Green economy  |  Successes  |  02.09.2011

The Use of Proceeds from Emissions Trading in the Czech Republic

The Czech Republic, steered by its former Green environment minister, made use of the emission trading mechanism to finance insultaning houses, promoting the use of heat from renewable sources of energy, building passive houses and ultimately creating new jobs in these sectors.

Under the Kyoto Protocol, the Czech Republic has an obligation to reduce its national greenhouse gas emissions by 8% compared to 1990 levels during the 2008-2012 control period, and thus has the right to release 900 million tonnes of CO2 equivalent during these five years. The real amount of released emissions will be lower, however. This is because in the baseline year 1990 extensive and extraordinarily energy-inefficient heavy industry inherited from the period of “real socialism” was still operating in full force in the Czech Republic.

In time new greenfield enterprises emerged, but while industry still represents a significant share of Czech GDP, compared to the record emissions from the late 1980s and early 1990s, the Czech Republic will comply with the Kyoto Protocol with a reserve of at least 100 million tonnes of CO2 equivalent. The country is gradually selling off this surplus of unused emissions allowances to those countries which are unable to completely meet their obligations without purchasing a certain amount of emissions credits from abroad.

The Czech Republic has so far managed to sell a total of 76.2 million AAUs (Assigned Amount Units) since March 2009, the most of any of the countries selling them. The largest buyer has been the Japanese state (40 million) followed by Japanese company Mitsui & Co. (25.7 million). All buyers are investing into the same scheme, i.e. at the sale they agreed to the use of the funds paid by them for energy savings, for using renewable sources of heat (modern biomass boilers, heat pumps and solar-thermal collectors) in family houses and apartment buildings and for supporting the construction of passive homes.

Housing was selected as a priority area because there is significant potential here for reducing greenhouse gas emissions, but only very limited EU funds are available for taking advantage of this. Individual heating especially of family homes with coal results in the release of fine particulate matters, which in the winter reach concentrations exceeding pollution limits set by EU legislation. Additional benefits which cannot be overlooked include reductions in household heating expenses and the creation of jobs, which in the case of home insulation performed by construction companies are more or less evenly distributed in individual regions.

Text adapted from an article by Ales Kutak, Deputy Czech Minister for Environment (2007 - 2010).

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