ETS2 emission allowances and the impact on Czech households

According to current EU plans, the ETS 2 emission allowance system for households and transport is to be launched on January 1, 2027, complementing the existing ETS 1 system for industry and energy. How significantly will this affect the budgets of Czech households?

Households will not pay directly for the allowances. Fuel suppliers (e.g., energy companies, fuel distributors) will have to purchase emission allowances for the amount of CO₂ generated by burning their products. However, these costs are likely to be reflected in prices for end consumers, including households.

The impact will, of course, vary depending on the type of energy source used. Households heating with coal or gas will feel the additional costs more significantly than households with heat pumps. Czech households consume a total of approximately 270 petajoules of energy, of which 36% comes from renewable sources, 23% from natural gas, 21% from electricity, 13% from purchased heat, and 8% from solid fuels. If we take the commonly used emission factors for each type of fuel and their consumption, we find that the volume of emissions related to energy consumption in households is approximately 7.8 million tons of CO2. The original intention was to launch the ETS 2 system with a threshold price of EUR 45/t CO2 in 2020 prices. Taking into account inflation over the last 5 years, the price of a permit is EUR 62/t. The current market price in the ETS 1 system is currently around EUR 70/t. At this price, the total cost for households in the Czech Republic is CZK 13.5 billion, i.e. CZK 2,960 per household per year.

The ETS 2 allowance system will also apply to fuels. With standard emission factors, the price of gasoline should increase by CZK 4.0 per liter, and the price of diesel by CZK 4.58 per liter. According to data from the Czech Statistical Office, the average annual distance traveled by car is 12,863 km. According to data from the same source, average consumption should be 6.6 liters per 100 km for gasoline and 6.3 liters per 100 km for diesel. An average household with a gasoline-powered car should therefore pay an additional CZK 3,390 per year, while for a diesel-powered car, the additional cost would be CZK 3,710.

The total impact is therefore around CZK 6,000-7,000 per household per year on average. Of course, in the case of poorly insulated houses, coal-fired boilers, or high mileage, the costs may be significantly higher.