EUROPEAN COMMISSION Brussels, 1.6.2022 SWD(2022) 161 final COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Poland Accompanying the document Proposal for a COUNCIL IMPLEMENTING DECISION on the approval of the assessment of the recovery and resilience plan for Poland {COM(2022) 268 final}



Table of contents 1. Executive summary 2. Recovery and resilience challenges: scene-setter 2.1. Macroeconomic outlook and developments since the 2020 country report 2.2. Challenges related to sustainable growth, cohesion, resilience and policies for the next generation 2.3. Challenges related to the green and digital transition 3. Objectives, structure and governance of the plan 3.1. Overall strategy of the plan 3.2. Implementation aspects of the plan 4. Summary of the assessment of the plan 4.1. Comprehensive and adequately balanced response to the economic and social situation 4.2. Link with country-specific recommendations and the European Semester 4.3. Growth potential, job creation, economic, institutional and social resilience, European Pillar of Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence 4.4. The principle of ‘do no significant harm’ 4.5. Green transition 4.6. Digital transition 4.7. Lasting impact of the plan 4.8. Milestones, targets, monitoring and implementation

4.9. Costing 4.10. Controls and audit 4.11. Coherence ANNEX – Climate and Digital tagging

1.Executive summary The implementation of the recovery and resilience plan is expected to contribute significantly to the recovery from the COVID-19 crisis. The COVID-19 pandemic pushed Poland’s economy into a broad-based recession in 2020. After nearly three decades of uninterrupted economic growth, Poland’s economy contracted by 2.2% in 2020. The fall in GDP was milder than the EU average, however, as Poland’s low exposure to hard-hit sectors and its diversified economic structure cushioned the impact of containment measures on economic activity. Real GDP then recovered strongly in 2021 despite recurring COVID-19 waves and supply chain disruptions, swiftly putting Poland back to its pre-pandemic output path. According to the Euroepan Commission’s Spring 2022 Economic forecast, real GDP is expected to decelerate to 3.7% and 3.0% in 2022 and 2023, respectively. After falling to its all-time low in 2020, the unemployment rate is expected to increase again to 3.9% in 2023, mainly driven by the significant inflow of displaced persons from Ukraine, which will increase Poland‘s labour force. In 2021, the government deficit declined to 1.9% of GDP. The general government debt-to-GDP ratio is expected to decline from 57.1% of GDP in 2020 to some 49.8% of GDP over the forecast horizon. The plan fully uses the estimated grant allocation of EUR 23.9 billion and Poland has requested EUR 11.5 billion of loans under the Recovery and Resilience Facility. Poland’s challenges relate mainly to shifting the economy towards higher value-added and lower emissions while improving the quality of key public services, such as education and training, health, long-term care and a stable and a predictable regulatory environment. The recovery and resilience plan should make a significant contribution to boosting the country’s economic rebound and contribute to a green, digital, inclusive and resilient future. Structured around the six pillars, the plan gives a focused response to several of Poland’s structural challenges. The plan is expected to contribute to effectively addressing a significant subset of the structural challenges identified in the country-specific recommendations of 2019 and 2020. The plan’s strong focus on energy transformation and the decarbonisation of the economy, sustainable transport, digital transition, improving the labour market relevance of vocational education and training and lifelong learning, improving accessibility and quality of early childhood education and care below the age of three as well as accessibility and quality of healthcare, innovation-enhancing support, addressing labour market segmentation and improving the investment climate can be considered a comprehensive and adequate response to the challenges Poland is facing. The implementation of the recovery and resilience plan is expected to contribute significantly to economic growth and job creation in Poland, while strengthening economic, social and institutional resilience. RRF support for research and innovation is expected to enhance research commercialisation activities and to facilitate innovation diffusion in the business sector, which is expected to lead to productivity growth in the medium to long term. The RRF support is expected to provide a boost to aggregate demand in the short to medium term, improving the cyclical position of the Polish economy, and thereby mitigating the adverse economic effects of the COVID-19 crisis. The plan also contains several measures contributing to increasing social resilience. They include measures for further development of childcare and long-term care, which are expected to improve the labour market participation of women. Additionally, extending the obligation for social security contributions to all civil law contracts is expected to further reduce the segmentation of the labour market and to provide better social protection to certain workers. Personal income tax reductions envisaged for taxpayers reaching the statutory retirement age and deciding to continue working aim at extending careers and are expected to help decrease income inequalities for the elderly. Resilience of the labour market is expected to be strengthened by measures improving the quality and adequacy of the functioning of Public Employment Services and reaching out to and activating older workers or people from disadvantaged groups through up- and reskilling programmes. Measures to attract and integrate labour migrants as well as to promote flexible forms of employment are expected to further increase the resilience of the labour market. The plan is expected to contribute to addressing challenges related to the investment climate, notably with regard to the Polish judicial system as well as decision- and law-making processes. In particular, the plan contains measures aiming to reduce the regulatory burden and improve the quality of law-making by reducing the use of fast-tracking procedures and rendering mandatory the use of impact assessments and public consultations. Furthermore, dedicated measures aim to strengthen the independence and impartiality of courts, through the reform of the disciplinary regime applicable to judges. With 42.7% of its allocation dedicated to climate-related measures, Poland’s recovery and resilience plan has a strong focus on climate mitigation and adaptation as well as environmental restoration and contributes to achieving the 2030 and 2050 climate targets. Increasing the installed capacity of onshore wind farms and photovoltaic installations, investments in renewable energy production – in particular offshore wind farms – and renewable and low-carbon hydrogen capacity combined with a set of reforms aimed at facilitating investments in onshore wind should help Poland achieve its 2030 renewables target. A wide programme of replacing coal-fired boilers combined with building renovations will decrease their impact on greenhouse gas emissions and improve air quality. In transport, a comprehensive package of reforms and investments will promote zero-emission mobility (both on roads and railways), multi-modality, road safety and sustainable public transport. The plan also includes reforms and investments aimed at water management in rural areas. All measures in the Polish plan pass the ex-ante assessment of the ‘do no significant harm’ principle. Any potential harmful environmental and climate impact is addressed through appropriate assurances that the applicable criteria are to be respected. For some measures contained in the energy or transport components, which are sensitive from a climate and environmental point of view, Poland ensures that no significant harm to the environment be done through a binding commitment to comply with the relevant requirements of the “do no significant harm” technical guidance of the European Commission (2021/C 58/01). With 21.3% of its allocation dedicated to digital measures, the plan is expected to contribute significantly to the digital transformation of the Polish economy and society. The plan puts strong emphasis on connectivity, which aims to provide access to fast internet connection in white Next Generation Access (NGA) areas, where internet access of at least 30 Mb/s is not guaranteed, and foster commercial investments in modern electronic communication networks. The development of digital skills is one of the objectives of the Digital Competence Development Programme and of the overarching investment in basic digital skills of different groups of the population, including civil servants, teachers, citizens with insufficient basic digital knowledge and people excluded or at risk of exclusion. The new policy for the digitalisation of education, common digital standards for schools and the substantial investment in ICT equipment for schools and teachers aim to ensure equal access to digital education and to support the efficient integration of ICT in teaching and learning. The plan also focuses on improving e-Government services and cybersecurity of the public administration and of the economy, on innovation, labour market, agriculture, green energy and reduction of energy intensity, e-health and transport. The plan is expected to have a lasting impact on Poland. The plan includes a package of measures aimed at addressing several structural challenges identified in the context of the European Semester. The measures in the plan also are set to facilitate the green and digital transitions and strengthen the growth potential, job creation and economic and social resilience of Poland. The measures presented in this respect comprise structural changes to the administration or relevant institutions and policies. The lasting impact refers to policy areas where the estimated long-term impact on growth potential and employment is significant but also in areas where structural changes are expected to improve social aspects that are not necessarily quantifiable. More specifically, the plan includes relevant structural changes to the public administration and institutions. Notably, reforms to improve the investment climate and to encourage the uptake of digital solutions in the public sector are set to have a lasting impact. The digitalisation efforts across a wide range of public institutions and administration levels have the potential to structurally enhance efficiency and improve the quality of public services. The plan includes several measures to foster the green transition, having a lasting impact on many aspects of the economy, including environmental, health, and competitiveness ones. Several policy changes are envisaged to improve the business environment with a lasting impact on the country’s competitiveness and potential for increasing investment. In the area of health, the reform of the hospital supervision system will likely support cost-efficiency and the quality of services. As far as labour market and education are concerned, the plan includes measures that will have a lasting positive impact by increasing labour market participation, limiting labour market segmentation, improving the quality of early childhood education and care below the age of three, modernisation of vocational education and training, and providing up-skilling and reskilling opportunities. Finally, the reform to modernise and simplify public finance management will strengthen Poland’s budgetary framework and enhance more efficient management of spending. The plan proposes a comprehensive and coherent set of milestones and targets that are clear, realistic and with a sufficient level of ambition to achieve the objectives of each component. Indicators attributed to milestones and targets are relevant, acceptable and robust. Poland has set up a comprehensive implementation system with a leading role of the Ministry of Funds and Regional Policy. Concretely, the Ministry is responsible for monitoring the implementation of the plan, verification of achievement of milestones and targets, reporting to the European Commission, establishing procedures for the implementation of the audit, and for drawing up and submitting payment requests and management declarations to the European Commission. The plan also provides adequate information on coordination and reporting mechanisms between the Ministry and other actors in charge of the implementation of investments and reforms. The same applies to the information concerning the assurance of management verifications, in particular for the fulfilment of milestones and targets. Overall, sufficient information and supporting documents has been provided to conclude that the estimated total cost of the plan is reasonable and plausible, commensurate to the expected national economic and social impact, and additional to other funds. The calculations and the methodology and assumptions made for the cost estimates of the various measures of the plan are clear and understandable. Poland has also provided a sufficient volume of justification and evidence to underpin the reasonability and plausibility of those cost estimates. These are most often built on the basis of the previous projects carried out for similar investments in the past. The plan does include some operational costs which cannot be considered as recurring because their nature is temporary and exclusively limited to the achievement of the relevant investment or reform. As regards additionality, the plan provides information on other sources of EU financing where relevant and sufficient assurance that the same type of cost will not be financed from several sources of EU funding. The arrangements proposed in the recovery and resilience plan are adequate to contribute to prevent, detect and correct corruption, fraud and conflicts of interests, provided that pending issues are addressed in due time, through specific measures contained in the proposal for the Council implementing decision. The arrangements are expected to effectively avoid double funding and help lower the risks as regards the effectiveness of the fight against corruption. The plan presents a coherent and comprehensive package of reforms and investments mutually reinforcing each other with a strong reform drive. Synergies between measures in the plan and with other national policies are ensured within components (for instance in the areas of transport, energy and digitisation) as well as horizontally across several components (for instance by improving e-competences in the digital component and increasing labour market relevance of vocational education and training, including upskilling with digital skills, in the education sub-component).

No/insufficient info provided Satisfactory Satisfactory, but justification lacking Partially satisfactory Unsatisfactory (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Balanced Response CSRs Growth, jobs… DNSH Green target Digital target Lasting impact M & T Costing Control Systems Coherence A A A A A A A A B A A 2.Recovery and resilience challenges: scene-setter 2.1.Macroeconomic outlook and developments since the 2020 country report The COVID-19 pandemic had a significant impact on the Polish economy, but the recovery was swift and robust. Before the pandemic, Poland was going through a period of strong economic growth. Real GDP expanded by 4.7% in 2019, driven by a robust performance of both domestic demand. Private consumption was thriving amid high consumer confidence and a buoyant labour market, which was recording all-time low unemployment rates and strong wage dynamics. The COVID-19 pandemic led to a sudden halt of GDP growth in 2020 as containment measures disrupted economic activity and foreign demand plunged. Following the introduction of government restrictions in March 2020, real GDP contracted by 3.8% in the first half of the year. Economic activity then rebounded strongly in the third quarter of 2020, growing by 7.3% q-o-q, but a surge in new infections and the reintroduction of containment measures during the last months of 2020 weighed on recovery. As a result, real GDP contracted by 2.2% in 2020, representing the first recession in Poland in nearly three decades. In 2021, despite recurrent COVID-19 waves, the economy continued a strong growth path, reaching pre-crisis levels of GDP in Q2-2021. Booming private consumption was the main driver of the rebound, supported by high levels of accumulated savings and a strong labour market. All in all, real GDP expanded by 5.9% in 2021, putting Poland back to its pre-pandemic output path. All sectors of the economy have been affected by the crisis, but the services sector took the hardest hit. At the beginning of the pandemic, the lockdown impacted the economy as a whole. Industrial production fell by 25.1% in April 2020 in year-on-year terms, driven by an unprecedented drop in manufacturing, particularly in the car industry. Shop closures also led to a plunge of retail sales, which decreased by 11.8% year-on-year in April 2020. Yet, as restrictions became more targeted and supply chain disruptions observed at the beginning of the pandemic gradually disappeared, most economic sectors saw a strong and sustained recovery from May 2020 onwards. Nevertheless, restrictions on activities that require face-to-face interactions weighed on the recovery of the services sector. After the historical drop in confidence and turnover during the first wave of the pandemic, the services sector only managed to partially recover the losses during the 2020 summer period. The recurrent waves of the pandemic further contained the recovery, resulting in a drop of almost 6.3% in gross value added in 2020 in services, vs. the -2.6% in the economy as a whole . Still, the sector was aided by significant public support, mainly in the form of loans and grants to companies, which prevented a sharp and sudden rise in bankruptcies. The macroeconomic scenario contained in Poland’s Recovery and Resilience Plan expects a rebound of economic activity in 2022-2023, following the COVID-19-induced contraction in 2020. The macroeconomic scenario underpinning the plan had 31 March 2021 as a cut-off date. Thus, the projections do not take into account economic developments for 2021 and the beginning of 2022, including the real GDP growth publication for 2021, which stood at 5.9%. For 2022, the forecast projects real GDP growth at 4.3%, driven by a strong pick-up in private consumption and investment, which is expected to be helped by public investments financed from the Recovery and Resilience Facility and by the drawing of Multiannual Financial Framework (MFF) funds. Growth is then expected to gradually moderate in 2023 and 2024 to around 3.7%-3.5%. The output gap is estimated to be closed by 2022 with output above potential thereafter. According to the plan, inflation is set to return to the 2.5% corridor over the forecast horizon. Against this backdrop, the scenario expects unemployment to peak in 2021 before gradually falling to 2.0% in 2024. Poland’s labour market was showing signs of overheating before the crisis, with unemployment reaching an all-time low at the beginning of 2020 and wage growth standing at 7.3% in 2019. The COVID pandemic had a limited impact on the labour market, mainly due to sizeable fiscal support, which encouraged cutting worktime instead of jobs. According to the baseline scenario of the plan (that does not factor in the positive impact of the plan), unemployment is expected to gradually decrease to 2.0% in 2024. Structural challenges in the labour market remain, however, despite its good performance since the recovery took hold. These include a low labour market participation of some population groups, segmentation in employment protection, differences in employment rates across regions, as well as labour and skill shortages. Although the employment rate increased to all-time highs, women’s participation in the labour market remains significantly below that of men, as they generally bear a larger share of care responsibilities. Despite investments in online education, the COVID-19 pandemic has deepened inequalities in education, affecting in particular disadvantaged students, which may also lead to increased early leaving from education and training in the long run. Labour shortages continue to be a significant problem, as it limits the ability of the economy to restructure towards high-growth and highly productive sector. Income inequality in Poland remains around the EU average, while the share of people at risk of poverty or social exclusion has been decreasing steadily in recent years, standing below the EU average in 2019. The pandemic had a strong negative impact on public finances. The budget deficit reached 6.9% of GDP in 2020. By 2023 it is set to decline to 4.4% of GDP, according to the 2022 Spring Commission forecast. Discretionary policy measures in response to the pandemic amounted to 4.5% of GDP in 2020. For 2022, the baseline scenario of the plan (which does not take the impact of the plan into consideration) expects a deficit of 4.2% of GDP, which is expected to decline to 2.5% of GDP by 2024. This does not take into consideration the impact of the measures included in the plan on public finances. After an increase in the debt-to-GDP ratio to 57.1% due to the combined effect of the macroeconomic downturn and fiscal package to counteract the crisis in 2020, the 2022 Spring Commission forecast projects the debt to reach 49.8% of GDP in 2023. The plan specifies a number of risks for the macroeconomic scenario. Downside risks mainly relate to a stronger-than-expected rise in inflation stemming from supply constraints and labour shortages, which could weigh on purchasing power and private consumption growth. New COVID-19 waves, especially given Poland’s relatively low vaccination rate, could also hinder the recovery. On the other hand, a better-than-expected recovery of Poland’s main trading partners could boost growth, representing a significant upside risk. On balance, risks are tilted to the downside, but the outlook remains broadly uncertain. Table 1: Comparison of macroeconomic developments and forecasts 2019 2020 2021 2022 2023 2024 COM COM COM COM RRP COM RRP RRP Real GDP

(% change) 4.7 -2.2 5.9 3.7 4.3 3.0 3.7 3.5 Inflation

(% change) 2.1 3.7 5.2 11.6 2.8 7.3 2.6 2.5 Employment (15-74 years, % change) 0.0 0.0 1.5 0.4 0.0 0.3 0.0 0.0 Unemployment rate (%) 3.3 3.2 3.4 4.1 3.0 3.9 2.5 2.0 GG net lending

(% of GDP) -0.7 -6.9 -1.9 -4.0 -4.2 -4.4 -3.2 -2.5 Government debt

(% of GDP) 45.6 57.1 53.8 50.8 - 49.8 - - Source: Commission 2022 Spring Forecast; Recovery and Resilience Plan (RRP) The forecast underpinning the plan is different than the latest Commission’s forecast, but this is largely due to different cut-off dates . The forecast underpinning the plan had as a cut-off date the 31 March 2021. It has not been updated after the Plan was submitted in May 2021. At the same time, the latest European Commission projections are from the Spring 2022 forecast, with a cut-off date of 29 April 2022. Consequently, differences between the forecast in the plan and the European Commission’s forecast mainly stem from different cut-off dates, which result in varying assumptions and data underpinning both forecasts. The forecast underpinning the plan is slightly more optimistic than the European Commission’s forecast. The 2022 Commission Spring forecast expects real GDP growth to be below that of the RRP forecast. In particular, the Commission 2022 Spring forecast expects real GDP to grow by 3.7% and 3.0% in 2022 and 2023, respectively. This is less optimistic than the forecast underpinning the plan, which projects growth at 4.3% in 2022 and 3.7% in 2023. The European Commission’s less optimistic forecast is largely due to the inclusion of the Russian invasion of Ukraine into the forecast, which significanly clouded the outlook for the Polish economy. In line with the Polish authorities, the Commission considers that domestic demand, particularly private consumption, will be the main growth driver over the forecast horizon. For net exports, the MoF projections expect a negative contribution of net exports to growth in 2022, before remaining broadly stable in 2023. This goes against the European Commission’s forecast, which project a positive – albeit small – contribution of net exports to growth in 2022 and 2023. Regarding the labour market, the European Commission forecast projects the unemployment rate to increase in 2022 due to the significant inflow of displaced persons from Ukraine. For inflation, the Commission forecast foresees a substantially stronger acceleration of inflation over the forecast horizon. For the general government deficit, the Commission forecasts a better performance compared to the Plan for 2022, but worse for 2023, mainly due to the assumptions on cost of aid to displaced persons from Ukraine. Years beyond 2023 are currently not covered by the Commission forecast. The macroeconomic and fiscal outlook continue to be affected by high uncertainty related to the COVID-19 pandemic and Russia’s unprovoked invasion of Ukraine. The macroeconomic scenario of the plan is overall plausible. The economic scenario is identical to the one contained in the 2021 budget, National Reform Programme, Stability and Convergence Programme and has been developed by the Ministry of Finance. The economic projections are broadly similar to those from other international institutions and independent government agencies.

2.2.Challenges related to sustainable growth, cohesion, resilience and policies for the next generation Poland has made fast progress in catching up with the EU average in the years following EU accession, driven by a significant inflow of foreign direct investment and close access to the EU market. GDP per capita in Poland increased from 63% of the EU average in 2010 to around 73% in 2019, in Purchasing Power Parity terms. This period of swift convergence was based on deeper integration of Poland’s economy into global value chains, mainly thanks to the relative competitiveness of Poland’s businesses, including lower labour costs compared to the EU average. However, despite considerable progress in recent years, Poland faces significant long-term structural challenges that can hinder the country’s potential to maintain a sustainable growth path, resilience and cohesion in the coming decades. An overarching challenge that Poland faces is the transition towards a higher value-added economy. This includes increasing Poland’s research and innovation capacity in order to upgrade its growth model from cost-competitiveness towards sustainability and more advanced products and services in the medium to long term. Measures in this area should focus on improving public-private cooperation and knowledge transfer, strengthening the mechanisms and support structures for the transfer of research, as well as supporting the commercialisation of research and innovation, which includes generally improving the R&D&I governance framework. Improving investment in innovation and R&D through e.g. fiscal incentives, regulatory changes, increased Science, Technology, Engineering and Mathematics (STEM) education and public investment will be key to help Poland develop products and services that will allow its economy to move up the value-chain. The pandemic has amplified the need for tackling structural deficiencies in Poland’s social services, labour market and education system. Social benefits should be better targeted to those in need. Challenges persist in the provision of social services, such as the underdeveloped childcare and long-term care services. These also hinder the labour market participation of various groups, in particular of women. Labour shortages have limited Poland's growth potential and ability to move up the value chain. Significant skills gaps as well as a decrease of the working-age population contribute to the labour shortages. To address the declining number of people at working age, it is important to encourage labour migration and the integration of migrants, particularly the high-skilled. As nearly half of the adult population lacks basic digital skills and the overall adults’ participation in learning is low, enhancing digital skills and efficient coordination of life-long learning policies is paramount. Increasing labour market participation of women, older people, persons with disabilities and their carers, those with lower qualifications, removing obstacles to more permanent forms of employment and improving the labour market relevance of skills is needed for more resilience in the future. Moreover, the frequent use of non-standard labour contracts (work contracts based on civil law) has led to labour market segmentation. While it has been limited in recent years, it is important to tackle the varying social protection. The pandemic has indicated that expanding and enhancing flexible working arrangements (e.g. distance working and flexible working time schemes), notably under permanent types of employment, may also help support groups with lower activity rates to find permanent employment. The Polish healthcare system is inefficient and excessively relies on hospitals, based on the most costly type of care. Shifting towards primary and ambulatory care is of particular importance, as healthcare spending is expected to grow considerably in the medium to long term, increasing the burden on public finances. Some hospitals run substantial debts and with low occupancy rates, while many medical procedures currently performed in hospitals could be performed at lower levels of care and at lower costs. Therefore, a shift from hospital to outpatient care is important and should be underpinned by a clear vision for reform and consolidation of the hospital sector. The primary care system is understaffed and overstretching its services. Its potential remains untapped, thus overburdening higher levels of care. At the same time, the hospital system suffers from chronic underfunding, especially in terms of human resources. Due to unfavourable conditions, such as low salaries, medical professions are not popular, and a significant ‘brain drain’ can be observed. The shortage in human resources places Poland in the lowest ranks compared with other Member States, and makes it necessary to keep professionals working beyond their retirement ages (with 40% of medical doctors over the pensionable age in some specialisations). Access to care differs among regions. Although progressing, e-health services are underdeveloped and underused. Since ensuring a favourable business and investment environment is important for the economy, especially to support the recovery of all sectors, Poland should address a number of challenges in this area. Fostering a stable and predictable regulatory framework, diminishing burdensome administrative requirements and procedures and frequent changes to key laws (in e.g. taxation, social security contributions, energy policies), improved use of experts, impact assessments and meaningful social partner consultations, and limiting the use of fast-track legislative procedures that do not require public consultations will help build a more resilient economy. Poland’s low private investment share to GDP compared to the EU average and peer countries could hinder its ability to transition into a more knowledge-based economy. Ensuring equal treatment of economic operators by an independent judiciary is also essential for a solid investment climate. Safeguarding and upholding the rule of law is a cornerstone for making the Polish economy more resilient. Safeguarding sound public finances is crucial to establishing the right conditions for mitigating the negative consequences of the pandemic and for making the economy more resilient in the future. Poland will face high expenditure pressures in the medium and long term as an effect of ageing of the population, an expected lower inflow of EU funds as Poland catches up with the EU, investments in the green transition and supporting the move towards a more knowledge-based growth model. At present, expenditure management in Poland has several weaknesses resulting from an outdated budget system and a frequent circumvention of fiscal rules. In view of limited expected tax collection gains, efficient and effective expenditure management will be key to ensuring fiscal sustainability. 2.3.Challenges related to the green and digital transition An overarching objective of the Recovery and Resilience Facility is to support the twin green and digital transitions. The Polish economy is lagging in bringing emissions reductions and energy sector developments into line with EU targets and in reaping the benefits of the digital transition, as measured in the Commission’s assessment of Poland’s 2020 National Energy and Climate Plan (NECP) and the 2021 Digital Economy and Society Index (DESI), respectively. To advance the green and digital transitions of society and of the economy, Poland needs to increase its ambitions and commit to long-term, consistent policies. This section recalls where Poland stands relative to the EU targets related to the green and digital transitions. Green dimension The recovery and resilience plan should contribute to the green transition and at least 37% of the financial allocation needs to contribute to climate objectives. The measures in the plan shall contribute to achieving the 2050 climate neutrality objective, and the 2030 climate and energy targets, taking into account Poland’s national energy and climate plan. They should also contribute to meeting environmental targets for waste, pollution control, sustainable mobility, biodiversity protection and restoration, marine and water resources, and support the transition to sustainable food systems and to a circular economy as appropriate, while ensuring that nobody is left behind.

To transition towards a climate neutral economy, Poland needs a progressive approach to decarbonisation and energy transformation. The Polish economy is very energy-intensive and highly dependent on fossil fuels. Around 72% of electricity is still generated in conventional coal power plants. Comprehensive planning, timely investment as well as the adoption of ambitious measures to support the energy transformation in line with the Green Deal are therefore essential. Lack of action in this respect would affect the competitiveness of the Polish economy in the coming decades due to, inter alia, increased energy costs. In addition, the reliance on fossil fuels hampers air quality, generating health problems and the associated health care costs. To address the issue, Poland should invest more in renewable energy, zero- and low-emissions heating and cooling, energy efficiency improvements in buildings, replacement and phasing out of inefficient and coal-based district and domestic heating, supporting energy savings and tackling energy poverty, as well as promoting zero- and low-emissions, smart and safe mobility and sustainable public transport. Moreover, more effort is needed in supporting investment in low-carbon innovation as well as energy- and resource-efficiency in industry sectors. Enhancing energy system integration across electricity and heating, industry and transport sectors is also necessary. Transition towards a low-carbon economy Poland is still one of the most energy-intensive economies in the EU, despite improvements over the last years. The greenhouse gas emissions intensity of the Polish economy is one of the highest in the EU due to the coal-based power generation and the economy’s reliance on heavy manufacturing. Air quality stands among the lowest in the Union, posing major environmental and health concerns. Poland’s 2020 NECP shows that significant additional measures will have to be implemented to achieve the national 2030 greenhouse gas emissions reductions target – for sectors not covered by the EU Emissions Trading System – of 7% below 2005 levels. A comprehensive and just transition to a climate-neutral economy calls for a clear strategy to reduce Poland’s coal dependency. Coal-based fuels play a key role in electricity and heat generation, industry, transport and agriculture sectors. Industry accounted for 22% of the national emissions in 2017. This sector has a considerable potential to reduce emissions through, for example, the electrification of industrial processes and improvements in energy- and resource-efficiency. Significant efforts are necessary to address emissions from the transport sector, accounting for 15% of emissions in 2017 and increasing year on year primarily in road transport. This includes shifting towards zero- and low-emission mobility and notably shifting from roads to rail and other modes of sustainable transport. Poland should also consider decarbonising the agricultural sector which accounted for around 10% of emissions in 2017. Finally, Poland should increase the share of renewables in energy production. Increasing the share of alternative zero or low-emission energy sources While the share of renewable energy has increased over the past years, Poland should accelerate the deployment of renewable energy in order to contribute to the decarbonisation of the economy in line with the 2050 targets. Pursuant to the Renewable Energy Progress Report , in 2018 Poland was identified as one of the few Member States that was at a severe risk of failing their 2020 renewable energy target. While the 2020 target has been met, further accelerated progress is needed in line with the Union’s new climate targets. To achieve climate neutrality Poland will need to significantly step up its ambitions by increasing energy production from renewable energy sources. Not only is the current 2030 target considered unambitious compared to the applicable benchmark but the measures included in Poland’s 2020 National Energy and Climate Plan are considered insufficient even to achieve that target. The national contribution to the 2030 EU renewable energy target is 2-4 percentage points below the share of 25% by 2030 based on the formula in Annex II of the Governance Regulation. As established in the Commission’s assessment of Poland’s 2020 National Energy and Climate Plan (NECP), the planned policies and measures will not allow Poland to achieve the planned renewable electricity consumption of 32% by 2030. Additional measures need to be put in place to incentivise renewables. This includes supporting large-scale installations, such as offshore wind where a dedicated support scheme is needed. To stimulate investments in onshore wind farms, the regulatory environment should be improved by relaxing distance restrictions on the onshore wind installations that were introduced in 2016. Further measures, notably a clear long-term auctioning plan, and support to facilitate the production of renewable gases (e.g. biomethane) and their injection into the gas networks should be explored, while an increase of renewables in heating should be coupled with the modernisation of the district heating network and building renovations. With regard to electricity infrastructure, the integration of renewables requires the strengthening and expansion of transmission and distribution lines across the national territory and the development of storage capacity. Other important measures include the setting up of an enabling framework for renewable self-consumption and energy communities, and promoting market-based direct power purchase agreements (PPAs). Reducing energy consumption The poor energy efficiency of buildings is one of the key challenges in Poland impacting the level of energy consumption and air quality. Public and residential buildings often have low technical standards and approximately 70% of houses are poorly insulated. Poland’s progress towards the 2020 indicative national energy efficiency targets was considered insufficient for primary energy consumption and for final energy consumption. Although the level of ambition has been increased compared to the 2020 target, Poland’s planned national contribution to the 2030 energy efficiency target is modest. Air pollution is a major environmental challenge across Poland, with several regions severely affected (e.g. Małopolska and Silesia). This pollution comes to a large extent from individual heating sources in residential buildings and from road congestion in urban areas. Around 3 million inefficient and polluting boilers need a replacement. District heating networks are often inefficient and heat generation is mainly coal-based (about 78%) with a limited coverage, especially in small and medium-sized towns. As 42% of Polish households are connected to district heating systems, Poland should address this challenge by phasing out coal-based heat sources and replacing them with less carbon-intensive sources. These investments should be combined with more connections of houses to district heating networks and with a reduction of heat demand by better insulating houses and other buildings. Poland’s investment support schemes should be streamlined and better targeted, notably with respect to low-income households. Effective investment support should be coupled with a proper monitoring and control of existing rules and standards, e.g. related to emission standards for local heaters and quality standards for fuels. The table below gives an overview of Poland’s objectives, targets, and contributions under Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action. Reduction of human impact on the environment The effects of climate change in Poland, in particular the sustained increase in average temperature and the growing intensity and frequency of extreme weather events, puts pressure on natural resources, the economy and social wellbeing. Adapting to climate change and making the economy more resilient to its impacts both in the short- and long-term remains a major challenge for Poland. Urban and infrastructure development should be adjusted for the expected impacts of climate change such as heat waves or floods. Similarly, agricultural practices and rural land management should avoid exacerbating the already prevailing impacts of climate change such as drought. Rural areas face challenges in the delivery of sustainable water and sanitation services. The prioritisation of investments needs to be improved to maximise the environmental benefits and cost-efficiency of projects. Water resources are increasingly scarce, also as a consequence of climate change. The retention of water in agricultural areas is low, in particular due to existing, inadequate drainage systems, which increase the water outflow and aggravate the consequences of droughts. Raising awareness of climate change impacts on the availability of water for agriculture should also be prioritised. The problems related to the presence of pollutants and hazardous waste accumulated in the past in a way that endangers human life or health are still present. The presence of hazardous waste in the environment can result in emissions to surface and groundwater, emissions to air, as well as pollution of land surfaces, and ultimately a risk to human health or life. In addition, remnants of the Baltic Sea seabed war remain a major challenge and pose a threat to the implementation of energy, marine and environmental projects. Finally, to support the green transition and avoid potential bottlenecks in achieving it, there is a need to enhance the development of relevant skills and to foster climate literacy. If not systematically addressed, Poland’s relatively low proportion of graduates in Science, Technology, Engineering and Mathematics (STEM) skills, the lack of education in ‘green’ skills and the generally low participation of the adult population in learning could undermine efforts in transforming the economy and society towards climate-neutrality.

The table below gives an overview of Poland’s objectives, targets and contributions under Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action. Table 2: Overview of Poland's energy and climate objectives, targets and contributions National targets and contributions Latest available data 2020 2030 Assessment of 2030 ambition level Binding target for greenhouse gas emissions compared to 2005 under the Effort Sharing Regulation (%) 21% 14% -7% As in ESR National target/contribution for renewable energy: share of energy from renewable sources in gross final consumption of energy (%) 11.3% 15% 21%-23% Unambitious (25% is the result of the RES formula) National contribution for energy efficiency: Primary energy consumption (Mtoe) 100.9 Mtoe 96.4 Mtoe 91.3 Mtoe Modest Final energy consumption (Mtoe) 71.8 Mtoe 71.6 Mtoe 67.1 Mtoe Modest Level of electricity interconnectivity (%) 4% 4% 8.7% N.A. Source: Assessment of the final national energy and climate plan of Poland, SWD 2020 920 final Sustainable transport The GHG emissions from transport in Poland have increased by 219% over the period 1990-2019. This trend is largely driven by an increase in road transport traffic, and leads to significant air quality, congestion and safety issues. It is thus key to step up measures to decarbonise road transport and promote clean modes of transport not based on fossil fuels. A comprehensive set of measures is needed to address transport-related emissions, urban congestion, and quality and coverage of public transport services. Even though some Polish cities have adopted sustainable urban mobility plans, they are not properly implemented. Despite substantial investments in urban mobility, half of the inhabitants of urbanised areas have no direct access to public transport (average distance to public transport is 2 km), which hampers its use and lowers the mobility of many inhabitants. Between 2008 and 2018, the length of regional and sub-urban bus lines in Poland decreased by more than 50%. As a result, around 65% of the rural population is devoid of public transportation. The modernisation of railway lines in Poland to TEN-T standards is still lagging behind. This is linked to the unsatisfactory technical condition of rail infrastructure, capacity bottlenecks and lengthy track works which has an adverse impact especially on rail freight competitiveness. Passenger rail is not an attractive alternative to private cars due to a low frequency of operations and an insufficient integration with other transport modes. Addressing interoperability is particularly important for long-distance and cross-border freight rail traffic. The focus of infrastructure investments in Poland should be on the completion of key sections and nodes of the rail TEN-T Core Network, especially rail Core Network Corridors. In the same vein, linking rail better with other transport modes and hubs and addressing accessibility issues would contribute to modal shift and support environmental priorities. Poland also lacks a comprehensive institutional set-up for the management of its approach to intermodal transport, including its governance, and does not take into account functional interdependencies between investments in different transport modes. The swifter deployment of the European Rail Traffic Management System (ERTMS) is needed for increased safety and capacity, reduced maintenance costs for infrastructure, higher performance and creation of a seamless rail transport. The capacity and quality of road infrastructure in Poland have improved over the recent years, contributing to significant growth in road transport, but also to an associated increase in greenhouse gas emissions. Measures to stimulate the shift towards zero-emission mobility, sustainable public transport, and alternative fuels are needed. Access to charging of electro vehicles and hydrogen infrastructure needs to be developed, being one of the main catalysers for the zero-emission mobility. Poland has improved its road safety in recent years, but still reports 50% more road fatalities than the EU average. To enhance road safety, Poland should focus on enforcement, education campaigns, and the infrastructure protecting vulnerable road users. Poland should explore its potential in clean hydrogen, as it is expected to play an important role in replacing fossil-based hydrogen or fossil fuels, in particular in transport and industrial applications. The development of zero-emission hydrogen rolling stock would also offer a viable option complementing railway electrification in Poland. Digital dimension The recovery and resilience plan should contribute to Poland’s digital transition and at least 20% of the financial allocation needs to contribute to digital objectives. The measures in the plan should, inter alia, contribute to the digital transformation of the economic and social sectors (including public administration, public services, primary and secondary school education, and the justice and health systems). The objective of the measures in the plan should be to improve not only the competitiveness, but also the resilience, agility and security of companies and public actors, while ensuring inclusiveness. Poland faces a number of challenges that slow down the digital transformation and its potential towards a higher value-added economy. Poland ranks 24th amongst EU Member States in the Digital Economy and Society Index (DESI) 2021. An integrated and strategic approach to connectivity, RD&I, digital skills and the broader digitalisation of the economy is still needed to keep up with digital technological developments, reap the economic benefits of digitalisation and narrow digital gaps in education and society. Connectivity In terms of broadband connectivity, Poland faces difficulties in meeting its targets. Although the coverage of networks capable of providing 30 Mbps speed or higher for all citizens was intended to be achieved by 2020, this has not been accomplished. While Poland continues to have the highest mobile broadband take-up in the EU and very competitive prices, fast internet is not yet available for all households (in 2020, 77% of households had access to fixed broadband) and many rural areas are not connected to fixed broadband at all. Although many legislative and administrative initiatives were taken to create a better basis for broadband investments (especially the 'Mega-law' which implements the Broadband Cost Reduction Directive rules), there are still barriers hampering the ultra-fast broadband roll-out, such as the uneven application of laws by local authorities, reluctance of the owners of power, sewage, and water networks to give access to power poles, and water and sewage infrastructure, obstacles in accessing buildings. Connectivity should be ensured to prevent a further deepening of the urban/rural divide and to enable the use of digital technologies. Priority should be given to ensuring access to Next Generation Access broadband infrastructure, especially in rural areas, as well as to strengthening Broadband Competence Offices at national and regional level. An effective deployment of the 5G networks may be helpful in assuring reliable and fast connectivity in rural and remote areas. However, Poland has still not assigned any frequencies in the 5G pioneer bands, namely the 700 MHz and 3.6 GHz bands, keeping the total harmonised 5G spectrum assignation at 0%. In order to accelerate the 5G network deployment, Poland should swiftly assign radio frequencies in the 700 MHz and 3.6 GHz bands on objective, transparent, pro-competitive, non-discriminatory and proportionate criteria, in accordance with the European Electronic Communications Code. Digital Skills Poland still faces significant challenges in improving basic digital literacy and advanced skills of the population. In 2019, only 44% of the adult population had at least basic digital skills. In 2020, ICT specialists represented a lower proportion of the workforce (3.4%) against the EU average (4.3%) and women constituted only 15% of ICT specialists. The education offered at post-graduate level in advanced digital skills is to be improved, as both the proportion of master’s programmes and the proportion of places offered to students, with contents on cybersecurity, high-performance computing or data science are lower in Poland than the EU average. Only the proportion of masters in artificial intelligence is higher in Poland than in the EU . These challenges create serious bottlenecks for developing a digital economy and society, as well as innovation and competitiveness, which is demonstrated by increasing skills gaps in the labour market. Public investments in life-long learning and upskilling are needed, given that investments by Polish enterprises for upskilling their workforce are comparatively low. Nevertheless, Polish enterprises have recently started investing more in ICT training for their employees, and 18% of them offered specialised ICT training to their employees in 2020, resulting in a significant increase from the previous year (13%). Poland has also continued the implementation of national initiatives on digital competencies, but neither a new comprehensive digital competences strategy nor a focused digital strategy for schools have been adopted so far. Despite significant efforts, various elements that are needed to ensure economy- and society-wide digital skills development are either not addressed in an integrated manner or lack sufficient ambition. Particular attention is needed to ensure equal access to quality education and training, including IT tools and equipment, effective integration of ICT to enhance teaching and learning at all levels, as well as the development of the digital pedagogy competences of teachers.

Digitalisation and innovation of SMEs Despite efforts undertaken by Poland to improve the level of digitisation of businesses, companies - particularly small enterprises - show a slow uptake of digital technologies. Only 23.7% of Polish companies are innovative, against an EU average of 50.3% . 52% of Polish SMEs have at least a basic level of digital intensity, which is slightly below the EU average of 60%. Compared to last year, Polish businesses slowly continue to take advantage of the opportunities offered by digital technologies. They are participating in online commerce, with 13% of SMEs selling online and 5% selling across border to other EU countries. However, only 10% of small enterprises are highly digitalised, compared to 50% of large companies. The share of high-tech exports has stagnated in recent years and skills gaps have further increased the challenges faced by businesses for improving their innovation capacity, which threatens the sustainability of Poland’s growth model. Only around 10% of Polish enterprises offer distance-working arrangements, which indicates insufficient digitalisation and ability to adapt to new conditions. Advanced technologies are slowly gaining popularity among Polish enterprises with 15% of them using cloud solutions and 18% integrating AI technology in their operations. However, the number of AI firms over GDP in Poland (0.58 firms per € bn GDP) lies below the EU average (0.71) (JRC AI TES Dataset 2020). Meanwhile, only 14% of Polish enterprises actively use social media while 29% use electronic information-sharing. E-invoices and big data are not yet widely popular. Despite a high share of graduates in science, engineering and computing (20.1%), which is in line with the EU average, businesses have difficulties in hiring specialists, and in particular small businesses have limited access to specialised ICT training. E-government and digital public administration Poland performs below EU average in the area of digital public services. The level of online interaction between public authorities and the general public shows only 49% of online users actively using e-government services (EU average 64%). On the availability of digital public services, Poland also scores below the EU average: only 65 out of 100 on digital public services for citizens, compared to the EU average of 75, and 67 out of 100 on digital services for businesses (EU average of 84). At the same time, positive developments can be seen with regard to open data maturity, where Poland classifies well above the EU average. The development of e-services is an essential part of the digital transformation of the economy and public administration, at all levels of governance. Efforts are needed to support the use of ICT and the development of e-government. To modernise the public administration, including the civil service, investments are needed in product testing laboratories, digitalisation of IT systems, and deployment of human resources and training programmes. Only 28.6% of the municipalities have digitalised studies, plans and maps, which indicates the need for investments in the digital capacity at local and regional level. Digital innovation To capitalise on the digital transformation and reinforce economic resilience, Poland needs significant reforms and investments beyond digital equipment and tools. The innovation capacity of the Polish economy is under structural threat due to a weak R&D&I performance, including its governance. Structural improvements to the entire innovation ecosystem are needed to facilitate the uptake of (digital) technology in businesses, building on increased access to internet and networks by businesses and households, and hence to support productivity growth. This requires efforts e.g. to improve public-private cooperation and support structures for knowledge transfer between science and businesses (including through strengthening Technology Transfer Offices in universities with improved governance mechanisms), support for (international) R&D projects, and more broadly improving the coordination of innovation policies. Note: EU aggregate corresponds to EU27, based on 2021 DESI report Box 1: Progress towards the Sustainable Development Goals Sustainable Development Goals and the four dimensions underpinning the Annual Sustainable Growth Strategy The objectives of the Sustainable Development Goals are integrated into the European Semester since the 2020 cycle. This provides a strong commitment towards sustainability in the coordination of economic and employment policies in the EU. In that respect, this section outlines Poland’s performance with respect to SDGs with particular relevance for the four dimensions underpinning the 2021 Annual Sustainable Growth Strategy and of relevance to the recovery and resilience plans (green transition, fairness, digital transition and productivity, and macroeconomic stability), indicating possible areas where investments and reforms in line with the objectives of the Facility could further accelerate the progress on the SDGs. Green Transition Between 2014 and 2019 Poland made significant progress across several indicators underpinning SDG 7 (‘Affordable and clean energy’) and SDG 13 (‘Climate action’) but additional reforms and investments will be necessary to close the gap with the EU average in a number of those areas. While the greenhouse gas emissions intensity of energy consumption decreased from 92 in 2014 (vs 2000 benchmark = 100) to 86 in 2019, this was still significantly above the EU average for that year (82.7). The pace of improvements in intensity was also not sufficient to offset an absolute growth in GHG emissions between 2013 and 2018, arguably linked to strong economic growth. Most worryingly, Poland has been very slow in increasing the share of renewable energy consumption in gross final energy consumption which increased from 11.6% in 2014 to 12.2% in 2019, while for the EU average these numbers stood at 17.5% and 19.7%, respectively. Another worrying element is that emissions from transport in Poland have increased by 219% over the 1990-2019 period, largely due to road transport increase, and a continued decline in the share of public transport in total passenger transport. On a positive note, the share of the population unable to keep their home adequately warm more than halved between 2014 and 2019 and the air quality significantly improved. Nonetheless, for the latter indicator Poland needs additional efforts to narrow the gap with the EU average. Fairness Poland has made progress towards achieving SDGs in the area of fairness, although challenges remain. Between 2014 and 2019, under SDG 1 (no poverty) the share of people at risk of social exclusion decreased from 24.7% down to 18.2%, which is below the EU average of 20.9%. At the same time, in-work at-risk-of-poverty (9.7%) remains above the EU average (9.0%). A positive trend is visible on good health and well-being (SDG 3), but additional progress is required to move closer to the EU average on most indicators for this SDG. For example, the self-reported unmet need for medical care decreased from 7.8% to 4.2% while the EU average is 1.7%. Poland performed relatively better than the EU average in most indicators measuring the reduction of inequalities (SDG 10). For instance, the adjusted gross disposable income of households per capita increased from 70% to 74% of the EU average. However, the decrease of the urban-rural gap for risk of poverty of social exclusion (from 13.4% to 11.1%) has only moderately contributed to closing the worrying gap with the EU average (1.1%). As regards gender equality (SDG 5), Poland made limited progress. It underperformed compared to the EU average for a majority of targets, such as the gender gap for tertiary education which went up from 18.8% to 19.9% between 2015 and 2020, well above the EU average of 10.8%.

Digital transition and productivity Poland is underperforming compared to the EU average in most targets related to the digital transition and productivity dimension reported under SDG 8 (Sustainable economic growth) and SDG 9 (Industry, innovation and infrastructure). While gross domestic expenditure on R&D has increased between 2014 and 2019 from 0.94% to 1.32% of GDP, it remains significantly below the EU average (2.11% in 2014 and 2.2% of GDP in 2019 respectively). The number of patent applications to the European Patent Office (EPO) has decreased between 2014 and 2019 from 15 to 13 applications per million inhabitants. This is significantly below the EU average where during the same period the number of applications increased from 141 to 147 per million inhabitants. The Polish transport infrastructure exhibits connectivity gaps, especially in rail TEN-T, and poor environmental and safety standards. Significant investment needs are identified to develop a sustainable multimodal mobility, including TEN-T and cross-border links. Road safety is a key issue: in terms of road fatalities per million inhabitants, Poland (75 in 2017) is significantly above the EU average (49 in 2017). Compared to 2010 the situation has considerably improved, but Poland is still clearly lagging behind the EU average. At the same time, Poland made significant progress towards increasing the share of households covered by a high-speed internet connection in the last 5 years, increasing 6 times its original value and surpassing the EU average by more than 5 percentage points. Macroeconomic stability Between 2014 and 2019, Poland has made significant progress across most indicators underpinning SDG 8 (‘Decent Work and Economic Growth’). Real GDP per capita growth averaged 3.6% per year between 2010 and 2019, gradually closing the GDP to the EU average and signalling steady progress in Poland’s convergence process. The share of young people neither in employment nor education and training has been decreasing steadily, from 15.5% of the total 15–29-year-old population in 2014 to 12% in 2019. The share of people in work at risk of poverty has also declined somewhat over the same period. Prior to the pandemic, public debt stayed below the Maastricht threshold of 60% of GDP, and even after the crisis remained slightly below, being significantly lower than the EU average. Still, several macroeconomic challenges remain, which ask for well-targeted reforms and investments. First, the share of investment to GDP has declined significantly in recent years, hampering Poland’s potential growth and ability to move up the value-chain in the medium term. Second, although labour market developments have been largely favourable since 2014, with the employment rate reaching 73% in 2019, pervasive labour shortages have been limiting investment activity and growth in Poland’s businesses, particularly SMEs. 3.Objectives, structure and governance of the plan 3.1.Overall strategy of the plan The recovery and resilience plan of Poland is a comprehensive response to the consequences of the COVID-19 crisis, as well as a response to the main challenges identified and systemic weaknesses of the Polish economy. The plan aims to rebuild the growth potential of the Polish economy, to enhance its competitiveness and to increase the standard of living of its citizens. The plan pursues the following objectives: ·strengthening of innovative economic development to increase productivity, taking into account the green and digital transformation, ·development of green and smart mobility, ·enhancing social capital and upgrading quality of life, in particular by ensuring the improvement of citizens' health and higher quality of vocational education and skills adapted to the needs of the modern economy. The Polish recovery and resilience plan comprises six components with the overarching objectives of increasing economic development and productivity, supporting the digital and green transitions and enhancing the quality of life. These components address challenges in the following areas: A.Resilience and competitiveness of the economy – where the aim is to build a crisis-resilient economy, increase productivity and create quality jobs through: 1.Reducing the impact of COVID-19 and the subsequent crisis for businesses 2.Strengthening the innovation capacity and the cooperation between enterprises and research institutes in key areas for the development of the economy (digitization and greening) 3.Improving skills development, the vocational education and training system and lifelong learning to better match needs of the modern economy 4.Increasing the labour market participation, the efficiency and crisis resilience of the labour market B.Green energy and energy intensity reduction – which is focused on the shift towards supporting renewables and generation of alternative fuels and energy efficiency to reduce the negative environmental impact and to ensure competitiveness and energy security coupled with greening of the economy through: 1.Improving the energy efficiency of the economy

2.Increasing the use of renewable energy sources and the development of alternative generation sources 3.Adapting to climate change and reducing its negative environmental impact C.Digital transformation – which is aimed at investing in modern technologies in the public sector, society, education and in the economy as a whole through: 1.Improving access to high-speed internet 2.Developing and consolidating e-services, creating the conditions for the development of digital technologies for the economy and improving communication between public institutions, citizens and business 3.Boosting digital skills and the digitalisation of education 4.Increasing cyberspace security, ensuring and digitising safe data processing infrastructure D.Efficiency, accessibility and quality of the health system – which focuses on ensuring a smooth functioning and modernisation of the healthcare system through: 1.Improving the efficiency of the health system, especially in the hospital sector, its accessibility and quality of health services, including by making more use of digital solutions 2.Developing healthcare staff and strengthening the capacity of medical universities and health care providers involved in the training of medical personnel 3.Supporting scientific research and the pharmaceutical sector to strengthen the resilience of the health system E.Green, smart mobility – which aims to develop a sustainable, safe and resilient transport system meeting the needs of the economy and society through: 1.Increasing the share of zero- and low-emission transport and reducing the negative environmental impact of transport 2.Enhancing transport accessibility and digitalisation as well as its safety and security F.Quality of institutions and conditions for the implementation of the plan – which aims to improve the investment climate and put in place the framework for implementing the plan through: 1.Strengthening the independence and impartiality of courts and remedying the situation of judges affected by the decisions of the Disciplinary Chamber of the Polish Supreme Court

2.Enhancing consultation of social partners and the use of impact assessments, and reducing the use of fast-track procedures in the law-making process 3.Ensuring the proper consultation of social partners and stakeholders, as well as the application of the Arachne risk-scoring tool in the implementation of the plan The cost estimations of the measures are presented in the table below. Table 3: Components and associated costs Component Costs (EUR million) Total (EUR million) Grants Loans A.Resilience and competitiveness of the economy 4,455 245 4,700 B.Green energy and energy intensity reduction 5,696 8,172 13,868 C.Digital transformation 2,797 2,100 4,897 D.Efficiency, accessibility and quality of the health system 4,092 289.5 4,381.5 E.Green, smart mobility 6,817 700 7,517 F.Improving the quality of institutions and the conditions for the implementation of the RRP 0 0 0 Total 23,857 11,506.5 35,363.5 3.2.Implementation aspects of the plan Consistency with other programmes The plan outlines the consistency with other relevant programmes. The main strategy document at the national level to which the RRP refers is the Strategy for Responsible Development (with a 2030 perspective) adopted by the government on 14 February 2017. The Strategy focuses on jobs and growth, with the main objective of increasing social, economic, environmental and territorial cohesion, which is in line with the challenges and priorities identified in the framework of the European Semester. The plan is also consistent with the National Energy and Climate Plan 2021-2030 submitted to the European Commission on 30 December 2019 and Poland’s Energy Policy strategy for 2040 (PEP2040), adopted by the government on 2 February 2021. The RRP also draws on several sectoral strategies adopted by the government in recent years in the areas of regional development, digitalisation, cybersecurity, sustainable agriculture, infrastructure, human and social capital. The plan is designed to be complementary to the Union Funds both in the current programming period (2014 – 2020) as well as in the new programming period (2021-2027). As the Partnership Agreement (PA) and the Programmes are still pending finalisation and approval, the plan explains the main synergies at a strategic level (between priority areas of the Cohesion Policy funding and RRP components), which are elaborated in individual components by indicating areas where funding from other sources is envisaged. The plan recognises the importance of synergies with Cohesion policy programmes and stresses that complementarities and potential overlaps will be systematically and continuously assessed at different levels of implementation (including at strategic, programme and project levels) to avoid double funding. Poland is the largest net recipient of Cohesion funds in the EU and, since its accession in 2004, the country has developed an efficient administrative capacity in this respect. Poland’s absorption capacity as regards EU funding is much above the EU average. Despite significant achievements in addressing structural problems, investment needs in Poland are still much higher than available funds, in particular regarding infrastructure, innovation, digital economy, human capital and health care. Moreover, the green transition poses an immediate and very costly challenge for the economy. Administrative organisation of the RRP The Ministry of Development Funds and Regional Policy, which is also in charge of the programming of the Cohesion policy, coordinates the preparation and implementation of the plan. Other ministries that are actively involved in the process include the Ministry of Economic Development, Labour and Technology, which coordinates the European Semester, the Ministry of Finance, the Ministry of Climate and Environment, the Ministry of Infrastructure, the Ministry of Health, and the Chancellery of the Prime Minister. Moreover, the plan has been prepared in in consultation with local governments, social and economic partners and NGOs.

To ensure effective implementation, the same implementing structure will be used for the RRP as for the Partnership Agreement. The use of the institutional system of Cohesion policy for the programming and implementation of measures under the RRP is expected to enable synergies between the programmes and to avoid double-funding for the same initiatives. The institutions involved in the programming, implementation, monitoring and control of Cohesion policy actions have the administrative capacity and the institutional experience necessary to carry out RRP-related tasks. To ensure the correct implementation of the plan, Poland will set up a Monitoring Committee composed of representatives of the institutions involved in the implementation of the plan, as well as a wide representation of stakeholders including trade unions, employers’ and non-governmental organizations. The Technical Support Instrument (TSI) provides expertise in building capacities to implement the plan in a number of areas. In particular, this concerns support for the implementation of green, digital and public administration RRP measures. For instance, TSI is providing support for the implementation of the programme for the development of digital competences, and for boosting the competitiveness of the railway sector to promote green mobility and socio-economic convergence. In addition, TSI continues to support the reform of the budgetary system (measure A1.1 Reform of the fiscal framework), in particular by assisting in setting out new budget classification. During the implementation of the plan, sectoral support for the design, implementation and evaluation of research and innovation policy reforms will be available via the Horizon Policy Support Facility. Gender equality and equal opportunities for all With regard to gender equality and equal opportunities for all, Poland indicates that horizontal principles guide all initiatives under the plan, in line with the European Pillar of Social Rights. Poland describes the impact of the COVID-19 crisis on various groups and the challenges related to gender equality and equal opportunities for all, in particular in view of labour market needs. The plan contains specific measures to address equality challenges, for instance by increasing the quality and availability of childcare facilities to facilitate the labour market participation of women. Poland has indicated that a pre-screening of different projects was made with equality criteria in mind, and that certain projects that were proposed were not included in the plan as they did not meet accessibility criteria for persons with disabilities or were otherwise not compliant with equality principles. Poland stresses that the principles of gender equality and equal opportunities for all will be taken into account at every stage of the management and implementation of the plan. Finally, the monitoring committee tasked to supervise the effective implementation of the plan will notably include representatives of bodies representing the civil society and promoting fundamental rights and non-discrimination. Stakeholder consultation Poland carried out stakeholder consultations through different platforms prior to the submission of its RRP. The public consultation process was based on the provisions of the Development Policy Act of 6 December 2006. The public consultation of the RRP was launched on 26 February 2021 and lasted until 2 April 2021. In total, 5 275 contributions were made in a dedicated form on the government website. In addition, comments were voiced during three debates organised by the government and five public hearings led by social partners and other organisations. The draft RRP was also discussed by the Joint Government and Local Government Commission (pol. Komisja Wspólna Rządu i Samorządu Terytorialnego). During the work of this commission, local governments submitted over 520 comments. In the framework of the Social Dialogue Council, the government also consulted social partners on the RRP. As a result of the stakeholders' consultations, changes were made to all components of the draft RRP. In particular, the planned reform of spatial planning was amended, and the investments in offshore wind farms and in the digitalisation of education were enhanced, and investments in green urban transition were added Security self-assessment The RRP does not contain a security self-assessment for investments in digital capacities and connectivity, in accordance with Article 18(4) point (g) of Regulation (EU) 2021/241. Poland does not identify any security issues nor does it provide any detail on how potential security risks could be addressed in order to comply with relevant Union and national law. However, Poland has indicated throughout the plan that projects related to digital technologies will be carried out in accordance with high cybersecurity standards, in line with the Polish Cybersecurity Strategy 2019-2024, adopted by the Council of Ministers on 22 October 2019. The main objective of the Strategy is to increase the level of cyber-resilience and data protection in the public, private and military sector. Furthermore, the RRP indicates that connectivity measures will be implemented in line with national and European legislation, and in accordance with the EU Connectivity toolbox. Cross-border and multi-country projects The plan envisages the involvement of Poland in the multi-country project Common Data Infrastructure and Services in the area of data processing. This multi-country project is expected to be implemented as a potential Important Project of Common European Interest (IPCEI) on Next Generation Cloud and Edge Infrastructure and Services. The European project aims at developing and industrially deploying for the first time highly innovative, ultra-secure and energy-efficient cloud and edge solutions that enterprises, public administrations and end-users are demanding for making sustainable businesses and delivering better public services to citizens. Communication strategy The communication on the Polish RRP will be carried out in coherence and complementarity with the communication on other EU Cohesion policy support instruments. This will allow for a comprehensive and complementary presentation of EU support to Poland. The government’s communication activities will focus on the results of key investment projects and structural reforms. Any added value of EU support to reforms and investments will be underlined. Communication activities are coordinated and carried out by the Ministry of Development Funds and Regional Policy, in cooperation with other ministries and actors involved in the implementation of the RRP, as well as social, economic, non-governmental organisations and beneficiaries. Beneficiaries of the RRP will also be obliged to communicate about their projects to achieve synergies in this respect. The aim will be to ensure a high level of awareness of the country’s development activities with the help of the European Funds and the role it plays in the EU. Various communication tools and channels will be used for the specified target groups. Coordination between EU and national authorities should be pursued to maximise the impact and effectiveness of communications. Communication activities on RRP will be subject to continuous assessment and monitoring by the authorities. State aid State aid and competition rules fully apply to the measures funded by the Recovery and Resilience Facility. Union funds channelled through the authorities of Member States, like the RRF funds, become State resources and can constitute State aid if all the other criteria of Article 107(1) TFEU are met. When this is the case and State aid is present, these measures must be notified and approved by the Commission before Member States can grant the aid, unless those measures are covered by an existing aid scheme or comply with the applicable conditions of a block exemption regulation, in particular the General Block Exemption Regulation (GBER) declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 TFEU. When State aid is present and it requires notification, it is the duty of the Member State to notify State aid measures to the Commission before granting them, in compliance with Article 108(3) TFEU. In this respect, the State aid analysis carried out by Poland in the recovery and resilience plan cannot be deemed a State aid notification. As far as Poland considers that a specific measure contained in the recovery and resilience plan entails de minimis aid or aid exempted from the notification requirement, it is the responsibility of Poland to ensure full compliance with the applicable rules. In addition to complying with EU’s State aid rules, measures taken under this framework should be compatible with the EU’s international obligations, in particular under World Trade Organization rules. 4.Summary of the assessment of the plan 4.1.Comprehensive and adequately balanced response to the economic and social situation Poland’s recovery and resilience plan provides a comprehensive and balanced response to the consequences of the COVID-19 pandemic, while tackling various structural socio-economic challenges (as detailed in section 4.3 of this document). As such, it makes an explicit reference to the six pillars of the Recovery and Resilience Facility pursuant to Article 3 of the Recovery and Resilience Facility Regulation. In accordance with Article 4 of that Regulation, the objective of the recovery and resilience plan is to promote economic, social and territorial cohesion by increasing resilience, crisis preparedness, adaptability and growth potential, mitigating the social and economic consequences of the crisis, in particular for women (and thereby achieving the objectives of the European Pillar of Social Rights). The plan also aims at supporting the green transition, contributing to the Union’s climate objectives, and digital transformation. Thereby, interventions envisaged in the recovery and resilience plan support the EU’s objectives of increasing socio-economic convergence, restoring and promoting sustainable growth and integration of EU economies, as well as the creation of quality jobs, the strategic autonomy of the Union and an open economy generating European added value. Green transition The Polish recovery and resilience plan identifies key challenges of Poland related to climate and environment. It emphasises that Poland’s economy is heavily based on solid fossil fuels as well as oil and petroleum products and while their share in the energy mix has been steadily declining it was around 72 % in 2019. The installed capacity in the national electricity system at the end of 2019 was close to 46.8 GW gross, of which almost 36.7 GW are conventional power plants, mostly based on hard coal and lignite. Rising prices of CO2 allowances contribute to rising energy prices, which together with a high energy intensity of the economy and a low level of energy efficiency of buildings lead to the risk of increased energy poverty and a noticeable rise in the prices of products and services, as well as a negative impact on the competitiveness of the economy. Against this background, the energy transition towards a climate-neutral economy is a key challenge for Poland.

Poland’s recovery and resilience plan is strongly oriented towards the green transition. This is reflected in the high share of climate-related investments in the overall plan (estimated at 42.7%). Major investments will be directed towards developing offshore wind on the Baltic Sea; the renovation of buildings combined with replacing coal-fired heaters; the construction of new buildings of more ambitious standard than Nearly-Zero Energy Buildings; developing hydrogen infrastructure and technologies; investing in efficient district heating systems; clean urban projects, sustainable water management in rural areas and sustainable public transport. The sustainability focus of the plan is reinforced by the inclusion of a number of key reforms. These reforms will notably include the removal of barriers to the development of onshore wind, a comprehensive set of measures aimed at phasing out coal in individual heating, and a regulatory framework to support the development of hydrogen technologies and alternative fuels. To provide investors with greater predictability and allow for longer advance planning a plan of auctions will be published. The new database of heat sources in buildings will increase the reliability and completeness of information about building stock. Reforms to promote clean modes of transport, sustainable urban mobility and substantial investments shall contribute to decarbonisation, digitalisation and safety of transport. The reforms include higher incentives for the development and implementation of sustainable urban mobility plans, incentives for promoting zero-emission vehicles and reducing the use of polluting vehicles in line with “polluter pays” principle, road safety measures (e.g. enforcement, elimination of blackspots, investments), and incentives for clean vehicles. The investments are focused on railways, zero-emission rolling stock for both urban and inter-urban transport, investment in public transport, digitalisation of road (ITS) and railways transport (ERTMS). The recovery and resilience plan is expected to contribute to the long-term resilience of ecosystems to climate change. Increasing the availability of water and sewerage infrastructure in rural areas with the biggest deficits should contribute to improving the quality of life of the population living there. The reforms and investments will create a framework for a more efficient management of water resources and increase the landscape’s water retention capacity in rural areas. Investments improving water retention within agricultural or forest land should improve the water balance and increase the availability of water for agriculture and forestry. These reforms and investments are expected to significantly contribute to the 2030 and 2050 climate objectives. Although the plan does not quantify this impact, measures included in the plan can be reasonably expected to accelerate Poland’s transition towards greater sustainability. Digital transformation Despite positive developments in recent years, Poland still lags behind the EU average on digital indicators ranking 24th out of 27 EU Member States in the Digital Economy and Society Index (DESI) 2021. The country continues to perform weakly in integration of digital technology and use of internet services, which remain the most challenging areas. The human capital dimension is still underdeveloped, with only 44% of the population having at least basic digital skills. Noteworthy is also the lack of female ICT specialists (only 0.9%). However, in connectivity Poland ranks among the best performers in the EU, thanks to the significant progress on the fixed very high-capacity networks coverage (60% compared to 29% one year earlier). The Polish recovery and resilience plan assigns to digital challenges 21.3% of the overall RRF allocation and presents a good mix of interventions to make progress with better digital administration and e-services, ranging from infrastructure, skills of public sector employees, efficiency of administrative processes, and an improved analytical capacity for decision-making. The outlined actions aim at ensuring access to high-speed internet for citizens, boosting the digital efficiency of the public sector, the economy and society, and improving the security of digital services. This should be achieved through investments in the broadband network, particularly to cover white next-generation-access (NGA) areas, by strengthening the use of digital processes in the administration and by improving digital skills across all sectors of society. With regard to the interaction between public institutions, citizens and businesses, the creation of user-friendly information systems should reduce the time and financial costs of communicating with the state and improve a wide range of public services. The cyber-resilience of the public administration is also improved. The reforms and investments are expected to reduce digital exclusion through upskilling and reskilling of e-competences and increasing opportunities for teleworking and learning. Increasing digital skills of the population is a key element for digitalising the economy. The Polish RRP takes a holistic and strategic approach to the acquisition of digital competences of the wider population and to the digitalisation of education and training. The proposed measures contribute significantly to the creation of a broader digital learning ecosystem and aim at an efficient coordination of the development of digital competences at national and local level. The investments in digital infrastructure and equipment for general and vocational schools, together with boosting the skills of teachers, should create the basis for the development of digital and information skills in the society. Improved access to technologies and e-competence training for a wide group of citizens should connect the digitally excluded, in particular inactive people, and help their re-integration into an increasingly digital society. Digital investments are expected to contribute to the ambition to modernise Poland across all components of the recovery and resilience plan. The roll-out of three new central digital services, including decision-making support tools for doctors based on AI algorithms, and the launch of a central repository of medical data are likely to contribute to the efficiency and accessibility of healthcare services for all citizens. In the area of energy, the development of smart grids will allow for a better integration of renewables into the Polish electricity system, while battery storage systems are expected to contribute to ensuring the local stability of supply, contributing thus to strategic energy independence as well as cleaner air in Poland. In the transport sector, the plan includes measures improving the efficiency of road and rail transport through digitalisation via ITS, ERTMS, and remote and traffic control systems. It also includes incentives to deploy single e-ticketing for railway passengers. Finally, several measures include support for the digital transition in the agriculture and agri-food sectors, in particular by encouraging the uptake of Agriculture 4.0 solutions, which is expected to increase the efficiency and sustainability of the sector. Smart, sustainable and inclusive growth, including economic cohesion, jobs, productivity, competitiveness, research, development and innovation, and a well-functioning single market with strong SMEs The plan presents targeted policy actions across various relevant policy areas related to smart, sustainable and inclusive growth. Smart growth will be promoted particularly through actions targeting innovation and digitalisation as well as through improvements in the business environment, educational outcomes and labour market relevance of skills. As regards sustainable growth, the plan’s key investment initiatives are expected to contribute inter alia to a cleaner energy mix, industrial decarbonisation and greening of public transport. The plan is expected to help tackle challenges in the labour market. The pandemic had a limited impact on the Polish labour market, mainly thanks to sizeable policy support, which prevented a rise in unemployment and bankruptcies. Still, job losses occurred mainly in the services sectors, particularly in the hospitality and food sector, affecting a significant share of the low-skilled workforce. The plan is expected to support the labour market by rolling out investments into green construction sector activities (both new constructions and renovations), renewables, nature protection, sustainable transport and digital infrastructure. The plan also includes various measures to incentivise an increase in labour market participation of various groups, as well as efforts to align education (in particular vocational education and training) with modern labour market needs. This will be particularly relevant for tackling labour and skill shortages, which are currently limiting the ability of the Polish economy to restructure towards more productive and higher growth sectors. Furthermore, the plan includes measures that are expected to increase the competitiveness and resilience of the sectors most affected by the crisis, especially the HoReCa and culture sectors, in particular by investing in re-skilling and up-skilling for employees in these sectors. Research and Innovation reforms and investments will contribute to strengthening the competitiveness of the Polish economy in the medium to long run. The level of R&D expenditure, despite an increase in recent years relative to GDP (up to 1.32 % in 2019), is below the EU average (2.19 % in 2019). The plan rightly identifies Poland’s structural challenges and the need for innovation-driven growth. Higher investment into R&D alongside other intangible assets could contribute to resilience against unfavourable economic shocks. Reforms and investments focus on strengthening the links between industry and research organisations and education facilities, as well as supporting pilot projects to facilitate the development of breakthrough technologies in advanced stages of R & D projects. To accelerate the process of robotisation and automation, in addition to supporting investments, the plan foresees fiscal incentives for the industry. A series of reforms and investments are expected to contribute to strengthening Poland’s competitiveness through more research and innovation and an improved business environment. The plan identifies the productivity-related challenges for Poland and the need for innovation-driven growth, while aiming at closing the gap vis-à-vis the EU average in terms of living standards. Support for cooperation between science and industry will improve research commercialisation and ensure a better implementation of innovative solutions as well as support the development and dissemination of innovations in the agri-food sector. The set-up of Sectoral Skills Centres is also expected to contribute to better links between vocational education and training and the economy and improved dissemination of innovative solutions. Several investments linked to decarbonisation efforts (such as the development of offshore wind farms and unlocking the potential of onshore wind, hydrogen technologies and alternative fuels, and energy storage facilities) are expected to strengthen the competitiveness of the Polish industry and to support the required green transition. Improvements in the business environment through the lowering of administrative burdens are expected to boost investment. Furthermore, the proposed reforms to enhance the use of public consultations in policymaking and reduce the use of fast-track procedures in law-making are expected to lead to a better and more stable regulatory framework, which may also improve the investment climate. Finally, measures aiming to strenghten the independence and impartiality of courts, and to remedy the situation of judges affected by decisions of the Disciplinary Chamber, are also expected to contribute to improving the investment climate. The reforms in the plan are expected to contribute to a well-functioning Single Market with strong SMEs. The Polish Recovery and Resilience Plan includes a number of measures targeted at SMEs which are expected to have a lasting impact on the Polish economy where SMEs account for more than 42% of total employment. SMEs in the agri-food sector will particularly benefit from investments to enhance their competitiveness and give a push to the green and digital transition in their activities. SMEs in the HoReCa, culture and tourism sectors are set to benefit from investments in reskilling, which can lead to increased productivity growth and competitiveness in the medium term. SMEs and mid-caps can also benefit from financial support from the Recovery and Resilience Facility to innovate and produce low-emission mobility and alternative energy solutions. Indirectly, SMEs will also benefit from a strong demand impulse triggered by other investments as well as improved infrastructure. For example, the investments to increase access to high-speed internet are expected to improve the competitiveness of SMEs and support innovation, particularly in remote areas. Overall, the plan is expected to contribute to achieving the objectives of the new Industrial Strategy for making the EU industry more competitive globally, enhance strategic autonomy and fostering the twin transition . Social and territorial cohesion The plan addresses the marked social and territorial cohesion challenges primarily through measures in the areas of digitalisation of education, skills development and healthcare services, as well as social housing. Investments to provide students and teachers with ICT equipment and support for the development of digital skills are expected to create opportunities for pupils from disadvantaged regions and persons at risk of social exclusion. Other digitalisation measures are also likely to improve social and territorial cohesion, such as investments in the development of network infrastructure to cover ‘white spots’ in broadband access and the development of 5G technology in market failure areas, as well as measures aiming at increasing the availability of digital public services. The creation of a network of sectoral skills centres and of regional coordination teams for vocational training and lifelong learning are expected to support upskilling and reskilling in the regions, in close cooperation with all local and regional stakeholders in education and the labour market, to maximise benefits for labour market participation. A new network of local digital leaders will support each municipality (‘gmina’) in the digitalisation efforts and will also contribute to social and territorial cohesion and digital inclusion. Relevant meas