The Czech Republic will reject the introduction of a new system of emission allowances (the so-called EU ETS2) if it would lead to a significant increase in the price of fuel or heating. This was agreed by members of the government at a meeting of the EU Committee on Wednesday (25 June 2025).

At the same time, Prime Minister Petr Fiala announced that the Czech Republic, together with other countries, is proposing changes to the system and is asking the European Commission for clear rules on the price stability of allowances.

"We cannot allow the emission allowance system to have a negative impact on citizens. If there is a threat of a significant increase in the price of petrol and heating, the government will not approve the new emission allowances," said Prime Minister Petr Fiala. He added that the Czech Republic had initiated a proposal for changes that had already been supported by a majority of EU Member States, including Germany, Italy, Spain and Poland.

The aim is price predictability and household protection

ETS2 is due to start operating in 2027 and will apply only to fossil fuels - petrol, diesel, gas and coal. It does not cover wood, pellets or other renewable sources. The government is therefore pushing for safeguards to prevent a spike in prices. The main demands include:

• introduction of a price brake: allowances should not exceed a threshold of €45, above which more would automatically be released onto the market,
• strengthening the Market Stabilisation Mechanism (MSM): allow for more flexible release of allowances in times of shortage, more than once a year,
• publishing information on the development of zero-emission technologiesthat affect the price of the allowance.

"We need a stable and predictable system that doesn't skyrocket prices for households or small businesses. The current proposal, without changes, would put socially vulnerable groups at risk and slow down the transition to cleaner heating," stressed Environment Minister Petr Hladík.

Wood remains outside ETS2

For households using wood as their main fuel, it is crucial that biomass combustion is not covered by ETS2. Wood, pellets and other renewables are not covered by the emissions allowance scheme - and will not be burdened with additional costs. This is in line with the EU's objective of reducing dependence on fossil fuel imports. However, increasing the price of other raw materials due to emission allowances could also make wood and pellets more expensive.

"Well-invested allowance revenues can boost energy security and accelerate building renovations. But the system must be socially fair," Hladík added.

Support for households: the Climate Fund and tax adjustments

In addition to the proposals for modifying ETS2, the Minister also recalled the possibilities for the state to compensate for possible impacts on the population. In the event of an extreme increase in fuel prices, the state may reduce excise duty on petrol and diesel - as it will do in 2022.

It should also help Social Climate Fundwhich should bring about CZK 50 billion to the Czech Republic from 2026 to support low-income households. Additional funds from the proceeds of emission allowances will go to the programme New Green Savings, which promotes insulation, boiler replacement and other energy savings.

Press release of the Ministry of the Environment of the Czech Republic

Report of the meeting of the Government of the Czech Republic on 25 June 2025

Photo source www.vlada.gov.cz