23 May 2019

No underwriting for PGE (Polska Grupa Energetyczna) Złoczew lignite open-pit mine

Dear Madam/Sir,

Concerned about the climate, clean air and water crisis we write to you as civil society organisations asking your insurance company not to underwrite the proposed Złoczew lignite open-pit mine.

The Złoczew lignite open-pit mine is a highly controversial project pursued by the Polish state- controlled PGE. The mine is projected to start its operations by 2028 and provide fuel for the Bełchatów lignite thermal power plant (TPP) for more than 20 years. Both the Złoczew lignite mine project and PGE’s business strategy are contrary to the decarbonisation requirements of the UN Paris Climate Agreement. The ‘Beyond 2 degrees’ scenario by the International Energy Agency shows that coal power generation must be phased out by 2030 in OECD countries and the European Union, in order to meet the Paris objectives. It would therefore be highly irresponsible and damaging to provide underwriting services to a project that clearly goes against the global climate agreement.

The Złoczew lignite open-pit mine, if built, will be the deepest lignite mine in Europe and is intended to prolong the operation of the Bełchatów power plant beyond 2030. Bełchatów is the biggest lignite plant in Europe and the biggest CO2 source in the EU. The mine would need between six and eight years of preparatory work just to remove the soil, earth, houses and all the infrastructure above the lignite seam, blow up the rocks above and pump out water. With 18 million tonnes a year of lignite from Złoczew, Bełchatów would yearly emit five tonnes of mercury, 26 tonnes of cadmium and 169 tonnes of lead. Methane leakage from the mine would be equivalent to 0.4 million tonnes of CO2 per year.1

1https://www.pl.clientearth.org/raport-wkrotce-wiecej-rteci-i-olowiu-z-elektrowni-belchatow/ 1

Moreover, in order to build the Złoczew mine, more than 3000 people would need to be resettled and 33 villages destroyed. This would include the destruction of roads, churches, cemeteries, schools and electricity lines, as well as other infrastructure. Additionally a water depression cone of up to 803 square kilometres would have a negative impact on water tables and availability for farming purposes (for comparison, Warsaw is 514 square kilometres in size). The impacts would be far bigger since the water depression cone is defined as a drop in the water table of more than one metre, and smaller drops also impact crop yields. These levels would only revert to original levels in 76 years. The losses from foregone agricultural production in the surrounding area have been estimated in the range of PLN 5.3 to 18.5 billion (EUR 1.2 to 4.3 billion) and additionally in the food processing sector of PLN 4.6 to 17.4 billion (EUR 1.07 to 4.05 billion)2. A milk cooperative, known throughout the region, would be heavily impacted and probably forced to close.

Impacts on health from both the non-CO2 pollutants from the Bełchatów lignite power plant as well as directly from the mine (especially dust on dry, windy days) would increase substantially. The Złoczew mine would emit yearly 702 tonnes of PM10, and 108 tonnes of PM2,5. A total of 157.7 million cubic metres of water would be pumped out each year in order for the Złoczew mine not to be flooded. The Oleśnica river, and consequently the Warta river (the biggest Odra affluent), would be polluted with heavy metals (including mercury). The EIA report for the project contains no assessment of the yearly load of priority substances and, therefore, the impact on water-dependent ecosystems has not been analysed correctly. The EU’s Water Framework Directive (WFD) goals would also be breached if the Złoczew mine is built and so far neither PGE nor the Regional Environmental Protection Authority (RDOŚ in Łódź) have requested an opinion from the European Commission – which is required if the project is to receive a derogation from the WFD, and for the EIA permit to be granted.

In addition to its environmental and health impacts, the Złoczew mine is also widely questioned by financial analysts on economic grounds and perceived as financially non- viable. The mine would cost between PLN 10 and 15 bln (EUR 2.3-3.5 billion). The Złoczew mine would also be a challenge to insure given that geologists have observed that, due to the depth of the mine, earthquakes would be common in the surrounding area and unproven technologies would need to be used for blasting the rocks over the lignite seam, thus increasing the risks. Moreover, as you are well aware, fewer and fewer insurance and reinsurance companies are willing to engage in underwriting new coal mines.

For all of the above reasons, the Złoczew open-pit mine is opposed by local and national associations, including the Polish Coalition “Development YES - Open-Pit Mines NO”. The EIA permit and the spatial plans that are needed in order for the mine to obtain a mining concessionarecurrentlybeingchallengedinPolishlawcourts. Aclearsignalfromfinancial institutions is needed to confirm that any expansion of the coal sector is undesirable and inconsistent with the goal of a quick and fair phase-out of coal, in particular in OECD countries, where it is of paramount climate importance to not build any new coal projects.

2Analysis by PhD Benedykt Pepliński from Poznań Economic University [not published] 2

The undersigned organisations are members of the Europe Beyond Coal, European Responsible Investors Network or Unfriend Coal campaigns, which scrutinise the implementation of sustainability and climate commitments by a range of financial institutions. Any participation in the underwriting of the Złoczew mine will be heavily criticised.

This is why we call on your institution not to participate in the underwriting of the Złoczew mine.

We would welcome an answer to this letter from your institution by 5 June 2019.

Sincerely,