The shoemaker’s children are ill-shod, saying teaches. And there is folk wisdom to it, because Poland, the world’s 9th biggest coal producer and by far largest in Europe, has run out of it.
The year is 2022. The whole of Europe has been decarbonized, at least in a sense of coal production. But the last village still stands, the last coal superpower in this part of the world responsible for 96% of the EU’s hard coal production. And yet, there’s no coal in warehouses, prices per 1 ton are 3-4 times higher than last year and 10 times higher than 3 years ago, people are desperate, and the government is bouncing from setting legislative cap prices for 1 tonne to giving away 3 thousand zlotys per household which generates heat from burning coal.
What happened, why, and what’s next?
We have to go way back and introduce the framework in which we operate. Around 3.5 mln Polish households, mostly detached houses, keep warm in winter by burning coal. It means, that 87% of households in the EU, that generate heat this way, are located in Poland. It’s one of the reasons for poor air quality.
Some 75% of those households were buying coal for individual heating from… Russia. Why? Because it was cheaper and better adapted for solid fuel stoves than coal from Polish mines, which mostly covered (and still is) the needs of electricity-producing utilities.
Poland bought 8.3 mln tonnes of coal from Russia in 2021. After the Russian invasion of Ukraine, the Polish government decided, as the first in the EU, to impose sanctions on Russian coal, and in the middle of April, the embargo became law and became effective. And rightly so, Europe needs to gradually depart from Russian fossil fuels. Soon, the EU collectively decided to do the same, but only the date was different – August 1st is the first day of the full EU embargo on Russian coal.
It seems like the Polish government impose an embargo and they started to think about what’s next. Because Russian coal has to be replaced by other sources. At the turn of June, it became clear that there is a shortage of coal which has traditionally been sold for individual heating. Polish Mining Group (PGG), the largest producer, but some of its resources on the market, but usually it took weeks before the order would be completed.
Meanwhile, the government introduced a bill that imposed the maximum price of the tone of hard coal at 996,10 zloty which is the average 2021 price. For any trader, who would sell to the public for this price, the government would transfer 750 zlotych per tonne. Soon enough, the bizarre mechanism became outdated and ineffective. The turnout from traders was low to the disappointment of Warsaw. They shouldn’t be surprised though. When the bill was signed by the president, the average retail price on the market was 2500-3500 zlotys/tone so no one in their right mind would accept the government offer.
In the middle of July, prime minister Mateusz Morawiecki ordered two state-owned companies to buy 4.5 mln tonnes until August 31st despite earlier assurances from the climate minister that 8 mln tonnes (which should fill the gap after Russian coal) are already contracted.
Then Warsaw switched strategy again. The government decided to give every household that generates heat in a solid fuel stove with coal 3 thousand zlotys. But it’s not the end of the peculiar Polish coal saga of 2022 because money won’t buy a product if there’s a shortage of supply. And it seems that in the last week of July, there is still not enough coal for individual households in the market.