the war in Ukraine

 

The Russian aggression against Ukraine and its consequences have specific economic effects also felt by Polish businesses. Considering that further developments are difficult to predict and that some difficulties are already present, the Union of Entrepreneurs and Employers (ZPP) gathered comments, risk assessments and recommendations related to the current situation from affiliated industry organisations and companies. The material, broken down by sector, is presented below and submitted for the consideration of public administration bodies in the context of potential legislative and organisational measures to be taken.

 

1. Transport

Urgent amendment of regulations governing the employment of foreigners

A significant threat to companies is the shortage of lorry drivers. Until now, Ukrainian drivers have constituted a large and growing group of drivers employed by Polish transport operators. We are already receiving indications from our transport operators that:

• drivers on leave do not return to work in Poland,
• drivers who have families in the danger zone want to return to their families,
• drivers called up for military service also return to Ukraine.

This may cause both problems with the availability of transport services and further increases in transport prices (operators are already increasing service prices due to soaring fuel prices and extended service times at petrol stations).

The introduced Act on assistance to Ukrainian citizens has made it possible to employ refugees and legalise their stay. However, problems may arise in international transport. During checks, the driver must often show a passport, which includes a visa and work permit. In the current situation, it should be possible to quickly obtain documents enabling cross-border work so that a driver employed in Poland could easily travel to other EU countries and beyond, for example, to the United Kingdom.

1. Motor vehicle rental

There is currently a large group of US citizens involved in helping refugees in our country. The military presence of our American ally in connection with the protection of NATO’s eastern borders is also increasing. In many cases, these people want to rent a car for their activities from a car rental company. Unfortunately, they usually do not have an international driving licence required in Poland for US citizens (the US driving licence is invalid). In such cases, rental companies are legally prohibited from renting cars to persons without a valid licence.

Given the above, to make it easier for United States citizens to function in Polish, it is desirable that US driving licences should be recognised in our country as a matter of urgency and treated the same as those issued in the European Union.

1. Pharmacy

• Enabling pharmacists and pharmacy technicians to access the labour market

The Act of 12 March 2022 on assistance to citizens of Ukraine in connection with armed conflict on the territory of their country has enabled doctors, dentists and nurses to access the Polish labour market. Given the current labour needs in the pharmaceutical sector, we are requesting that pharmacists and pharmacy technicians be granted a temporary licence to work on the same basis.

• Allowing mail-order sales of prescription drugs

Currently, pharmacies are only allowed to carry out mail orders and delivery of medicines, but only over-the-counter medicines and only as far as online pharmacies are concerned. The most critical prescribed (Rx) medicines must be picked up by the patient in a pharmacy. The introduction of delivery of Rx medicines and other reimbursable products (e.g. adult nappies, which are difficult to transport for the elderly) is beneficial from the point of view of patients – in particular, those who need them the most (e.g. elderly and/or disabled individuals). Importantly, pharmacy employees could monitor the correct delivery and temperature, which is important for some products.

• Amendments to the Pharmaceutical Law regarding advertising of pharmacies and pharmacy outlets

The Pharmaceutical Law provisions regarding the prohibition on advertising pharmacies make it very difficult to inform patients about the services provided. Pharmacists are faced with different interpretations of the law and different interpretations by the pharmaceutical inspection authorities. These regulations have been in place for ten years without any amendments and are not adequate in the current situation in the pharmacy market and the country as a whole. New services have been introduced in selected pharmacies, including immunisations and diagnostic tests. Moreover, further services, e.g. drug review, are planned to be implemented. For example, because of the advertising ban, pharmacists are afraid to advertise that people can be vaccinated against COVID-19 in their pharmacy, assuming that the pharmaceutical inspectorate will consider this prohibited advertising. Also, in the face of the war in Ukraine and the influx of refugees crossing Poland’s eastern border, placing information in Ukrainian on a pharmacy window or providing help to the needy may be treated as an “encouragement” to visit the indicated pharmacy. As a result, its owner and manager may face the consequences imposed by the pharmaceutical inspectorate. The most problematic issue is not the law itself but its interpretation. It is necessary to rationalise and standardise the ban on advertising in pharmacies so that entrepreneurs know how to operate in the market and so that their pro-patient initiatives are not blocked. Particularly in a state of emergency, war or natural disaster, it is essential for the patient to be adequately informed about the services available in a given establishment. Currently, the patient is deprived of such information.

• Speeding up administrative procedures conducted by pharmaceutical inspectorates that prevent pharmacies from opening

More than 200 pharmacies are currently closed to patients due to suspended operations. In many cases, the prolonged suspension is due to an administrative procedure by a pharmaceutical inspectorate. As a result, the establishment cannot provide its services and stocks medicines that cannot be delivered to patients. In cases where the administrative procedure does not concern matters where the pharmacy endangers patients’ safety or health, there should be a specific time frame for a final administrative decision, which allows the opening of the pharmacy to patients. Currently, there are known cases when administrative procedures, e.g. concerning the transfer of a licence to operate a pharmacy, last even a dozen or more months, while according to the Code of Administrative Court Procedure, they should last two months at most. This results in reduced access to medicines, huge costs for businesses and losses for the State Treasury. In case of a possible crisis or armed conflict, as many establishments as possible should be put into operation. The actions of the pharmaceutical inspectorates should not hinder and cause the prolonged closure of pharmacies that can help patients.

• Developing ICT systems and official applications to confirm product availability in pharmacies

To confirm that a particular medicinal product is available in a given establishment, you need to contact the pharmacy directly – in person or by telephone or using a commercial app. Commercial applications only cover selected establishments that have chosen to make information on their stocks available on a paid basis. In recent years, the Polish pharmacy market has been facing the problem of shortages of goods and frequently selected particularly scarce products are available in only a few pharmacies. Introducing a central system indicating a pharmacy convenient to the patient where all the medicines needed are available would be extremely useful.

1. Drug manufacturing

In case of a crisis or state of emergency, to ensure continuity in the production of medicines, it is necessary to ensure:

• the possibility for workers in the domestic pharmaceutical industry to move to work;
• keeping doctors, pharmacists employed in the domestic pharmaceutical industry in their jobs, fulfilling the obligations of the applicable laws, including but not limited to the pharmaceutical law, so that they are not transferred by the government administration to other tasks;
• refraining from recruiting pharmaceutical workers in the event of military mobilisation;
• maximum security of supply chains at the domestic, EU, non-EU and continental levels;
• in the event of the reintroduction of internal borders within the European Union, the creation of the so-called “medical corridors” for the transport of medicines, active substances and materials necessary for their manufacture;
• maintaining the mobility of workers within and outside the EU;
• stopping all legislative work that would worsen the condition of the domestic pharmaceutical industry, including revisions of the Reimbursement Act, and introducing the so-called price corridors if need be;
• enabling Responsible Persons, Skilled Persons and Competent Persons to work remotely;
• actively and effectively counteracting speculation on the price of materials necessary for the manufacture of medicines by the institutions set up for this purpose;
• access for drug manufacturers to the necessary materials for the manufacture of medicines;
• simplification of procedures and electronic communication in all regulatory and administrative procedures, including the submission of all documents with a certified electronic signature;
• providing pharmaceutical companies with the opportunity to purchase currency for raw materials for production at the pre-war exchange rate, which will enable the price of medicines to be maintained at its current level;
• continuity of gas and energy supply to domestic manufacturers.

1. Waste management

In providing continuous waste collection and management services (particularly hazardous waste) for both residents and institutions, one of the key issues is securing fuel for the motor vehicles of the services involved in this activity. The massive influx of refugees to Poland also requires additional capacity in plants and waste treatment facilities. Due to delays in the processing (due to the pandemic) of the relevant applications submitted by entrepreneurs, there is a very serious risk that the operations of almost 50% of waste treatment plants and facilities in the country will be unreasonably suspended.

1. Hospitality and catering

Amendment of sanitary regulations to facilitate opening accommodation and catering facilities for refugees (hospitality and catering sector).

1. Metallurgy

Manufacture of specialised machinery and equipment – metallurgy sector

• Government-level economic meetings/missions to countries that can support steel supply (Moldova, China, India). Emergency supply agreements are needed.
• Joint action with the EU on maritime transport to identify priorities for the EU in compliance with WTO rules.

1. Research and development (R&D)

Laboratory tests (physical and chemical, microbiological tests, analyses and measurements)

Recommendations	Justification	Applicable regulations
Accreditation, permits, licences, other applicable regulations
Renewal of accreditation without periodic evaluation	Polish Centre for Accreditation (PCA) is a domestic accreditation body authorised to accredit conformity assessment bodies under applicable law. No PCA assessment is equivalent to the loss of accreditation for testing/sampling. Law regulates the areas where accredited methods are required. In case of difficulties related to the PCA operations, the legal possibility of extending the validity of licences already granted seems appropriate.	Act of 13 April 2016 on conformity assessment and market surveillance systems (consolidated text of Dz.U./Journal of Laws/ 2022, item 5)   Polish Centre for Accreditation Procedures/Policies   Act of 27 April 2001 – Environmental Law (consolidated text of Journal of Laws of 2021, item 1973).
Reducing the frequency of testing of the working environment and pollutant emissions/imissions	The frequency of testing is regulated by law; if the laboratories’ capacity to carry out tests and measurements concerning the working environment and emissions is reduced, it is reasonable to reduce their frequency temporarily.	Ø Regulation of the Minister of Climate and Environment of 7 September 2021 on the requirements for measuring emission levels (Journal of Laws of 2021, item 1710);   Ø Regulation of the Minister of Climate and Environment of 11 December 2020 on the evaluation of levels of substances in ambient air (Journal of Laws of 2020, item 2279)   Ø Regulation of the Minister of Health of 2 February 2011 on tests and measurements of health risk factors in the working environment (Journal of Laws of 2011, No. 33,  item 166).
Renewal of other permits held by economic operators (e.g. water permits), licences (e.g. ones issued by sanitary and epidemiological stations)	In case of difficulties related to public administration operations, the legal possibility of extending the validity of licences already granted seems appropriate.
Continuity of key services
Ensuring access to chemical reagents and consumables for key economic operators	Lack of access to chemical reagents and consumables will result in an inability to provide services to: Ø process line entities; Ø local government administration, the population in the area of testing water for consumption and food.
Simplification of customs procedures for the purchase of reagents and consumables outside the EU	In the case of the need to supply essential inputs from outside the European Union, it would seem advisable to simplify customs procedures or even reduce customs duties and fees.
Environmental protection
Provision of hazardous waste collection	In case of armed conflict – given the possibility that authorised entities may cease to provide services in this area – takeover of the provision of services relating to the disposal of hazardous waste, including veterinary waste, by municipalities.	Act of 14 December 2012 on Waste (consolidated text of Journal of Laws of 2021, item 779)
Energy security
Ensuring access to electricity for key economic operators	In case of armed conflict – giving priority to energy consumers who are key economic actors to maintain production continuity.
Finance and taxation
Simplification and extension of deadlines for the settlement of corporate taxes (CIT, VAT)   Extension of the reporting deadline.	In case of armed conflict, communication problems with the public administration will affect the ability to settle taxes on time.	Act of 15 February 1992 on Corporate Income Tax (consolidated text of Journal of Laws of 2021, item 1800).

 

1. Sports

• Keeping activities and procedures to a minimum;
• Systematic monitoring of the course of actions in Poland and Ukraine (support of services responsible for public security, cooperation of administration bodies, entrepreneurs, groups of companies, etc. support of security divisions);
• Efficient communication (including crisis communication), defining a list of communication priorities;
• Designation of alternative venues for major sports activities/meetings/events;
• Designation of a crisis centre coordinator and responsibilities for individual persons;
• Creation of a backup of IT resources;
• Periodic workplace safety procedure refreshers for employees, i.e. information on emergency exits, muster areas, first aid kits, etc.

1. Glassmaking, glass packaging

Risks associated with reduced gas supply to the glass packaging industry

It is necessary to ensure a continuous (uninterrupted) gas supply to the glass packaging industry. A potential interruption of supply, even a short one, can cause irreparable damage and jeopardise safety. 

1. Potential effects of a natural gas shut-off on the industry

1. Due to the very high temperatures (approx. 1500°C), the sudden interruption of the operation of glass-melting furnaces as a result of restrictions on the supply of gas poses an immediate danger to the workers’ life and health and also threatens to destroy industrial facilities used in the manufacture of glass.
2. There are over 40 large and many smaller glass-melting furnaces in operation in Poland. In the largest ones, there are approx. 400 tonnes of liquid glass.
3. Shutting off the natural gas supply to a glass-melting furnace means:
   – the solidification of liquid glass in the furnace;
    – the irreversible destruction of the entire furnace – the most important part of a glass factory that typically operates continuously for 15 to 20 years.
4. Due to the nature of the production process and the design of the furnaces required, it is impossible to empty them of liquid glass within a short period (e.g. several hours).
5. Draining glass from the furnace takes several days, preceded by many days of preparation and constructing a dedicated system.
6. Bearing in mind the potential scale of the problem (number of systems, availability of ceramic and refractory materials from which the glass-melting furnaces are built and availability of specialist companies), the time for reconstruction of the systems should be counted in years (making a very optimistic assumption that in such conditions the owners will decide to reinvest in them at all).

1. Potential economic effects

1. In case of the destruction of most Polish glassmaking facilities, these consequences would potentially affect not only around 20 glass factories but would also result in the dismissal of several thousand workers and the bankruptcy of the owners of these factories.
2. The associated damage would include months of halting or significantly reducing the production of the food and beverage industries, which are vital to the functioning of the country and life. The number of domestic customers for glass products ranges from a few dozen to more than a hundred per glass manufacturer.
3. Import substitution of domestic production of glass products destined for other industries must be considered impossible in practice.
4. The vast majority of recipients of glass products are not in a position to store glass packaging for the manufacture of their products in large quantities – greater than the stock corresponding to their production of a few days.
5. Poland is the fifth largest producer of glass in Europe. Production is carried out on a very large scale – in the case of container glass, it amounts to approx. 1.8 million tonnes per year and approx. 8.5 billion pieces of glass packaging. 
6. Polish glassworks also have a positive impact on the balance of trade. A large proportion of the glass industry’s products is sold on foreign markets.
7. The glass industry also supplies a number of key sectors for the foreign trade balance (e.g. producers of premium spirits, beer, processed foods).
8. The number of regular suppliers of raw materials, packaging, spare parts for machinery and equipment and specialised services can reach up to 50 per glassworks. Natural and chemical raw materials of domestic origin predominate among the raw materials. The stoppage of production at glassworks also means production cuts and probably a reduction in employment at these suppliers.
9. Due to the consumption of around 700,000 tonnes per year of recycled raw material (cullet) – keeping glassworks running is crucial not only for the glass recycling industry but for the entire waste management system.

 

See: 17 March 2022 Business commentary and recommendations on the economic risks associated with the war in Ukraine