Last Tuesday, the European Parliament approved the adjustment of the CO2 emissions allowance system. While so far only heavy industry, energy and heating are applicable, from 2027 they will also apply to buildings and road transport. A price ceiling of 45 euros per ton of CO2 means that a liter of gasoline will become more expensive at today’s exchange rate by about 2.50 crowns, a liter of diesel by 2.80 crowns. We asked the Czech MEPs what sense they see in this.
It is an extension of the existing EU ETS system, where allowances for one ton of CO2 are traded on the stock exchange. From 2027, this trade will also include automotive fuels. They will be paid by the distributors, who will also most likely pass them on to end customers. In the Czech Republic, this is the first time that motorists pay a special form of environmental tax in addition to VAT and consumption tax.
“This legislation is being introduced because we need to reduce the emissions that are damaging the environment and causing the problems that we are all dealing with now. The aim of emission allowances is not really to make people pay more money for the same drive. The aim is to have and they used low-emission transport more,” Mikuláš Peksa, a deputy of the pirate party, wrote to the editors of Aktuálně.cz.
He also pointed out that states will be able to apply for money from the social and climate fund for measures to help households, small and medium-sized enterprises. For the Czech Republic, this means up to 100 billion crowns. “In transport, support can typically be used to improve the availability of cars with low or zero emissions. The specific form of support will be in the hands of the individual states,” adds Peksa.
Luděk Niedermayer for TOP 09 points out that fuel distributors will pay the allowances, and it is not certain whether they will transfer the full cost to consumers. “However, above all we should focus on savings. Use public transport more, which the state can modernize and make more efficient with the contribution of EU money. Everyone can also influence their bill by choosing a more economical car.”
“For a long time, I have been promoting the opinion that the state should focus programs to support energy savings precisely on households with medium and lower incomes, which cannot afford the necessary investments on their own. I consider it a fundamental mistake that we are not doing this yet,” writes Luděk Niedermayer.
According to Tomáš Zdechovský for the KDU-ČSL, the money from the social climate fund will support the energy transformation of households with lower incomes. “Help must come from the bottom, i.e. the very poorest with the lowest incomes. As members of parliament, we were worried that the most vulnerable citizens might not be able to handle it. But we were assured several times by the commission that this would not happen.”
“The method of redistribution will still be discussed. However, the goal is to further improve the quality of life for everyone,” added Zdechovský.
Alexandr Vondra from ODS has a more critical view. “People’s journeys to work, education and entertainment will become more complicated. They will have to think more about where they are going. This is also why I did not support the creation of the new system, even though I and my colleagues managed to achieve many concessions during the negotiations on the final form of the legislation,” he writes. Wonder.
These concessions primarily include postponing the start-up of the entire system to a later date and fixing the price of allowances at 45 euros.
Let’s add that allowances will be traded on the stock exchange as before, for which consumers paid extra at the beginning of the war in Ukraine. The lack of natural gas then led to speculative purchases and a sharp increase in the price of allowances, which was also reflected in the prices of energy and heat.
The clause mentioned by Alexander Vondra says that if the allowance price reaches the mentioned 45 euros, additional allowances must be released to the market. This should prevent the risk of uncontrolled price increases. The price of fuel at Czech pumps should therefore be influenced by nothing but the policy of a particular distributor and the exchange rate of the koruna.
A ton of CO2 is created by burning 427 liters of gasoline, 375 liters of diesel, 364 kilograms of natural gas or 662 liters of LPG. The amount of 45 euros calculated for individual liters therefore comes to 0.105 euros for gasoline, 0.12 for diesel, 0.124 for CNG and 0.068 euros per liter of LPG. At the current exchange rate, this means about 2.50 crowns per liter of gasoline and 2.80 per liter of diesel.
The European Parliament also approved the carbon border adjustment mechanism, known by the abbreviation CBAM (Carbon Border Adjustment Mechanism) and often referred to simply as a carbon duty. This should be based on the carbon footprint of goods imported from outside the EU.
It will thus affect, among other things, critical materials for the production of batteries for electric cars. The question is how it will be possible to set fees for goods from countries like China, where ecological considerations and reporting are under the control of a totalitarian government.
The current phase only accounts for steel, aluminum, cement, fertilizers, electricity and hydrogen. From 2030, the equalization mechanism should apply to all goods.
“It needs to be said that until CBAM is fully functional, free allowances will be available for European industry at the same time,” says the pirate MP Mikuláš Peksa. “Regarding the verification mechanism itself, it is good to note that all the signatory states of the Paris Agreement already monitor and report emissions. China has a decarbonization plan and a system of emission allowances, within which emissions are also detected and charged.”
Peksa emphasizes that companies will have a choice whether to pay for emissions in China or in the EU. The burden of proof will be on them. Either they prove that they paid for the emissions in the country of production, or they pay the full price according to the EU ETS standards.
“In the EU, a separate authorization unit will be created for this, which I would expect to come up with some additional verification standards. But I wouldn’t exactly suspect China of not being able to ensure that it chooses from companies what its own laws impose,” wrote Peksa.
Luděk Niedermayer for TOP 09 points out that certificates will be issued by specialized workplaces and there will also be certified verifiers of the calculation of CO2 emissions for the given product.
“But the fundamental thing is that CBAM is a ‘safety brake’. We assume that CO2 emission standards will quickly converge across the world and, in the end, CBAM will not need to be applied to a large part of trade. The major world economies – the EU, the US and China – have to reduce emissions CO2-like targets,” adds Niedermayer.
Tomáš Zdechovský for KUDU-ČSL also considers the industry standards to be sufficiently clear. “The Commission knows what emission values these products have. If the carbon footprint data does not match or is suspicious, the European Commission will calculate and evaluate it itself. In cases of repeated violations, the Commission can resort to restrictions.”
Zdechovský also points out that if reliable data for the exporting country cannot be used for a certain type of goods, the default values are based on the so-called average emission intensity of 10% of EU equipment with the worst performance for the said type of goods.
Alexandr Vondra remains skeptical. “How honestly CO2 emissions will be reported in which country is a big question that I did not get a satisfactory answer to during the CBAM deliberations.”
“That is why I demanded that the system of allocating free allowances to energy-intensive industry in the EU be maintained as long as possible. It is a proven system that does not depend on how our trading partners, over whom we have no effective leverage, fill out the form,” adds Vondra.
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