Czech CEZ hopes crisis will stall EU climate package

Tuesday, November 11, 2008

PRAGUE (AFP) — Central Europe's top power producer, Czech-based CEZ, is pinning hopes on the financial crisis to thwart the approval of the EU's green package, saying it would hit hard at the region's coal-dependent industry.

The EU's climate-energy package seeks to raise the share of renewable sources in power production by 2020, boost energy savings and tighten the rules for trading in CO2 emission permits in a bid to cut greenhouse gas emissions.

Martin Roman, CEZ chairman and chief executive, said in an interview with AFP that a "yes" vote on the package from EU members in the region would be "economic suicide."

Roman attacked above all the plan to make companies pay the full price for their CO2 emissions from 2013 as a move that might have a devastating effect on central European industry, affected by the financial turmoil.

"The EU is shooting around without knowing where the enemy is," Roman said, adding the EU should take its time and commission an analysis of the situation before ordering companies to buy all carbon permits in auctions.

The European Commission and most member states want to see the climate package agreed at an EU summit in mid-December so Europe can be in a strong position at international climate change talks next year.

The EU now earmarks CO2 emissions permits for individual countries which hand them out to companies for free. Those which emit more CO2 than the permits cover must buy further permits from rivals who emit less.

But industrial companies in the region may now find it hard to raise the necessary funds because of the crisis, which may also force many to curb investment in new, environmentally friendlier technologies.

"I can't imagine the current economic situation having no impact here," Roman said with a hope that the EU will be more tolerant amid the financial turmoil.

"For Czech or European climate, it does not matter if we embark on full auctioning from 2013 or from 2020," he said.

On Thursday, the state-run CEZ got a solid backing from Czech Prime Minister Mirek Topolanek, who stood up against full auctioning from 2013, saying he preferred a gradual switch to the auctions too.

Rather than a pollution tax paid to Brussels, Topolanek would prefer "money for investment to stay in this region" to help "improve the environment by investing in new technologies and technology upgrades."

CEZ, the most profitable Czech firm, expects to raise net profit to 48.6 billion koruna (2 billion euros, 2.56 billion USD) this year from a record-high 42.76 billion koruna in 2007.

Roman is also betting on allies abroad, particularly in Poland which has established itself as one of the plan's fiercest opponents.

"I can't imagine Poland committing an economic suicide by approving full auctioning as of 2013. They can never do that when they produce 95 percent of their energy from coal," he said.

The prime ministers of Poland, the Czech Republic, Hungary, Slovakia, Estonia, Latvia and Lithuania agreed on Wednesday that the costs of the climate package could stunt economic growth in the post-communist countries.

"We want an energy-climate package that will not threaten our economies," Polish Prime Minister Donald Tusk said on Wednesday.

CEZ is buying up stakes in power producers and distributors in countries such as Bulgaria, Romania, Bosnia and Herzegovina, Albania, Russia and Turkey.

The company produced 32.2 terawatt-hours (TWh) of power in the first half of this year. Coal-fired sources contributed more than a half of the amount with 17.5 TWh, while nuclear plants added 13.8 TWh.

Within the overall targets of reducing greenhouse gas emissions by 2020, the 27 EU nations have agreed to bring renewable energy use up to 20 percent of the total and to make 20 percent energy savings.

The Czech Republic is expected to raise its share of renewable sources, such as wind, hydro, biomass and solar, to 13 percent by 2020 from the current level of about 5 percent.

But CEZ is betting above all on nuclear projects, like many rivals in the region which believe this is a way to reduce dependency on oil and gas supplies from Russia, jeopardised by conflicts such as the invasion in Georgia in the summer.

"I think nuclear energy will be accepted as a renewable source, so we won't have a problem," Roman said. "After all, it's the most environmentally friendly source you can get. There are no emissions."

Just as with carbon permits, Roman relies on foreign allies to help to make this very political decision come true, starting with the French who are among the strongest advocates of the nuclear option.

CEZ has been lobbying hard at different European forums in the past months to rehabilitate the atom in the wake of the energy crisis.

The company is now planning to add two nuclear units to the two 1,000 MW reactors it already runs at Temelin in southern Czech Republic, and to build a new reactor in Dukovany (southeast), where it runs four smaller 440 MW units.

Posted in |