CZ

Government of the Czech Republic

The Czech Republic has sent requirements from 18 EU member states to the European Commission regarding changes to emissions trading

Premiér Petr Fiala a ministr životního prostředí Petr Hladík.
Premiér Petr Fiala a ministr životního prostředí Petr Hladík.


The Czech Republic has sent a non-paper to the European Commission on behalf of 18 member states that have signed it. The states, representing a majority of the EU, are requesting the Commission to make fundamental changes and provide guarantees that emissions trading will be predictable and will not have a negative impact on citizens.

The Czech Republic advocates for the abolition or postponement of the emissions trading system in the transport and buildings sector; however, there is insufficient consensus on this matter within the EU. Nevertheless, the Czech Republic managed to reach a compromise, and this document, which demands guarantees in five points, has been supported by 18 states. 

“It still holds true that it would be best to completely abolish or postpone the new emission allowances, but unfortunately, we currently lack the necessary majority for this. The Czech Republic is therefore proceeding step by step and has drafted a joint document, a so-called non-paper, which proposes specific modifications to ETS2 and has already been signed by a qualified majority of Union states, clearly showing that our concerns are not isolated. “We are doing our utmost to ensure that EU climate policy is not only ambitious but also socially bearable, economically sensible and does not have a negative impact on our households or businesses,” stated Prime Minister Petr Fiala.

The Czech Republic has been supported in its efforts by large states such as Germany, Italy, Spain, Poland, Austria, Belgium and others. The Czech government has discussed the proposals with the European Commission, and the Commission itself recognises the pressure from member states and the need for adjustment. The Czech proposal focuses on strengthening and streamlining the mechanisms that will prevent a sharp increase in the allowance price, and thus a steep rise in prices of, for instance, petrol, diesel or gas. 

“We now expect the European Commission to act swiftly and come forward with a legislative proposal for amendment so that the final proposal can be discussed, approved and be valid by the end of this year,” stated Minister of the Environment Petr Hladík.

“We have clear requirements for mechanisms that will ensure predictability and perspective of allowance prices. This includes the disclosure of information about the pace of implementing zero-emission technologies, which will affect the allowance price. Furthermore, it concerns the Market Stability Reserve (MSR), which will release additional allowances if there is a significant shortage of allowances in the market. This instrument should be strengthened and made more efficient to prevent situations with high prices. It should thus be possible to place more allowances on the market than currently anticipated. Additionally, there should be an option to release extra allowances whenever needed, not just once a year. The aim is also to strengthen the allowance price threshold to 45 euros, above which additional allowances will be released to the market to reduce the price,” explained Minister Petr Hladík.

The Emissions Trading System (EU-ETS2) applies only to fossil sources – namely petrol, diesel, gas or coal. It does not apply to wood, pellets, biofuels, etc. The purpose of emission allowances is thus not only to reduce emissions but particularly to reduce dependence on fossil fuel imports.

“If fuel prices exceed a certain threshold, the state can intervene and reduce the excise duty, which is included in petrol and diesel at a rate of 9 to 13 CZK per litre. The current government has already used this instrument once in 2022,” added Minister Hladík.

5 crucial points of the non-paper ensuring the stability of emission allowance prices:

  • Regular publication of information for better awareness of price forecasts for ETS2. Official renewable energy installations will be regularly published to have a positive effect on the emission allowance price downwards, i.e. towards its reduction.
  • Commencement of early auctions in 2026 to reduce price uncertainty for 2027. Emission allowances in the ETS2 system will not be cancelled until 2028; however, trading needs to commence earlier so that we can respond quickly, launch control mechanisms as soon as possible, and thus maintain stable prices.
  • Setting up the MSR (Market Stability Reserve) trigger mechanism to limit price fluctuations as in ETS1, and increasing released MSR volumes under tight market conditions. We request an increase in the quantity of emission allowances to maintain the price at the threshold of 45 euros.
  • Extension of the MSR mechanism's lifetime beyond 2031 to ensure sufficient allowances in the market. This involves creating a mechanism to prevent price increases at the end of the 2030–2033 emission period and maintain the emission allowance price at a stable level.
  • Strengthening price control mechanisms. To ensure the price mechanism, Article 30h(2) of the ETS Directive must be amended alongside the MSR mechanism. This, in simple terms, determines under what conditions and how many allowances will be released to the market. Additionally, it should be possible to release additional allowances more than once per year.

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