Environmental policies of the EU: a case study of market-based instruments and internalization of environmental externalities from airborne pollution in the Czech Republic
Abstract
Current set-up of economic instruments provides little incentive to abate air pollution generated by the Czech energy sector that predominantly uses coal as energy input. As a byproduct of energy production airborne pollution arises that imposes serious burden on society in the form of environmental externalities.
External costs from coal power generation are considerable, ranging from 5.3 to 11.6 c€/kWh. The current rates of emission charges and other economic instruments are too low, especially emission charges do not stimulate energy producers to any relevant abatement.
Consequently, internalization rate accounting for emission charges and electricity tax does not exceed 6% of marginal external costs for any of the coal power plants under assessment. If we assume cross-subsidy for promotion of electricity from renewables as another internalization measure then the internalization rate attains up to 70%.