The starting point of the Czech Republic

The Czech Republic has undergone a significant transformation of its economy in the last 30 years, reducing its 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).

Reducing emissions by 2030

In December 2019, the European Commission (EC) 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. At the time of writing, the Green Deal’s aspiration to create a climate-neutral Europe is one of the world’s most ambitious decarbonization plans.

Assuming a matching effort by the Czech Republic (which also would reduce its GHG emissions by 55 percent), our 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) (Exhibit 1).

Exhibit 1

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. 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 (Exhibit 2).

 Exhibit 2

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 (Exhibit 3).

Exhibit 3

Reducing emissions by 2050

In December 2019, the European Commission (EC) 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. At the time of writing, the Green Deal’s aspiration to create a climate-neutral Europe is one of the world’s most ambitious decarbonization plans.

Reaching net-zero GHG emissions would be a major undertaking for the Czech Republic. Full decarbonization would require far-reaching technological changes in every sector and the deployment of both natural and artificial carbon sinks to eliminate emissions in hard-to-abate sectors such as cement production and agriculture.

Based on our analysis, reaching net-zero would likely require additional investments amounting to CZK 4 trillion (EUR 150 billion) from 2031 to 2050, or roughly 4 percent of GDP over that period. This investment would be necessary for the large-scale electrification of transport and heating and cooling in major industries, scaling up renewable power generation, completing the construction of two new nuclear units in line with the 2019 Czech National Investment Plan,  improving building insulation throughout the country, and deploying the carbon sinks necessary to offset residual GHG emissions. The majority of these investments would be profitable or would at least fully pay for themselves through reducing operating costs for businesses and would contribute to reducing local pollution (Exhibit 4).

Exhibit 4

 Although the costs of achieving net-zero by 2050 would be substantial, the next 30 years offer significant opportunities for making capital upgrades as existing infrastructure and industrial equipment reach the end of their useful lives. However, many of the changes would have to be underway by the end of the 2020s to remain on track for reaching net-zero by 2050. Specifically, efforts to switch from fossil fuels to electricity in transportation, scale up renewable power sources significantly, and considerably increase the energy efficiency of buildings all need to be well underway by 2030.