European Commission approves measures to stabilise ETS2 allowance prices in Czechia

Brussels/Prague, 27 November (CTK) - The European Commission today approved a proposal for measures to stabilise the price of an emissions allowance in the ETS 2 system and prevent impacts on households and businesses. Specifically, the proposal concerns changes to the so-called MSR stabilisation mechanism, which aims to maintain balance in the allowance market and prevent extreme price fluctuations. Changing the decision on the MSR is a key step towards swiftly implementing the measures announced by European Commissioner Wopke Hoekstra to ensure the gradual and smooth launch of the ETS2 system, the European Commission said in its statement. Outgoing Czech Prime Minister Petr Fiala, whose government had pushed for changes to the emissions allowance system, also welcomed the Commission's move.

"In response to our proposal, the European Commission today approved specific measures that will prevent ETS2 allowance prices from rising and limit the negative impact of the allowances on citizens and businesses," Fiala said on the social media platform X.

"We are thus keeping our promise not to allow a sharp increase in housing and fuel costs. The new legislation will make it possible to effectively cap emissions allowance prices," he added. According to Fiala, the new government must continue negotiations and secure support for further changes and the abolition of the entire system, as representatives of the ANO movement promised before the election.

In October, in response to requests from Czechia and 18 other countries, the European Commission announced changes to the ETS2 emissions allowance system. It outlined five mechanisms to keep the price of an emissions allowance at 45 euros per tonne of carbon dioxide (CO2) over the long term. The mechanisms will be triggered when the allowance price exceeds this level.

"Today we are delivering on the commitments we announced in October. These measures further strengthen stability and affordability under ETS2 and set us on a more predictable path towards a low-carbon future," European Commissioner Hoekstra said.

"We are creating the right conditions to keep prices under control and act swiftly if they rise too much," he added.

The proposed measure can be implemented without amending the ETS Directive. Following its adoption by the Commission today, EU member states and the European Parliament must agree on it. It will enter into force only after that.

According to Jiří Tyleček, an analyst at XTB, approval of the measure has reduced the risk of prices soaring to extreme levels. "But this does not create an ironclad price cap of 45 euros per allowance. Moreover, we are still talking about a real value close to 60 euros by the time the emissions allowances enter into force," Tyleček said.

He also stressed that an allowance price close to the cap would still significantly affect household and business spending. "On average, households will need to prepare for several thousand crowns in additional direct costs each year. They will also incur other substantial, though somewhat hidden, costs indirectly as businesses pass their higher costs on to customers through rising prices for goods and services," Tyleček added.

The new ETS 2 system will extend emissions allowance trading to sectors including road transport and building heating. Under the original plans, it was due to take effect in 2027. However, following pressure from Czechia and other countries, it was agreed that it would be postponed by a year and launched in 2028.

Andrej Babiš, chairman of the ANO movement and likely future Czech prime minister, has also criticised the introduction of the ETS2 system. The policy statement of the incoming government lists among its commitments that it will "reject emissions allowances, the so-called ETS2, reduce distribution and transmission fees, support the development of nuclear power and domestic energy sources, and strengthen the country's self-sufficiency and energy security".