Czech law likely to earmark allowance revenues for tackling climate change impacts

The government’s amendment to the law on emissions trading, which would allow proceeds from the sale of allowances to be used only to tackle the impacts of climate change, is heading to its final reading in the Chamber of Deputies following today’s proceedings. It will face a motion to reject it. Today’s second reading was marked mainly by criticism from opposition benches of the government for incorporating only part of the European directive into the law and omitting the introduction of the EU ETS 2 system. This system extends emissions allowances to fuels and heating. The government, however, will seek to postpone its introduction.

Prime Minister Petr Fiala (ODS) told the Chamber of Deputies last week that he considers it necessary to postpone the introduction of the EU ETS 2 system. The Czech side, he said, will seek its revision.

The Economic Affairs Committee recommended approving the bill. The Environment Committee recommended adding several amendments. One of them, dubbed “Lex Liberty” after the bankrupt Liberty Ostrava steelworks, would allow the Ministry of the Environment to freeze an account holding surplus emissions allowances so that they could be used only to surrender allowances for emissions released. Companies would therefore be unable to sell them. The measure would apply, for example, to companies in insolvency proceedings or preventive restructuring.

Former Deputy Environment Minister and current ANO MP Berenika Peštová accused the government of getting cold feet and therefore leaving ETS 2 out of the amendment. According to former ANO Environment Minister Richard Brabec, the bill in its current form cannot meet the requirements for transposing the European directive. He said the government should seek to have the ETS 2 system scrapped in its proposed form. He warned that the impact on heating and fuel prices could be enormous.

ANO’s shadow prime minister Karel Havlíček said that emissions trading was undermining Europe’s competitiveness and that companies would rather move to the United States. “Europe is going completely to the dogs,” he said, among other things. According to Havlíček, the last chance to hit the brakes came during the Czech presidency of the EU. He warned that emissions allowances would not rise by just a euro or so, but by much more, and that petrol prices would consequently rise by more than ten korunas per litre.

“We care about the competitiveness of the Czech Republic; we care about the future,” Environment Minister Petr Hladík (KDU-ČSL) responded.

He also said the Czech government travels to Brussels to negotiate as a sovereign state and knows how to reach agreements. Transport Minister Martin Kupka (ODS) asked Havlíček how uncompromising he had been in the past at the European Council and when discussing the phase-out of coal. “We have a chance to unite so that the Czech Republic can be a voice of reason,” Kupka noted. “But fiery speeches will certainly not put things right,” he added.

The government’s bill would mainly introduce a rule stipulating that proceeds from the sale of emissions allowances may be used only for measures that reduce or compensate for the effects of climate change. The amendment responds to a revised EU directive requiring all allowance revenues to be used for climate protection. In line with the European directive, the bill also adjusts the rules for emissions allowances in maritime transport. It raises the maximum fine for the most serious offences from five to 20 million korunas.