Czech Republic Energy

Czech ministries argue over ETS funds to cut climate change

| 2024-01-03 2 min read

Czech ministries argue over ETS funds to cut climate change

Reading Time: 2 minutes

Czechia has to decide soon on reallocating its revenues from emission allowances to reduce or compensate for the consequences of climate change, Hospodasrske Noviny reports.

The approval of the amendment should have been valid since the beginning of this year, and Czechia could be threatened with sanctions for their late adoption.

A draft amendment has been prepared in response to the modified EU directive that all revenue from allowances be used for climate protection, which Czechia should later report to Brussels. Until now, only half such revenues had to be used this way.

The main instrument for reducing greenhouse gas emissions is the European Emissions Trading System (ETS), which sets limits on the total amount of greenhouse gases that can be emitted by sectors within its scope, while allowing businesses to obtain or purchase emission allowances. As the price of allowances increases, so does the incentive for firms.

Gov’t talks ongoing, as ministries vie for revenue

The Czech government planned to discuss a draft amendment to the law on trading allowances on Wednesday, 3 January, according to the Bratislava-based outlet. As several ministries are interested, ministers must resolve the contradiction of who controls the revenues of the allowance auction. This year’s revenues from allowances should amount to over CZK 40bn (EUR 1.62bn), according to a government report.

Power plants and industrial enterprises that release into the atmosphere greenhouse gases such as carbon dioxide buy emission allowances. Each permit entitles a company to release a tonne of carbon dioxide or the equivalent amount of another gas.

There is disagreement over the direction of revenue, currently partly distributed between the Environment Ministry, the Industry and Trade Ministry and the state budget. According to the Environment Ministry, which drafted the proposal, the money should be managed by the State Environmental Fund. 

However, the Industry and Trade Ministry wants revenue to finance the operational support of existing energy sources. The Finance Ministry and Transport Ministry both want the revenues to be state budget income. 

Opposition movement ANO vice-chairman Karel Havlicek said the government should use the money collected from the sale of emission allowances to reduce energy prices. Environment Minister Petr Hladik (KDU-CSL) said this would break EU regulations.