Study: Decarbonising the Czech Republic will pay off for businesses, consumers
Significant investments to move away from coal use in the Czech Republic will pay off in the long run, as they will help businesses and households reduce their operating costs. This follows from a study of possible paths to decarbonisation for the country’s main economic sectors by the consulting company McKinsey.
“The most important step is to further significantly reduce the production of electricity and heat from coal. In addition, there is a need to accelerate the construction of renewables, support the transition to alternative fuels, especially electromobility, and continue to increase the energy efficiency of buildings,” Viktor Hanzlík, a partner at the Prague office of McKinsey, quoted by CTK as saying.
In December 2019, the European Commission announced the European Green Deal, a new policy framework to accelerate decarbonization in the European Union. The EU Green Deal, if approved by member states and the European Parliament, would require the bloc to lower GHG emissions by at least 55 percent by 2030 versus 1990 levels, and to net-zero by 2050.
“Our analysis shows that achieving the 55 percent reduction target by 2030 would require additional investments of CZK 500 billion (EUR 18 billion, corresponding to an estimated 1 percent of GDP) over this decade. Most of these investments would pay for themselves (or generate a profit) as new technologies that lower business operating costs are adopted,” McKinsey writes.
The Czech Republic has undergone a significant transformation of its economy in the last 30 years, reducing its greenhouse gas (GHG) emissions from 199 MtCO2e in 1990 to 129 MtCO2e in 2017. Despite this drop, the country was the fourth-largest GHG emitter in the EU on a per capita basis. Most GHG emissions come from electricity and heat generation, at 45.3 MtCO2e, followed by industry (36.2 Mt), transport (18.7 Mt), buildings (12.7 Mt), agriculture (9.7 Mt), waste, and others (6.8 Mt).
Assuming a matching effort by the Czech Republic (which also would reduce its GHG emissions by 55 percent), McKinsey’s calculations show that the country would need to intensify its emission reduction efforts to 3.2Mt per year from 2018 to 2030 (or 2.5 percent of emissions from the beginning of the period), and 4.4Mt per year from 2031 to 2050 (or 5 percent of emissions from the beginning of the period).
“Based on our analysis, the 2030 target is achievable, but reaching it would still require a significant effort by government and businesses to overcome the challenges involved. The primary levers that could be used to meet the 2030 target include further reductions in the country’s reliance on coal for power and heat and reduced coal mining. On the cost-optimal pathway, this would account for 75 percent of the GHG emission reductions required to meet the 2030 target,” McKinsey writes.
“This is already underway. Many coal power plants either have shut down or are scheduled to close in the next few years. The rising EU Emissions Trading Scheme (ETS) permit prices further encourage a move away from coal, as do low natural gas prices. The reduction in coal power generation capacity could be partly offset by a significant increase in the Czech Republic’s renewable electricity generation capacity, adding 3.2 GW of new solar photovoltaics (PV) and wind by 2030.”
On the cost-optimal pathway, three other sectors – industry, transportation, and buildings – would contribute the remaining 25 percent of the required gross GHG emissions reduction. This percentage reflects the greater difficulty and higher costs of decarbonization in those sectors relative to power.