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Environmental taxes: current priorities in the Czech Republic |
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Current proposal on new trading system
for domestic emissions
Since 1990, the Czech Republic has developed legislation covering both the basic needs of a market economy and environmental protection. Indeed, the state of the environment in 1989 was described as disastrous, with air, water and food pollution, devastated landscapes and deteriorated land. According to European standards, the Czech Republic was one of the biggest exporters of pollution through air and rivers to neighbouring countries. As a result, environmental protection has been seriously taken into account since 1990, with legislation being created and rewritten in accordance with the requirements of accession to the European Union and Organisation for Economic Co-operation and Development (OECD) standards. The Czech environmental policy programmes are characterized by a gradual transition from corrective to preventative measures, from normative to economic/market measures and from a component to a sector approach. The use of market-based instruments is therefore
increasing in the country, as a mean to effectively change polluters
behavior while raising funds to be reinvested in environmental protection.
They are used along with more traditional command-and-control measures also
needed in any balanced environmental policy. A wide range of environmental economic instruments already in place The Czech Republic has developed a wide range of environmental economic instruments since 1990 with both fiscal and financial measures. Fiscal instruments include all types of environmental charges (air emission charges, charges for extraction of water, sewage charges, water effluent charges, municipal waste charges, charges on solid waste disposal, charges for dispossession of forests and agricultural land, mining charges) but also reduced rates of value added tax for a number of environmental friendly products, income tax allowances for a number of environmental friendly industrial activities, and an airplane noise pollution tax. For example, air emission charges first introduced in 1967 have been completely redesigned by the Act No 389/1991 Coll. on state administration of air protection and charges for its pollution. These charges have been in force since January 1992 with a distinction between large and medium sources of air pollution and small-scale business polluters. They cover main air pollutants and are increased by 50 percent if the prescribed emission limit is exceeded. Similarly, water effluent charges first established in 1979 have been recently reshaped by the Act No 58/1998 Coll. on water effluent charges. They aim at stimulating water polluters to build wastewater treatment plants, by charging for the discharge of a large number of pollutants and fines for any delays in payment. At the same time, the country has developed environmental financial instruments with the creation of the State Environmental Fund (SEF) by the Act No 388/1991 Coll. The SEF follows the basic rules established in the "Strategy of the State Environmental Fund in the years 1997-2000," which includes areas of compliance with EU accession criteria. The standard income of the Fund mainly consists of
different percentages of the environmental charges listed above, e.g. 28
percent of
the charges for emission of harmful substances into the air. Expenditures of
the Fund consist of subsidies (only to non-business entities) and loans with
various interest rates. A large number of programmes are currently supported by
the SEF in that way, mainly in the water and air sectors in accordance with
the priorities laid down by the State Environmental Policy. Proposed trading system for domestic emissions The Czech Republic is now working on a very innovative type of instrument, namely the possible development of a domestic emissions trading system as part of its climate change policy. The existing national climate change strategy, approved in 1999, formally accepted the national greenhouse gas (GHG) emissions reduction target set in Annex B of the Kyoto Protocol, a reduction of 8 percent of GHG emissions in the period 2008-2012 compared to 1990. The new climate change strategy currently being developed would be based on an emissions trading system as a main implementation instrument. The type of emissions trading envisaged is the cap-and-trade system: an overall cap would be set on emissions and allocated to individual companies in the form of emission permits or allowances that companies would be authorised to trade. This instrument is viewed as a cost-effective instrument to reduce GHG emissions at home, as well as being well adapted to the features of the Kyoto Protocol, namely national targets and the possibility to trade internationally. The proposed domestic trading system seems to be a realistic option for the Czech Republic and to fit well with the Czech climate policy context. It could be implemented provided there is political support. Particular attention is given to design and implementation, including further studies and additional resources provided for its implementation. |
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