Czech Cabinet Approves Free CO2 Permits
Country: CZECH REPUBLIC
Author: Roman Gazdik and Robert Muller
The Czech government approved a plan on Wednesday to allocate a part of carbon dioxide emission allowances for free to electricity producers in 2013-2020 and will raise energy taxes to make up for the lost revenue.
The plan marks a compromise among the finance, industry and environment ministries following a row over the free allocations.
It will give majority state-owned utility CEZ around 78 million free credits.
Environment Minister Tomas Chalupa, announcing the move, said the recipients of free permits must invest in environmental improvements.
"All subjects covered by this distribution scheme have pledged to deliver investments into an improvement, ecological enhancement of their installations ... to invest 138 billion crowns that are tied to the allocation of these permits," he said.
While the European Union has agreed to auction all carbon dioxide emission permits as of 2013 instead of giving them out for free, the Czech Republic is one of 10 member countries that have negotiated to be allowed to switch gradually by 2020.
Chalupa said the plan assumed that overall Czech electricity producers would be allocated 108.2 million free permits from 2013 to 2020.
This corresponds to around 1.4 billion euros in total, according to 2013 carbon credit prices.
To make up for the shortfall in revenues, the government will raise energy excise taxes imposed on fossil fuels.
The tax changes would bring an extra 5-7 billion crowns ($277 million-$388 million) in budget revenues annually.
CEZ shares rose 3.59 percent, leading gainers on the Prague exchange and beating a 2.4 percent rise in the main PX index.
Editing by Jan Lopatka, Jason Neely and Dale Hudson