Fiala: EC will heed Czech call to cap prices of new allowances

The European Commission will heed a proposal from Czechia and other countries and prepare a plan to cap the prices of new emissions allowances for household heating and fuels, Prime Minister Petr Fiala (ODS) told CNN Prima News today. Fiala described the decision as a major success, even though Czechia’s aim is not to introduce these emissions allowances at all. So far, however, it has not managed to secure a majority for that position. Environment Minister Petr Hladík (KDU-ČSL), who is in Brussels for talks today, confirmed that he had secured a direct commitment from European Commissioner for Climate Wopke Hoekstra. Czechia expects a response from the Commission within days or weeks.

The new emissions trading system, ETS 2, is intended to extend emissions allowance trading to areas such as road transport and building heating. Under current plans, it is due to take effect in 2027. Czechia is part of a group of nearly two dozen countries calling for changes to the system.

Fiala told CNN Prima News that he had received an update from Hladík, who was attending a meeting of EU environment ministers in Brussels. “The latest news is that the European Commission will heed the request we made as a coalition of 19 countries. It will prepare a proposal to ensure that the price of emissions allowances is indeed capped,” he said. This means no one will have to fear increases in fuel or housing costs, as some estimates have predicted, he added.

He considers the decision a major success. “I would like these type-two emissions allowances not to be introduced at all. But we don’t have a majority for that,” he noted. After Wednesday’s cabinet meeting, Fiala told reporters that Czechia was ready to seek support for further changes, a postponement and the abolition of this type of allowance.

According to the Ministry of the Environment, Climate Commissioner Hoekstra said that, like Czechia, the European Commission clearly does not intend to accept excessively high prices and understands the concerns in Czechia and other EU countries, the ministry told the Czech News Agency (ČTK) in a press release this afternoon. The Commission is now carefully and thoroughly analysing the proposals and recommendations from member states set out in a letter sent to it by Hladík on behalf of 19 countries in early July, the ministry said. Hoekstra pledged that the Commission would respond to the requests in a way that allays concerns and implements the recommendations set out in the letter initiated by Czechia, according to the ministry.

“Our efforts have paid off, because we cannot allow the emissions allowance system to hit Czech households, especially those on low incomes. The European Commission has now confirmed that it will respond to our concerns and incorporate mechanisms to keep the price of an emissions allowance at an acceptable level,” Minister Hladík said.

According to the Czech minister, Hoekstra accurately described the current situation at the start of today’s meeting in Brussels, saying that the European Commission did not want to allow emissions allowance prices to become unpredictably high or negatively affect EU citizens. “The Commission is taking our non-paper very seriously, examining its principles and will make changes to European legislation,” Hladík said. He is in constant contact with Commissioner Hoekstra. “We expect a response from the Commission within days or weeks,” the minister added in response to a question from the Czech News Agency.

The letter, known as a non-paper, proposes three main areas of action to ensure that the price of an allowance does not exceed 45 euros, according to the ministry’s press release. These include better predictability and visibility of the prices allowances will reach under ETS 2, for example through earlier allowance auctions or the publication of information on the pace of the rollout of zero-emission technologies, which will affect allowance prices. Another proposal is to strengthen the market stability reserve (MSR), which releases additional allowances or, conversely, withdraws them from the market if there is a significant shortage or surplus. This mechanism should be strengthened and made more effective to prevent situations involving high prices. It should also be possible to stabilise the market continuously, rather than only once a year. The final point is to strengthen the €45 threshold for allowance prices, above which additional allowances would be released onto the market to bring prices down.

“The so-called non-paper is a successful initiative by Czechia, which secured the support of 18 other member states, representing 91 percent of the EU population. In the letter, Czechia called on the Commission to make fundamental changes and provide guarantees that emissions allowance trading would be predictable, allowance prices would not rise sharply and citizens would not be negatively affected,” the Ministry of the Environment’s press release said today.

The EU currently operates the ETS allowance system, which applies to power plants and industrial companies that produce greenhouse gases. Each allowance permits the release of one tonne of carbon dioxide, or an equivalent amount of another gas, into the atmosphere. EU member states are expected to use the revenue from their sale for climate protection measures.