Introductory background and context

Czech industry in the context of economic development

The Czech Republic is a relatively industrialised country with a higher share of industrial activity than its closest neighbours. The carbon consequences are aggravated by the relatively poor quality of the available coal which is used in the power sector. Higher-quality black coal, which is also available in smaller quantities, is mostly used for the production of coke and for the blast furnaces in the steel industry. These factors explain the relatively high carbon intensity of the economy expressed in carbon intensity per capita or per unit of GDP.

During the past decade and a half, Czech industry has undergone a significant transformation that shaped the conditions in which the Czech National Allocation Plan (NAP) was prepared and the attitudes towards carbon emissions trading. The main factors were:

• the transformation from a directive-based economy to a market-based one along with economy-wide privatisation and an increased opening to external influences

• the breakdown of stable Eastern European markets after political changes in the former Eastern bloc required an orientation to more demanding Western markets

• the relatively quick change from non-existing environmental legislation in the communist period to implementation of economy-wide environmental legislation that required massive investment for air and water protection

• Entry into the European Union (EU) in May 2005 and the further strengthening of environmental legislation due to implementation of the environmental acquis in order to fulfil conditions of a single market.