that (i) carbon mitigation is possible, (ii) the policy actions required to improve preparedness must span a wide range of social and economic areas but are manageable, and (iii) many of the policies that can help firms and workers transition into cleaner and more productive industries are the same policies needed to help populations weather other economic shocks as well.

# **<mark>Box 1 - Carbon Mitigation and Successful Adaptation: Poland</mark>**

<mark>Poland’s economy is twice as energy-intensive as the EU average. However, Poland has made significant progress in reducing overall carbon emissions by almost 30 percent since transition to a market economy began</mark><sup>19</sup> <mark>. Carbon mitigation is not a new issue in Poland. Poland’s particular challenge is its reliance on domestic coal. Eighty five percent of Poland’s green house gas emissions come from the energy sector, and more than 90 percent of electricity comes from coal-fired power plants which emit the highest levels of CO</mark> 2 <mark>per unit of electricity of any power generation technology. Poland is an outlier with regards to the dominance of coal in its energy sector; both within Europe and in the world (Figure 10). In addition, the share of natural gas (13 percent) and renewable energy (5 percent) are significantly below the EU average, while no energy is being generated by nuclear technologies.</mark> <mark>Poland’s progress in adapting to new climate and energy price realities relies not only on reducing CO2 emissions, but also on making its policies – especially in the labor market and skills production system - more conducive to a successful transition to a low carbon economy. In terms of labor market costs and flexibility, Poland still has a relatively high tax wedge compared to other countries in the region but a low to average rigidity in employment protection legislation. This is probably one area where additional improvements could facilitate labor reallocation towards new sectors or jobs. Poland, however, spends significant resources on active labor market programs compared to peer countries, and these programs have been playing an increasingly important role in improving the matching of workers and jobs.</mark>

**<mark>Figure 10 – Poland is Heavily Dependent on Energy-Intensive Industries</mark>** <mark>Energy consumption by type of fuel (2007)</mark>

<!-- Start of picture text --> Coal Oil Natural Gas Nuclear Renewables Other<br>100<br>80<br>60<br>40<br>57<br>20 39<br>26<br>18<br>0<br>World EU27 EU10 Poland<br><!-- End of picture text --> Source: European Commission, World Bank staff calculations <mark>Although there have been important reforms in social protection, there is still room for improvement. Poland</mark> 19 From 564 million metric tons of CO2e in 1988, greenhouse gas emissions collapsed along with output through 1990 (declining 20 percent), as inefficient, often highly energy-intensive plants shut down during the early years of transition. The period of 1996 to 2002 witnessed another 17 percent decline in emissions but while GDP expanded. Overall, although Poland’s GDP near doubled during 1988 to 2008, its GHG emissions were reduced by about 30 percent.

19