Czech ministries agree on emissions allowance revenue split, ministers say

The Ministry of the Environment and the Ministry of Industry and Trade have agreed on how to allocate revenues from emissions allowances, and the government is expected to approve the agreement today. Ministers said so as they arrived for a cabinet meeting. According to Transport Minister Martin Kupka (ODS), next year revenues from allowance sales will remain part of the state budget, while from 2026 the main recipient will be the State Environmental Fund (SFŽP).

The government is set to discuss a draft amendment to the Act on the Conditions for Trading in Allowances for the third time this year. In recent months, the cabinet has twice postponed the amendment over disagreements about how revenues should be divided among ministries. Several ministries were interested in overseeing the revenues. Until now, the money has been divided among the Ministry of the Environment, the Ministry of Industry and Trade, and the state budget. In addition to allocating allowance revenues, a key element of the draft is a requirement that all allowance revenues be used for measures to reduce or compensate for the effects of climate change.

Environment Minister Petr Hladík (KDU-ČSL) declined to comment further on the details of the agreement until the cabinet meeting had concluded. „I think we have found a good solution,“ he said. According to him, there had been agreement from the outset that revenues from allowance sales should go towards modernising and decarbonising the energy sector or insulating homes; the discussions focused on how the process for handling the revenues should be set up.

Agriculture Minister Marek Výborný (KDU-ČSL) also confirmed that the ministries had reached an agreement, but did not provide details. „Revenue from allowances should primarily go to projects related to responding to climate change,“ he said.

The draft revised amendment 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 this way, while using the remainder for this purpose was only recommended. The draft does not specify particular examples of measures for which the money could newly be used.

Approval of the amendment is gradually falling behind schedule. Under the original plans, it was supposed to take effect at the start of this year. If delays continue, Czechia could face penalties for adopting the changes late. In recent weeks, the Confederation of Industry and Transport of the Czech Republic has warned that the delay threatens investment in domestic industry and the energy sector. The current situation is also making it more difficult for companies to prepare for the new market conditions.

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