Chunk of carbon credits for free from 2013

In a big win for industry, the government agreed to keep 39 percent, or an estimated 47.5 billion Kč ($2.6 billion) worth, of carbon credits free starting in 2013 in exchange for industry investing the money saved on credits into emissions-reducing technology. To make up the revenue the government would have gained from the sale of those credits, a carbon tax for smaller companies that don't emit enough carbon to require credits is now under discussion.

Large energy sector companies, the greatest beneficiaries, said the extra cash would allow them to invest in "greener" technologies to meet future emissions goals and keep consumer prices down, a claim environmental advocates reject, calling the credits a "gift" to the state's pet energy lobby and a hit to smaller businesses, which may now have to pay an additional carbon tax.

"It is a victory of common sense for us and for the millions of people who use district heating," said Martin Hájek, head of the District Heating Association. "It's not just a free gift from the government, but it leaves the money in the sector, which desperately needs it for investment. When you invest, you save energy and maintain reasonable heating prices. When the money is given to the government, it's hard to make the necessary investment."

The decision came as the government worked to pass a grimly austere 2012 state budget and after weeks of lobbying by Finance Minister Miroslav Kalousek to charge for all of the credits, which could have provided an estimated 24 billion Kč boost to the budget.

The details regarding the carbon tax and how much it would yield have yet to be defined by the government but will likely be ready by the end of this year.

"We believe it would be more reasonable for the government to keep the money and invest it in low carbon solutions that are economically more profitable than those proposed by the industry," said Vojtěch Kotecký, program director of the environmental organization Hnutí Duha.

Two-hundred-fifty million credits is the maximum allowed to be given for free in the Czech Republic in the EU plan for phase III of the Emissions Trading Scheme for the 2013-20 period. In total, the Czech Republic is allotted 640 million credits.

In a proposal to the EU regarding how credits will be divided within the industry, the Czech government suggests 108 million free credits for electricity producers alone.

Perhaps the greatest beneficiary of the plan will be the state-owned energy giant ČEZ, which controls about 70 percent of the domestic energy market and receives about two-thirds of the free credits (about 26 billion Kč worth) for the 2013-20 period, according to some estimates.

In exchange for the credits, the Environment Ministry expects companies will invest around 138 billion Kč into green technologies. Additionally, the government will invest 50 percent of the revenues from auctioned credits into reducing emissions and other environmental efforts.

"It's for really important refurbishment of the heat distribution network," Hajek said, explaining investments in the heating sector are focused on upgrading boilers, producing boilers that cut emissions and exchanging old heating systems for newer, more efficient ones.

Critics say energy companies already had their budgets set to meet upgrade demands under the assumption that no credits would be free, which makes the credits more like a present to industry.

"The entire plan to leave solutions to the energy corporations is highly questionable. It would be more appropriate to use the market-based emissions trading system where polluters pay for pollution rather than invent measures where they don't pay, but forge some of their own solutions," Kotecký said.

Hajek countered it is impossible that all the necessary projects could be pre-planned and included in budgets.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com