Credit Manager Magazine 6/2021

46 CREDIT MANAGER MAGAZINE czerwiec / june 2021 ANALYSIS Poland’s green opportunity: deploying EU funds to accelerate transition to more sustainable long-run growth Cross-party agreement on the recovery and resilience plan is a potential breakthrough for Poland, providing a much-awaited opportunity to narrow the gap with the rest of the EU on addressing climate change. However, the government’s capacity to effectively deploy EU funds and define environmental priorities remain concerns. A more sustainable economic growth model would support Poland’s credit outlook. Dennis Shen Director, Sovereign and Public Sector ratings, at Scope Ratings GmbH Poland (rated by Scope A+/Stable Outlook) faces one themost challenging paths in Europe for the reduction of greenhouse-gas emis- sions (see Figure 1). The agreement among the country’s political parties that will unlock nearly EUR 60bn in EU grants and loans will help accelerate Poland’s transition towards carbon neutrality by 2050 – if the funds are invested efficiently in the right projects. Poland’s recovery and resilience plan, agreed after months of negotiations, must still be assessed by the European Commission and approved by the Council of the European Union, which may request more ambitious objectives than those under the current draft. However, the Polish government is likely to follow Brussels’ guidance if only because of the scale of EU funding involved, which, at EUR 58.1bn, represents more than 10% of estimated 2021 GDP. The funds include EUR 23.9bn in grants, as part of the EUR 750bn Next Generation EU (NGEU) fund’s Recov- ery and Resilience Facility. The agreement gives Poland a chance to narrow the gap with the rest of the EU on climate We recognise that financial considerations have clearly contributed to the political agreement as Poland is expected to be among prime EU beneficiaries of NGEU proceeds. However, the agreement now gives the coun- try a chance to narrow the gap with the re- mainder of the EU in achieving climate objectives and, in the process, reducing sus- tainability-related credit risk. Poland and its central and eastern European neighbours the Czech Republic (AA/Stable Outlook) and, to a lesser extent, Hungary (BBB+/Stable) face among the highest costs in transforming their economies from re- liance on greenhouse gas-emitting energy sources to renewable sources of energy. The three countries have low average shares of renewables in their energy mixes as well as poor resource productivity. Poland remains reliant on coal for around 75% of electricity needs. Electricity-intensive industry remains the bedrock of the Polish economy, making the country among the highest CO2 emitting nations of the EU, on per capita and unit of GDP bases. All of this has contributed to Poland being the most reluctant EU member state to embrace 2050 net-zero emissions objectives. Figure 1: Greenhouse gas emission intensity of power generation, G CO2 equivalent/kWh, 2016 Source: Destatis, Scope Ratings GmbH and OECD statistics. Note: Poland as well as neighbouring coun- tries Czech Republic and Hungary are marked in orange.