Czech government to discuss emissions allowance system changes for third time on Wednesday

The government will discuss a bill amending the Act on the Conditions for Trading in Allowances for the third time on Wednesday. In previous months, the cabinet postponed the bill twice because of disputes over how revenues should be divided among ministries. Several ministries want oversight of the revenues. The Ministry of the Environment (MoE) declined to comment on the latest changes to the bill. However, the key provision remains the requirement to use all revenues from allowances for measures that reduce or offset the effects of climate change, according to previous drafts of the bill.

Emissions allowances, which are expected to generate around 40 billion crowns this year, are purchased by power plants and other industrial companies that emit greenhouse gases into the atmosphere, such as carbon dioxide. One allowance entitles a company to emit one tonne of carbon dioxide, or an equivalent amount of another gas.

The revised bill responds to an amended EU directive requiring all revenues from allowances to be used for climate protection. The state will probably also have to report this to the EU. Until now, half of these revenues had to be used for this purpose, while using the rest was only recommended. The bill does not specify examples of the measures for which the money could be used under the new rules.

The government has already had the bill on its agenda in January and March. However, because of disagreements among ministries over how to divide the revenues, which are currently shared between the MoE, the Ministry of Industry and Trade, and the state budget, the cabinet postponed it on both occasions. The Ministry of the Environment, which submitted the bill, and the Ministry of Industry and Trade are seeking oversight of the proceeds from the sale of emissions allowances. The ministries of finance and transport, meanwhile, wanted the revenues to go to the state budget.

After the government discussed the allowances bill in March, Minister of Labour and Social Affairs Marián Jurečka (KDU-ČSL) said the ministries would seek further agreement. If they failed again, he said he expected a meeting of coalition leaders. It is unclear whether the authorities have now reached an agreement. MoE spokesperson Veronika Krejčí told the Czech News Agency (ČTK) that detailed information would be released only after the government meeting.

Approval of the bill is increasingly delayed. Under the original plans, it was supposed to take effect at the beginning of this year. If the delays continue, Czechia could face sanctions for adopting the changes late. In recent weeks, the Confederation of Industry of the Czech Republic has warned that the delay threatens investment in Czech industry and energy. The current situation is also making it harder for companies to prepare for the new market conditions.

The European Union Emissions Trading System (ETS) is the main tool for reducing greenhouse gas emissions. It sets limits on the total amount of greenhouse gases that sectors covered by the system can emit, while also allowing companies to obtain or purchase emissions allowances, which they can trade as needed. As allowance prices rise, companies have greater motivation to try to reduce their emissions.