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New green tax to aid environment

Measure expected to help stem global warming trend

By Michael Heitmann
Staff Writer, The Prague Post
January 3rd, 2008 issue

Local officials have added a new weapon to their arsenal to fight global warming — a tax on fuel that could also hit some consumers hard in their pocketbooks.
The new environmental excise tax is being raised by the government in an effort to reduce greenhouse gas emissions and energy use.
Consumers will pay up to 8 percent more to use brown coal for heating, for example, which could cause some to switch to a fuel that pollutes less, analysts say.
While the new measure may seem forward-thinking, it is unlikely to earn any green accolades for the government coalition that approved it. That’s because the government mostly stuck to the minimum requirements for energy taxation laid out in a 2003 European Union directive, said Jiří Gavor, director of energy analyst agency ENA.
Consumers must pay a tax of at least 1 euro per megawatt-hour of electricity, and no less than 21 euros ($30.17/555 Kč) per 1,000 liters of diesel fuel to the state treasury, under the new rules. Natural gas for business use is to be taxed at a minimum of 0.15 to 0.3 euros per gigajoule. In addition, the government also reserves the right to increase taxes in the future, a plan that could be linked to inflation.
Consumers that rely on district heating won’t pay more at the moment, since it was granted tax-exempt status, Gavor said.
With district heating, hot water is carried from central power stations through pipes under city streets to heat buildings and businesses, a system that makes more efficient use of fossil fuels than local boilers, said Pavel Kaufmann, a spokesman for the Association for the  District Heating ČR.
“Metaphorically speaking, out of three coal wagons the standard power plant transforms one into electricity, and two leave the chimney or cooling tower unused,” Kaufmann said.
“At a cogeneration plant, one wagon goes into electricity, one becomes a source of district heating, and only one coal wagon’s energy is emitted as lost heat.”
Gavor predicts price increases ranging from 1 percent for electricity to 8 percent for relatively inefficient brown coal. This 1 percent increase matches calculations by the Energy Regulation Office ERÚ said Eva Nováková, a spokeswoman for state-controlled electricity company ČEZ.
An average household will pay up to 130 Kč ($7.10) more based on the additional 28.30 Kč per megawatt-hour climate change levy, Nováková said.
Although EU guidelines specifically target inefficient brown coal, households that burn coal will still pay a lower bill than those that rely on natural gas or even electricity to keep their homes warm, due to lower overall prices, Gavor said.
During a six-year, 50 billion Kč modernization project in the 1990s, ČEZ installed flue gas desulfurization units at all of its coal-fired power plants, Nováková said, adding that even more refined methods are being put in place at its power plants in Tušimice and Prunéřov.
Greenpeace activists climbed halfway up Prunéřov’s 300-meter-tall chimney in early December to protest the continued use of brown coal. Prunéřov alone emits approximately 9 million tons of carbon dioxide per year, making it one of the largest polluters in the country, Greenpeace claims.
The new energy tax is designed to be fiscally neutral for consumers, since the levy is supposed to be offset by a cut in employer’s social insurance contributions by to 0.3 percent.
It remains to be seen whether the government will indeed reduce social-insurance contributions, Gavor said.
Miroslav Ševčík, who heads the Liberal Institute in Prague, disagreed, saying the new tax is just another financial burden imposed on residents as a general surcharge on goods and services.
“I’m convinced that the ecological tax does by no means aid the environment,” Ševčík said.
Low-income groups will be most affected by the tax, he said, since a separate flat income tax introduced this year partially alleviates the costs for high- and middle-income groups.
More importantly, consumers did not lower their energy use in other countries where excise taxes were passed, Ševčík said.  
“The implementation of ecological taxes is only an ideological cliché that serves to stupify people,” Ševčík said.
Energy analyst Gavor disagreed, however.
“It’s an indisputable fact that higher energy prices motivate consumers to conserve energy,” he said.

Michael Heitmann can be reached at mheitmann@praguepost.com


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