This Briefing Paper presents an assessment of the political economy of the Czech Republic with regard to the low-carbon transition. This paper is part of a series of briefings on the four Central European states forming the Visegrád Group.
The Czech Republic has typically taken a sceptical stance on low-carbon development. At the EU level, it has often cooperated with the Visegrád Group countries in blocking climate ambition. However, it tends to be more progressive than e.g. Poland on the EU Emissions Trading System (ETS) and energy efficiency. Increasingly, cracks are appearing in the bloc. The Visegrád Group has become regarded as a toxic alliance in Czech political circles following the election of the right-wing ‘Law and Justice’ government in Poland.
The Czech government itself is split on the low-carbon transition, with Prime Minister Sobotka being moderately supportive while President Zeman is stridently opposed. The parliament generally leaves the field to the government and the Energy Regulatory Office, led by a political appointee of President Zeman who is actively impeding the development of renewables. However, this configuration is likely to change given the upcoming general elections in October 2017, where the ANO party, the current junior coalition partner, is expected to register major gains and the current coalition leader, the social democratic party ČSSD, will lose out. The ANO party led by Andrej Babiš, second wealthiest Czech and currently the Vice-Prime Minister, has a eurosceptic outlook and it remains to be seen how progressive their engagement on climate and energy would be at the EU level.
Overall, the Czech Republic has much more to win, and much less to lose, from low-carbon development than e.g. Poland. Its R&D and innovation capability – both domestically and in foreign companies operating in the Czech Republic – is exceptional compared to other Central and Eastern European (CEE) countries. The regulatory framework for low-carbon innovation and investment is weak, but there is significant potential to take advantage of low-carbon opportunities. A widely publicised scandal around the country’s 2005 feed-in-tariff law has led to a backlash against subsidies for renewable energy in policy and public opinion.
The continued reliance on coal power generation, as well as the social implications of a future phase-out for regions and workers, who are organised in influential unions, are acting as a brake on low-carbon progress. Subsidised lignite is also widely used for heating in poor households, adding to the social issues around phasing out coal.
The state-owned energy company ČEZ, which accounts for about three-quarters of electricity generation capacity, has an internal coal phase-out plan and is actively looking to invest in the low-carbon transition. ČEZ has significant influence on government policy and has been actively lobbying for a stronger EU Emissions Trading System (ETS) because its non-coal power plant portfolio would benefit from higher CO2 prices. The company operates nuclear power plants, and is looking to build new ones, and it has also recently built several gas power plants which are unprofitable under current market conditions.
Energy security is a driving concern, but less so than in other CEE countries as the Czech Republic has well-developed gas and electricity interconnection capacity. These concerns are cementing reliance on coal and nuclear power. The strong focus on nuclear power in the country’s energy strategy invites complacency on the grid and electricity market reforms needed to facilitate the integration of renewables. However, the energy security benefits of efficiency and renewables are increasingly present in the public debate. Energy efficiency is being actively promoted, even though the country will likely not meet its 2020 target.