ETS and CO₂ prices: why does Poland pay some of the highest energy bills in Europe?
The European Emissions Trading System (ETS) is increasingly influencing energy prices in Poland. Find out how it works, why it's driving up electricity bills, and what scenarios await businesses and households in the coming years.
What is ETS?
European Emissions Trading System (ETS) is a European Union mechanism for limiting greenhouse gas emissions. It places a price on every tonne of CO₂, and companies must hold the appropriate allowances, forcing them to factor environmental costs into their operations.
EUA (EU Allowance) price forecasts and their impact on energy prices in Poland
Since 2005, EUA prices, or EU CO₂ emission allowances, have fluctuated between €3 and €90/tonne. However, forecasts point to further and sustained increases, in line with the Fit for 55 package, which assumes tighter EU emission limits.
The chart below shows how EUA prices have increased from 2005 to 2025.
- According to analysts' estimates, in 2040 the EUA price may reach as much as EUR 336/t (approx. EUR 250 in real terms).
- Rising prices of allowances directly translate into electricity costs in Poland, where coal still accounts for a very large share of the energy mix.
- Currently, the correlation between CO₂ prices and electricity prices in Poland is exceptionally strong—any increase in EUA prices means higher bills for industry and entrepreneurs.
The chart below shows how EUA prices have increased from 2005 to 2025.
graphic: EUA prices from 2005 to 2025, from Enerace.Online
Below are further forecasts for CO2 prices until 2040. It is not possible to be optimistic about energy prices in the coming decades - the trend is clear: further systematic increases.
graphic: EUA price forecasts until 2040.
Polish policy towards the ETS - between criticism and the lack of an alternative
In August 2025, President Karol Nawrocki vetoed the Wind Farm Act, which was to contribute, among other things, to the development of onshore wind farms.
"To lower the price of electricity, we must abandon what most impacts the price of electricity, namely the ETS - we must abandon the Green Deal. And the attempt to construct a media or public construct that wind turbines and the entire renewable energy component will reduce the price of electricity is a wrong assumption (...)," stated President Karol Nawrocki.
The question then arises: what is Poland’s plan for moving away from the ETS, from which it has also been benefiting thanks to the sale of allowances since 2005. However, if it does not find an effective way to limit its impact, then with the forecasted EUA prices (even EUR 336/t nominally in 2040), electricity in Poland could become several times more expensive than today.
"To lower the price of electricity, we must abandon what most impacts the price of electricity, namely the ETS - we must abandon the Green Deal. And the attempt to construct a media or public construct that wind turbines and the entire renewable energy component will reduce the price of electricity is a wrong assumption (...)," stated President Karol Nawrocki.
The question then arises: what is Poland’s plan for moving away from the ETS, from which it has also been benefiting thanks to the sale of allowances since 2005. However, if it does not find an effective way to limit its impact, then with the forecasted EUA prices (even EUR 336/t nominally in 2040), electricity in Poland could become several times more expensive than today.
Energy prices in Poland and EUA costs
The strong correlation between the price of CO₂ emission allowances (EUAs) and electricity prices is particularly evident in Poland. The high share of coal in the mix means that rising EUA costs almost immediately translate into the bills of businesses and end users.
The graph shows electricity prices for delivery in 2026 (green) and EUA prices (blue). The relationship between the two curves clearly shows that emissions costs are one of the key factors shaping electricity prices in Poland.
The graph shows electricity prices for delivery in 2026 (green) and EUA prices (blue). The relationship between the two curves clearly shows that emissions costs are one of the key factors shaping electricity prices in Poland.
Graphic: Electricity prices for delivery in 2026, from Enerace.Online
Energy prices in Poland compared to Europe
Poland is among the countries with the highest electricity prices in Europe. Data shows that only Italian companies are paying more for supplies scheduled for 2026. This means that Polish companies securing contracts for the coming years face significantly higher energy costs than their Western European competitors.
The graph below shows that, apart from Italy, Poland has the highest contract prices for 2026, which significantly weakens the competitiveness of domestic enterprises.
The graph below shows that, apart from Italy, Poland has the highest contract prices for 2026, which significantly weakens the competitiveness of domestic enterprises.
graphic: Energy prices in Poland compared to other European countries, from Enerace.Online
Same goal, different rates - ETS systems around the world
Despite the common goal of reducing greenhouse gas emissions, ETS systems vary significantly between regions. Differences in mechanisms, prices, and sectoral coverage result in uneven burdens on businesses.
The chart shows global ETS prices - data from the Draghi report.
The chart shows global ETS prices - data from the Draghi report.
Source: Draghi Report
We're seeing historical developments in ETS allowance prices around the world. The EU ETS is by far the most restrictive and expensive system, while countries like China and South Korea maintain relatively low CO₂ prices.
Comparison of the most important ETS systems
Below is a brief summary of the most important emissions trading systems currently operating around the world.
Region / Country
Start
Range / mechanism
CO₂ price (2024)
Additional Goals/Notes
EU – EU ETS
2005
Energy, industry, aviation / cap-and-trade
65–85 EUR/t
62% emission reduction by 2030
Great Britain – UK ETS
2021
Cap-and-trade
35–55 GBP/t
An independent system, similar to the EU ETS
China – China ETS
2021
Energy / intensity-based system
8–10 USD/t
The largest emission range in the world
USA – California
2013
Energy, industry, transport / cap-and-trade
30–40 USD/t
One of the most advanced systems
USA – RGGI
2009
Energy / allowance auctions
15–20 USD/t
Voluntary Agreement among States
Canada
2019*
Federal + Provincial ETS
55–60 USD/t
Hybrid system (ETS + carbon tax)
South Korea
2015
K-ETS, industrial sector
20–30 USD/t
Plan to expand into new sectors
New Zealand
2008
Dynamic limit adjustments
30–50 NZD/t
The first national ETS outside Europe
Japan
2026**
Planned national system
–
Currently only local systems (Tokyo, Saitama)
*The Federal Output-Based Pricing System has been in operation since 2019, but provincial systems existed before (e.g., Québec).
** Japan plans to launch a national ETS from 2026.
** Japan plans to launch a national ETS from 2026.
The impact of the ETS on entrepreneurs
Businesses declare their readiness to take climate action, but energy prices remain a key competitive factor. In Europe, the ETS system generates significant costs – in Poland, up to 50% of the energy price is due to CO₂ emission allowances. Below, we present the situation in individual markets.
Region / region
Impact on business
Main features
European Union
Very high
• 30–40% of the energy price is the cost of ETS
• Risk of carbon leakage in heavy industry
• For SMEs, the indirect effect is higher energy and material costs
• Risk of carbon leakage in heavy industry
• For SMEs, the indirect effect is higher energy and material costs
Great Britain
High
• Mechanism similar to the EU, but lower prices
• Some companies use free allowances
• Some companies use free allowances
China
Low
• Symbolic price (8–10 USD/t)
• System intensity-based
• Little pressure on coal-fired power plants
• System intensity-based
• Little pressure on coal-fired power plants
California (USA)
Moderate
• CO₂ cost relevant for energy and transport
• Sector-wide system
• Sector-wide system
RGGI (USA)
Moderate
• CO₂ cost relevant for energy and transport
• Sector-wide system
• Sector-wide system
South Korea
Moderate
• The CO₂ price applies to large corporations
• Implemented stabilization mechanisms
• Implemented stabilization mechanisms
Canada
High
• The federal price floor is rising every year
• Companies must buy allowances or pay carbon tax
• Companies must buy allowances or pay carbon tax
Summary - what's next for ETS and energy prices in Poland?
The ETS will remain a key climate policy mechanism in the EU – its importance will only grow as emission limits become more stringent. However, Poland faces a choice: either accelerate its energy transition and reduce its reliance on EUAs, or face further increases in energy costs.
FAQ - The European Emissions Trading System (ETS)
How does the ETS system work?
The ETS is based on a cap-and-trade principle: an emissions limit is set, and companies must hold allowances for every tonne of CO₂ emitted. The number of allowances decreases annually.
What is ETS emissions trading?
Allowances can be bought and sold on the market. This allows reductions to be implemented by companies that can do so most cheaply.
What is the price of CO₂ emissions?
The price fluctuates depending on supply and demand. In the EU, it was around €65–85/tonne in 2024.
Who pays for CO₂ emissions?
Costs are borne primarily by power plants, energy-intensive industries, and airlines. Some of these costs are passed on to consumers through energy and product prices.
What is the share of ETS in the electricity price?
The cost of allowances can constitute up to 30–50% of the final energy price, especially in countries such as Poland.
Where does the ETS revenue go?
Revenues from the auctioning of allowances go to the budgets of EU countries and are largely allocated to the energy transformation.
What is the impact of ETS on electricity prices?
The ETS increases the costs of producing energy from fossil fuels, which drives up electricity prices. This is also intended to encourage investment in renewable energy sources.
Author: Bartosz Palusiński, Consultant
