This is an age in which populist and nationalistic discourse trumps liberal, internationalist and progressive politics. In this environment, it's no surprise that Poland’s ruling right wing Law and Justice Party (PiS) rose to power pledging a tougher stance on refugees, more state control over the economy and opposing UN-led plans to curb CO2 emissions.
Poland has the largest economy in Central Europe, and relies on coal for 85% of its electricity generation. Coal is intrinsically linked to the Polish economy, providing 171,500 jobs in August 2016, according to EU data. It is unsurprising that Jan Szyszko, Poland’s minister of the environment wrote that Poland is willing to implement the emission reduction goal of 40% by the year 2030 agreed for the EU, “but only on terms that take into account the specificity of the Polish economy”.
In Szyszko’s words “hard coal and lignite is the foundation of Poland’s economy and sustainable development”. But short of closing all the coal mines, the PiS is doing the next best thing, and working to stimulate growth in the renewable energy sector.
Poland did ratify the Paris Agreement on October 7, and in doing so committed to reducing its GHG emissions in line with the below 2°C objective outlined in the Paris Agreement.
And now it is putting this promise into action in preparing to issue a green bond. Critics have said that the government has done very little to prove itself on climate change, but at least it's starting to do so now.
Issuing a green bond is not an easy task, and the required reporting has been enough to deter some issuers. Poland hasn’t just been talking about doing a bond, it has everything in place to issue immediately, according to a banker at one of the leads on the deal.
In its Green Bond Framework, published on December 5, Poland outlined its National Renewable Energy Action Plan (NREAP) in which, among other things, it aims to ensure an increased share of renewable energy sources are used in final energy consumption of up to at least 15% by 2020, and to build a 10% share for biofuels in transport fuel by 2020.
The government has earmarked six sectors for which the proceeds of the deal can be used, either for new financing, or the refinancing of existing eligible projects.
These are clean transportation, sustainable agricultural operations, afforestation, national parks, the reclamation of spoil heaps and finally the renewable energy sector under which Poland’s Green Bond Framework specifically noted “where waste to energy plants are on a standalone basis and not used for cogeneration in coal plants”.
Poland has also secured the support of an independent second party, Sustainalytics, to verify its proposed five year euro benchmark issue. The firm noted that Poland’s plans are indicative of the priority it assigns to achieving its climate change mitigation goals.
Of course Poland will have to prove that this is not just a one-off, a marketing exercise which will please only the green bond sceptics. That would be rather more damaging to Poland’s reputation.
That Poland is the first sovereign to roadshow a green bond is remarkable, but that doesn't mean the market should react with cynicism. France has spoken openly about preparing to issue a green bond, as have Nigeria and China. These governments should really take note, and start doing, not just talking.