Czech environment ministry proposes over CZK 2bn in compensation for companies facing high electricity costs

Companies facing high electricity costs because of charges for greenhouse gas emissions could receive compensation from the state totaling more than two billion crowns. This is set out in a draft regulation that the Ministry of the Environment (MŽP) will submit to the government on Wednesday. The aid would cover expenses incurred last year. It is intended for energy-intensive sectors that could move production abroad because of higher costs, to countries with less stringent regulations. According to the ministry, this could subsequently worsen the global situation with greenhouse gas emissions.

The regulation is to follow on from the law on emissions allowance trading. The law sets out rules for financial compensation to companies that face high costs for greenhouse gas emissions, which are reflected in the price they pay for the electricity they consume.

The draft sets the amount of compensation for costs incurred in 2023. The amount is set annually under the law. In determining it, the government uses data that companies submit to the ministry. Under the proposal, CZK 2.15 billion could be distributed for 2023.

The draft regulation underwent an expedited consultation process from 17 May to 31 May. Major comments were submitted by the Ministry of Industry and Trade, the Ministry for Regional Development, the National Budgetary Council, the Confederation of Industry of the Czech Republic and the Czech Chamber of Commerce.

The Ministry of Industry and Trade (MPO) wants the compensation to come from the government’s reserve, but the Ministry of Finance opposes this. The dispute remains unresolved. The Ministry for Regional Development is calling for the compensation to be used to reduce emissions and for 30 percent of electricity to come from renewable sources. The Ministry of the Environment supports this proposal, but the Confederation of Industry of the Czech Republic and the Ministry of Industry and Trade oppose it.

Under an EU directive, member states may provide state aid to sectors threatened by so-called carbon leakage. The term refers to a situation in which companies relocate outside the EU to avoid the EU’s strict standards on greenhouse gas emissions. Financial compensation therefore goes mainly to companies in energy-intensive sectors that produce large amounts of greenhouse gases. If these companies relocated outside the EU, greenhouse gas emissions would worsen globally, according to the Ministry of the Environment.