Analysts: Emissions allowances will still cost Czech households extra after changes

Even after changes to the ETS2 emissions allowance system presented by the European Commission on Tuesday, allowances will still cost households several thousand crowns a year in additional expenses. Analysts contacted by the Czech News Agency (CTK) said so. Some experts said the changes reduce the risk of extreme price fluctuations, while others called them cosmetic adjustments intended to address criticism from some member states.

"Even after the latest changes to the ETS2 system, emissions allowances will still impose a significant additional burden on family budgets. The risk of extreme prices has been reduced, but essentially the calculations made so far still hold," said Jiří Tyleček, an analyst at XTB.

According to XTB, an average household with lower energy consumption will pay several thousand crowns more a year, while a more energy-intensive household could pay up to a few tens of thousands more.

Finlord manager Boris Tomčiak estimates that even if the €45 cap is maintained—one of the aims of the new adjustments—the impact on an average household that uses fossil fuels for heating and transport will amount to several thousand crowns. He also pointed to falling energy commodity prices, which offset the increase in costs associated with allowances. He cited natural gas as an example: its price has fallen by €13 (316 crowns) per megawatt-hour (MWh) since the start of the year. "This kind of drop means an even greater reduction in the final price of gas for households than the increase caused by emissions allowances," Tomčiak said.

Tomčiak said the risk lies in the assumed cap not being maintained, in which case energy costs would rise faster than household incomes. However, he pointed to revenue from ETS2 sales, which countries will use to provide partial support to low-income households most at risk from rising prices.

On Tuesday, the European Commission outlined five mechanisms to ensure that the price of an emissions allowance remains at €45 per tonne of carbon dioxide (CO2) over the long term. The mechanisms will be triggered as soon as the allowance price exceeds that level. According to Environment Minister Petr Hladík (KDU-ČSL), the changes guarantee that allowance prices will remain affordable and that the new system will not negatively affect people, consumers, small businesses or sole traders.

However, Radim Dohnal, an analyst at Capitalinked.com, considers the proposed changes to be mere declarations. "The European Commission's proposal yesterday (Tuesday) needlessly complicates the scheme and further clutters European law. It is not a change for the better," Dohnal said.

A household that uses ten MWh of gas a year for heating and drives 20,000 kilometres a year in a diesel car would pay an additional 17,000 crowns annually, according to Dohnal. If the allowance price were €45 per tonne of CO2, the additional cost would be 10,000 crowns, he said. He considers both amounts to be minor items in a household's total bill and described the impact on households as being wildly exaggerated.

Trinity Bank economist Lukáš Kovanda also criticised the Commission for not introducing a price cap. Brussels had made only cosmetic changes, he said. "The system should be more predictable and stable, but that does not rule out a significant rise in allowance prices. They will probably just rise more predictably and with smaller fluctuations. That is more of a win for investors and allowance speculators than for citizens of EU member states, including Czechia," Kovanda said.

The new ETS 2 system is intended to extend emissions allowance trading to sectors such as road transport and building heating. Under current plans, it is due to take effect in 2027. Czechia is among nearly twenty countries that called for changes to the system and guarantees that emissions allowance trading would be predictable, that allowance prices would not surge, and that citizens would not be negatively affected.