December 18, 2025 – Prague, Czech Republic – The European Union risks losing its competitive edge to China and the United States if it continues to pursue ambitious climate targets without reconsideration, Czech Industry and Trade Minister Karel Havlicek warned. The minister called on EU allies to reconsider the bloc’s next-generation emissions trading scheme (ETS2), which is set to cover buildings and road transport from 2028 under the EU Green Deal.

The Czech Republic’s new government, led by billionaire Prime Minister Andrej Babis and his populist ANO party, has vowed not to participate in ETS2, citing concerns over high energy costs and negative impacts on industrial competitiveness.

Czech Government Opposes ETS2

In one of its first official acts, the government rejected ETS2, arguing it would impose a brutally disadvantageous burden on the Czech economy. Studies cited by the ministry suggest the scheme could cost the country around 40 billion Czech crowns ($1.92 billion) annually, exceeding potential EU penalties for non-participation.

Minister Havlicek emphasized the need for Europe to remain competitive with global powers:
“For us, it is important that we start to keep pace with other great powers, whether it is China or the United States, and that we are not disadvantaged here.”

The Czech Republic already faces some of the highest household electricity prices in the EU, according to Eurostat, and companies in the country have long voiced concerns over energy costs impacting industrial production, particularly in its large automotive sector.

Call for EU Policy Rethink

Havlicek criticized the EU’s approach to climate policy, arguing that ambitious targets are leaving Europe behind competitors with fewer constraints on business operations. Using a metaphor, he said Europe is “like a car hurtling toward a wall but reassuring itself the car is electric,” highlighting what he sees as misguided optimism in EU climate policy.

The Czech government is now seeking allies within the EU to revise or scrap ETS2, positioning the country as a leader in pushing for changes to the emissions trading framework.

“I do not want to be a doormat for China, and I do not want our companies leaving for the United States just because they have cheaper inputs there, and that thanks to climate measures, even companies investing in climate projects will leave for America,” Havlicek said.

Strategic Implications

The Czech stance signals potential friction between national governments and EU climate initiatives, particularly as countries with high energy costs may resist regulations that could affect industrial competitiveness and economic growth. Analysts suggest this could spark debates about flexibility in climate policies and balancing environmental goals with economic realities.