Electrify fleet vehicles to boost e-mobility

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Developing a ‘flagship’ to decarbonize the transport sector Key elements for the flagship analysis What is a flagship?

Key transformative investment opportunities that are priorities for climate action in sector Flagship analysis is accompanied by a set of recommendations for financing and reforms to implement then Example: “add XX thousand solar rooftops by 2025” or “help XX cities decarbonize their district heating & cooling networks by XX”

• Assessment of the progress that can be achieved by the Recovery and Resilience Plan (RRP) against the respective investment needs baseline, discussion of the gaps and how they can be closed through modifications in the RRP and/or the National Energy and Climate Plans, provision of a critical review considering the 2030 and 2050 targets/ relevant strategies • Assessment of contribution for GHG emission reduction

• Review of cost-effectiveness and investment needs (in order to achieve 2030 climate targets) • Reforms: Identify the existing regulatory and non-regulatory barriers to investment in flagship technologies and identify key enabling reforms • Finance: Identifying the role of public and private sector finance to enable implementation of flagships. Opportunities from RRP and EU Green Deal: what's missing and what can be covered by national government or promotional banks

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Overview: Transport in CZ By electrifying fleet vehicles first, companies can help start the transportation transformation by driving the demand for fully electric vehicles and infusing the secondhand market sooner.

Rationale behind the flagship target • Used cars are in high demand in Czechia, except for in company registrations. Increasing the electrification targets for corporate fleets could drive the transportation transformation by increasing the number of ZEVs into the corporate market, which would make them available to the second-hand market sooner.

• Corporate fleet vehicles are driven an average of 2.25 times further than private cars, so they have a disproportionate climate impact and potential for green transition.

Investment need • Estimated at €1.0 bn (CZK 25 bn) by 2030 to fund (e.g. VAT tax reduction, varying depreciation rates, etc.) the purchase of an additional 620,000 ZEVs for the corporate sector. Private investment needed in ZEVs is between €12-20 bn (CZK 307-512 bn).1

CO2 emission savings • By 2030, cumulative emissions savings would total around 11 Mt CO2.

• Annually, emissions savings would continue to increase as more fleet vehicles are electrified, but will save an average of 1.2 Mt CO2 per year between 2021 and 2030. By 2030, if 45% of the corporate fleet is electrified, annual emissions savings will reach an estimated 6.3 Mt CO2 savings.

Corporate fleets could be fully electric by 2035 if the rate of BEV uptake is accelerated.

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Overview: Investment needs Electrifying fleet vehicles first Total investment needs to transform the district heating sector • CZ Transport Policy 2021-2027 with a view to 2050: €4.3 bn (CZK 110 bn) per year for transport infrastructure • For road charging: €71 mln (CZK 1.8 bn) + for charging in households: €94.8 mln (CZK 2.4 bn) + for charging at work: €59.2 mln (CZK 1.5 bn)2 • Total financing gap in European Innovative Transport is between €5.5 - 13 bn (CZK 139 - 329 bn)3

Role of public vs. private sources in the building sector • Direct investment support should not be the only way to support the transformation of clean transport 1. Subsidy projects are one-off investments which do not create the necessary resources for the continued renewal of EVs. Czechia needs to approach the issue comprehensively by utilizing selective tax measures as proposed in this flagship analysis, or setting up a system (incentives) of permanent support for the renewal of EVs and infrastructure.

What is currently committed?

• RRP funding for non-rail public transport €193 mln • National programmes: Operational Programme Transport €4.86 bn, Integrated Regional Operational Programme €4.8 bn, Operational Programme for Technologies & Applications for Competitiveness €3.2bn • EU-programmes: REACT-EU €15.9 mln, TRANSGov €291.9 mln

Investment needs for flagship • Estimated at €1.0 bn (CZK 25 bn) by 2030 to fund (e.g. VAT tax reduction, varying depreciation rates, etc.) the purchase of an additional 620,000 ZEVs for the corporate sector. Private investment needed in ZEVs is between €12-20 bn (CZK 307-512 bn).

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Flagship implementation What is needed to implement the flagship?

Overall priorities: •Increase electrification of fleet vehicles first in order to expand access of ZEVs on the second-hand market, and thus lower-income individuals

Reform 1 – Establish a ZEV mandate for fleets at the EU-level • Set a fleet vehicles mandate for 2025/2030 at the EU-level • Expand the Clean Vehicle Directive at the EU-level to include corporate and private fleets, in addition to the already-covered public fleets

Reform 2 – Varied financial incentives to aid company fleets in increasing EV uptake • National VAT tax reductions for the purchase of ZEVs or varying depreciation rates for company purchases of ZEVs (bonus) and ICEs (malus) • Minimize the national taxable benefit in kind tax that employees pay for the private use of a company car if the car is a ZEV

Reform 3 – Increase financial access for SMEs to replace their business vehicles • Direct financial support from EU and national-level programs to aid Czech start-ups and SMEs with the purchase of ZEVs to replace their fleet vehicles, through financial guarantees or interest rate reductions

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Background information: Transport Investments and GHG reduction efforts needed →

Czechia faces increased transportation needs (i.e.

→

individual transport and transport of goods) which require investments in

→

better transportation infrastructure for increased competitiveness.

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Transport accounts for 14% of Czechia’s total GHG emissions (compared to 21% in the EU)1 →

Passenger car emissions account for 57% of GHG emissions from transport 2,6

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Emissions from passenger cars increased by approximately 120% between the period 1993-20172,7

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Passenger cars increased sharply from 2.4 million in 1990 to 6 million in 2020 1

The car fleet in CZ is older than the EU average, 15.2 years6 and 10.8 years respectively1,3 →

High demand for used cars in the CEE region hinders the uptake of low-emission car technology such as EVs

→

An older car fleet means higher emissions, but also a greater opportunity to electrify when the vehicles are naturally replaced

Significant investments are needed for Czechia’s railway →

Only 34.6% are electrified (compared to the EU average of 54.3%) 4

→

Replacement of old diesel locomotives2 would significantly increase the electrification of Czech railways

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Many routes of the TEN-T network still need to be better connected or improved 5

Emission reduction efforts are described in the Transport Policy of the Czechia (for the period 20212027, with a perspective until 2050) and the National Action Plan for Clean Mobility →

Efforts to decarbonise transport are difficult due to growing transportation demands 3 and slow adoption of low-carbon transportation modes1

→

CZ’s market share of electric vehicles (EVs) was only 1.6% in 2020 compared to 5.4% in all EU27 countries8 8

Investment Barriers → Investment barriers in transportation in Czechia include: → Prices of electric vehicles (EVs)/hydrogen vehicles are still higher than ICE vehicles → EV adoption is expected to be slower in countries with a high demand for used cars, such as in CZ.2

→ Currently lacking charging infrastructure is unattractive to end consumers & a key barrier to the development of electromobility.1 → An unambitious target for the number of publicly accessible recharging stations could be slowing sale and uptake of plug-in cars and providing uncertainty to electro-mobility markets and players.3 → A lack of minimum infrastructure requirements for public & private buildings to support cabling/preequipment to accommodate the installation of chargers in buildings doesn’t exist.4 → The electrification of individual car transport could be seen as threatening to local industry and the 14 million jobs currently in this sector in the whole EU.5 9

Investment barriers Investments and GHG reduction efforts needed Installing more public infrastructure to charge EV cars is extremely important, but many funds and directives already exist to support this (i.e. AFID, TEN-T network) so our flagship focuses on increasing EV uptake in fleets

which are naturally renewed more quickly than private cars.

→ Though businesses cite both the lack of EV supply to meet demand (particularly for heavy duty & specialized vehicles) and a lack of robust charging networks to support long-distance journeys and remote areas as obstacles for the uptake of ZEVs in company fleets2, we choose not to focus on increasing the installation of charging infrastructure due to the availability of funds to subsidize the public charging network, but also the recently proposed update to the AFID in the ‘Fit for 55’ Report which includes mandatory targets and guaranteed remote and rural areas to be covered. → However, to meet Czechia’s goals of reducing energy consumption & GHG emissions, the government realizes it must motivate people to replace individual car transport with less energy-intensive public transport, especially rail & EVs. The share of public transport should grow & serve as a substitute for individual car transport.1

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Policy context – European Semester Country Report 2020 → “There are no effective and efficient tax measures in place to ensure climate transition, particularly in road transport.” 1

Country Specific Recommendations2,3 → CSR 3 (2019): Focus investment-related economic policy on transport, notably on its sustainability → CSR 3 (2020): Focus investment on the green transition, in particular on sustainable transport infrastructure, including in the coal regions.

→ These recommendations are quite broad and general → not particularly useful for a rigorous evaluation of whether the RRP adequately addresses CSRs and Semester goals

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Policy context – National Energy and Climate Plans (NECP) NECP2 goals for transport - summary → Builds on the National Action Plan for Clean Mobility 2015–2018 with a view to 2030 (NAP CM) & 2019 Update →

The Renewable Energy Directive II1 sets an indicative target to increase renewables in the transport sector to double the RES share used in gross final consumption from 6% (2016) to 14% (2030).

Focus on electromobility, CNG, LNG and hydrogen technology

→ Contains no target for reducing GHG emissions in the transport sector by 20301 → The NECP envisages that the RES increase will be achieved through RES, biofuels, biomethane, and partially hydrogen2 which would put pressure on land use & not trigger structural transformation of transport1 → With only 16.9% RE share planned for 2030, only a limited percent of electricity use in transport can be counted as renewable1 → Electromobility touched upon, but fleet vehicles are not included in NECP → Electromobility objectives: →

220,000-500,000 clean electric vehicles (BEVs) by 2030, which is about 3-7% of the fleet

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Need for publicly accessible infrastructure in 2025 of 6,200-11,000 charging points (lowuptake scenario) and 19,000-35,000 charging points in 2030 (high-uptake scenario)

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No financial incentives detail in the NECP that could help explain such a rise in the adoption of BEVs1 12

Policy context – National Energy and Climate Plans (NECP) European Commission evaluation of the NECP1 (author’s comments in italics) → Czechia has no target for reducing GHG emissions in the transport sector by 2030. → Note: Since there are no goals/targets for reducing GHG emissions in transport, there also is no roadmap to lower emissions. However, this is an important key piece missing from the NECP.

→ The National Action Plan for Clean Mobility is a good starting place as the plan provides different scenarios on the uptake of electromobility. → Note: With only 16.9% renewable energy for the transport sector planned by 2030, only a limited percentage of electricity use in transport can be counted as renewable.

→ Measures to promote a modal shift are mentioned in the NECP, but no detailed information how to jumpstart it is provided. → The NECP specifies that at least 14% of energy used by transport in 2030 will come from renewables. → Note: This increase will partly come from RES, biofuels, biomethane, and hydrogen. However, the production of biofuels have negative social and sustainability implications, such as land use change and land grabbing.

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Policy context – Recovery and Resilience Plan Transport in the RRP1 → Part of the Component 2.1 Sustainable and Secure Transportation and 2.4 Development of Clean Mobility

→ Includes investments into the following focus areas: →

Development and expansion of electrified railroads

→

Modernisation of existing railway connections and renovation of stations (esp. stations)

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Investments to further expand infrastructure for EVs and hydrogen vehicles, as well as increasing the share of EVs and hydrogen vehicles

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Development of cleaner, stronger and more extensive public transport

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Improvements in safety and security (crossing facilities for pedestrians, railways, etc., but also walking and biking paths)

→ Excludes investments in the TEN-T road network (i.e., highways) and LNG/CNG vehicles and infrastructure → Expected impacts → Includes funding for the installation of EV charging stations for public transport and non-public purposes, and the financial support for the purchase of EV and hydrogen vehicles for businesses and municipalities, and the purchase of battery trolleybuses & low-floor trams for public transport in Prague. → Budget allocation for all non-rail public transport: €193 mln (CZK 4.8 bn) which is about 2.5% of RRP allocation

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Policy context – Recovery and Resilience Plan Measures Component 2.4 Developing clean mobility1 Title of the reform or investment

2.4.1.1 Building infrastructure for public transport (Prague)

Number and title of milestone or target

Quantitative indicators (for targets)

Quantitative indicators (for targets)

Deadline for completio n

52 charging points and 9 km

Q4 2024

950

Q4 2024

1650

Q4 2024

Target 1: Increase of charging infrastructure in Prague

Number of recharging points

2.4.2.1 Vehicles (el, H2) for business including Ecargocol

Target 1: Increase of zero vehicles for business

Number of vehicles

3885

Q4 2024

2.4.2.2 Vehicles (el, H2) and non-public charging stations for municipalities, regions, state administration

Target 1: Increase of zero vehicles and charging stations for municipalities, regions, state administration

Number of vehicles

1300 vehicles and 180 charging points

Q4 2024

Target 1: Increase of ZEVs in Prague

Number of vehicles

25

Q2 2024

2.4.1.2 Building non-public infrastructure 2.4.1.3 Building recharging points for residential buildings

2.4.2.3 Vehicles (battery trolleybuses and lowfloor trams) for public transport in the City of Prague

Source: information from Czech RRP, 2021

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Policy context – role in the RRP COM Evaluation of Czech RRP (July 2021) →

“A high need for clearer strategy and investment to move to zero/low emission vehicles”2

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“The shift towards low-emission road transport should be supported by appropriate carbon tax measures and regulatory arrangements.”2

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“misses the opportunity to shift to clean mobility with road levies, taxation, or other regulatory measures.”2

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“Overall, the ambition seems low with no publicly accessible electric recharging infrastructure planned to be financed”2

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The proportional impact of RRF funds will only contribute a small percentage increase of public transport investments due to the already rather high spending on transport infrastructure pre-pandemic.2

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“includes investments serving all 5 dimensions of the NECP, but no reforms able to initiate systemic changes are envisaged.”2

-European Commission

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Policy context – role in the RRP Other Evaluations of Czech RRP → In Czechia’s RRP (as well as 5 other MS’), the national RRPs only cover measures that were “already introduced in previous legislation.”1 → Independent fiscal institutions in the Czechia raised concerns about the content of the RRP, lack of information about the projected reforms, and the implementation and prioritization of the national RRPs.1 → Green Recovery Tracker evaluation: all recovery measures for non-rail transit are assessed with a climate impact of positive or very positive, though as a whole, the Czech RRP lacks a strategic vision and relevant components are not linked together2 → BankWatch evaluation: the recovery plan’s investment into EVs and H2 vehicles is noted as a positive sign, though the Czech plan only dedicates 37% (the minimum required amount) to climate expenditures shows a lack of ambition3 → Our evaluation: Czechia’s RRP dedicates €35.4 mln (CZK 990 mln) for the purchase of 4,555 EV & H2 vehicles for business entities/private firms and €23.6 mln (CZK 600 mln) for the purchase of 1,485 EV & H2 vehicles (& some non-public charging infrastructure) for municipalities, regions, and state administration4 → These low values show that subsidizing EVs doesn’t go far enough in making a significant impact on the market & uptake

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Transport – why EVs?

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Transport – why EVs?

Average monthly total cost of ownership (TCO) for subcompact & compact cars in CZ3 Petrol

Diesel

Electric

€541

€570

€793

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Transport – why EVs? By electrifying fleet vehicles first, companies can help start the transportation transformation by driving the demand for electric vehicles and infusing the secondhand market sooner. → Even with Czechia’s carbon-heavy energy mix, the emissions of a medium-size EV are 51% lower than the CO2 emissions of a petrol car.1 → In general, BEVs have by far the lowest life-cycle GHG emissions compared to all other technologies.2 Tonnes of CO2 per distance driven1

Image Source: Transport & Environment, 2020

Tonnes of CO2 emitted over the lifetime1

Image Source: Transport & Environment, 2020

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Transport - Current state of EV charging infrastructure in CZ Key facts → Support to help install e-charging was previously provided by the Operational Programme of Enterprise & Innovation for Competitiveness (OP EIC)1 and the Operational Programme Transport (OPD2) 2014-20202 in Czechia, both in the form of subsidies → 4 of the 9 proposed Operational Programmes for 2021-2027 still need approval by the Czech government, so the extent of future EV infrastructure support is uncertain3,4 → The current charging network for EVs was developed on a commercial basis, mainly by large grid operators such as CEZ, E-on, and Pre2, with some support from the EU CEF programme1

Image source: Transport & Environment, 2020

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Transport - Current state of EV uptake Key facts →

Passenger cars emitted 12.2 Mt CO2e in 2019 (57% of total transport CO2 emissions).1

→

Electric cars fleet (2021): 3,693 plug-in hybrid electric vehicles (PHEVs) and 7,681 BEVs.2

→

BEV and PHEV new car growth rose over 300% in 2020, compared to 2019, but is still far from achieving EV uptake targets (shown below).2

Image source: author’s own

Image source: Transport & Environment, 2021

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Transport - Current state of EV uptake Key facts

EVs in the Czech Republic2

→ It is difficult to imagine how the EVs will increase from current numbers of 7,681 battery-electric vehicles (BEVs)1 (0.13% of fleet) to hundreds of thousands (37% of fleet) within this decade. → The NECP provides no roadmap or funding mechanisms to achieve this exponential increase in BEVs for the Czechia.

Image Source: author’s own

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Transport – current state of EV uptake EV Maturity Scores1

Key facts → Czechia scored in last place on LeasePlan’s EV Readiness Index for 20211 out of 22 EU countries, which also indicates a regional disparity between Western & Eastern Europe → Approx. 50% of public charge points in CZ are fast chargers which is positive, but there are not nearly enough charging points per inhabitant (currently at 0.09 charging plugs per 1000 inhabitants compared to 3.53 in the Netherlands – a highly developed EV country)1 Image source: LeasePlan, 2021

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Transport – Fleet vehicles Transformative character of flagship → Fleets encompass the vehicles owned by companies or other organizations, importantly not those owned by private individuals, and they represent the main market share for new cars bought in Europe1 → Only 4% of company vehicles in CZ are EVs, compared to 16% in other EU Member States2 → “Currently, no EU Member State or any other country appears to have legal requirements directly imposing environmental criteria on corporate fleet composition.”3

Image source: Transport & Environment, 2021

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Transport – Fleet vehicles

Image Source: author’s own, definitions from Transport & Environment

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Transport – Fleet vehicles → The Platform for Electromobility, representing 40+ organizations across civil society, industries, cities, & all transport modes, recently called for a new proposal on the electrification of corporate fleets across the European market: → A regulation across all MS would “harmonize the European market by preventing risks of increased gaps between MS” and “provide cohesion and regulatory clarity for businesses owning fleet across the EU.”2 → Be crafted in such a way as to avoid placing a heavy burden on the smallest companies, a regulation of 100% of new vehicle purchases in corporate fleets to be electrified by 2030 should apply to fleets above a certain size and include higher incentives for smaller fleets.2 → A Regulation, rather than a Directive, is essential if the EU wants to mandate a transition to ZEVs for corporate fleets.

Directives must first be enacted into national law in MS before the law is enforceable, while Regulations are immediately enforceable as law.4

1 3

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Transport – Fleet vehicles

High-kilometre drivers can kick-start BEV uptake across society1 Image source: modified from Uber, 2021

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Transport – Fleet vehicles Benefits of “fleet-first” electrification → Making used EVs available sooner to lower-income households is achievable by boosting sales of new EVs. →

Fleet vehicles are typically sold on after 3 years (or even sooner)1, making them available to the second-hand market.

→ The cost of owning a second-hand EV is roughly €3,000-3,700 less than an equivalent diesel or petrol engine vehicle.1 → In Czechia, companies purchased approx. 74% of new passenger cars sold in 20202, presenting a big opportunity to drive new EV sales → Co-benefits of ZEV policies: →

Emissions of other air pollutants such as NOx and PM have decreased as a result of the uptake of EVs3

→

Reduction in air & noise pollution4

→

High-visibility & exposure of corporate & urban vehicle fleets can support the normalization & acceptance of EV technology among the public, demonstrating leadership & helping to develop best practices for others to follow5

→

Shifting the auto industry towards ZEVs can lead to the creation of green jobs and new job opportunities. Workers from the fossil fuel industry can be reskilled and bring positive economic results.6

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Charging infrastructure & battery cell manufacturing have the largest job creation potential, followed by pedestrian and bike lane construction.7

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Transport – Flagship details BEV share in the Czech corporate fleet*

Flagship investment

→ Our flagship reforms aim to achieve 45% electrification of the current company car fleet by 2030, which would require an additional uptake of 620,000 electric vehicles on top of the base/current scenario of BEV uptake in Czechia → This “accelerated” scenario shown by the green line (see figure) would allow the corporate fleet to be fully electrified by 2035

100% 90% 80%

BEV share in the Czech corporate fleet

→ The current trajectory of electrification of the corporate car fleet will not meet 100% electrification by 2035 (when the EU has proposed a phase-out all diesel and petrol vehicles1), shown by the blue line (see figure)

70% 60%

Accelerated

50%

Base case

40% 30%

20% 10% 0% 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Image Source: author’s own, created from Transport & Environment template

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Transport – Flagship details

10,000,000

Accelerated with flagship reforms

5,000,000

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

0

2024

→ Estimated €1.0 bn in lost VAT taxes if the VAT tax is reduced for the purchase of these additional BEVs (Reform 2, Option 3)

Base

2023

Investment needs

15,000,000

2022

→ Increasing annual emission savings of approx. 1.2 Mt of CO2 by 2030

20,000,000

2021

→ Cumulative emissions savings of 10.9 Mt of CO2 emissions by 2030 (if 45% of fleet vehicles are electrified by 2030)

25,000,000

2020

Emission reduction potential

Annual reduced CO2 (tonnes)*

Image Source: author’s own, created from Transport & Environment template

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Transport – Fleet vehicles Financing options I Public financing options → REACT-EU Fund (2021-2022) → Funding from the EU Recovery Plan - NextGeneration EU, total of €834 mln (CZK 20.8 bn) for Czechia → Energy efficient renovation of public infrastructure & demonstration projects, €15.9 mln (CZK 397.5 mln) for CZ →

Municipalities can apply for financing of alternatively powered cars for social infrastructure/services – Specific Objective 6.1/Call No. 101

→ Aims to bridge the gap between the immediate COVID-19 pandemic and its social consequences, and long-term recovery, including integration of the green & digital transitions → 25% of the funds is expected to go towards financing climate objectives → TRANSGov Fund (2021-2030)

→ Funding from the EU Modernisation Fund, €291.9 mln (CZK 7.3 bn) for Czechia → This program supports the acquisition of alternatively powered vehicles & the construction of infrastructure for public transport → Public organizations, enterprises with state involvement, & public entities and public non-commercial and commercial entities having a public service obligation can apply for funding 32

Transport – Fleet vehicles Financing options II Public financing options → Operational Program Transport Fund/OPD3 (2021-2027) → Funding from the European Regional Development Fund and Cohesion Fund, €4.9 bn (CZK 126.8 bn) for Czechia → Priority 3 - sustainable urban mobility & alternative fuels → Owners/operators of infrastructure & means of transport can apply for funds1

→ Integrated Regional Operational Program/IROP2 (2021-2027) → Funding from the European Regional Development Fund, €4.8 bn (CZK 120 bn) for Czechia → Aims to promote sustainable multimodal urban mobility, develop more interconnected & cleaner climate-resilient transport → Public recipients like regions, municipalities, or organizations funded by these can apply

→ Operational Programme Technologies & Applications for Competitiveness/OP TAK (2021-2027) → Funding from the European Regional Development Fund, €3.2 bn (CZK 81.5 bn2) for Czechia → Specific Objective 4.4 promotes sustainable mobility by allocating funds to the expansion of the network of non-public chargers and to increase awareness & ability of entrepreneurs to finance alternative transport methods 33

Transport – Fleet vehicles Financing options III EIB Recommendations →

Financing gap for European Innovative Transport start-ups and SMEs in all of Europe estimated in 2018 between €5.5 - 13 bn annually.1

→

Efforts should be increased to support the uptake of alternative fuels in public fleets, the value chain and push the build-up of charging infrastructure.

→

The EIB recommended the organization & coordination of a European joint procurement platform for electric public fleets to allow manufacturers to achieve economies of scale.

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A good first start would include the following:

→

→

Public authorities including young innovative manufacturers & service companies to bid in public tenders

→

Linking (semi-)public financing of PTO/As to the upgrading of fleets with EVs

→

Developing flexible forms of financing solutions to support the leasing & purchasing of zeroemission fleets

Financing idea: “zero-emission transport bonds & obligations backed by zeroemission fleet leasing & lending contracts, potentially supported by a public guarantee or asymmetric return schemes”1

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Transport – Flagship details Current EU policies → The Clean Vehicle Directive boosts the uptake of low- and zero-emission vehicles for the following types of transport1: →

Public road transport services, special purpose road passenger transport services, non-scheduled passenger transport, hire of buses with drivers, waste collection services, mail transport by road and parcel transport services

→ The 2019 Revision of the CVD extends the scope to include2: →

Public service contracts and the leasing, renting, and hire-purchase of road transport vehicles for both public authorities & operators carrying out public service contracts

Member State - Czechia

From 2 August 2021 to 31 December 2025

From 1 January 2026 to 31 December 2030

National targets for clean light-duty vehicles

Cars/vans

29.7%

29.7%

National targets for clean heavy-duty vehicles Trucks

9%

11%

Buses

41%

60% Source: European Commission, 2019

The CVD only covers the electrification of cars, vans, trucks and buses purchased, leased, rented, or hire-purchased by the public sector. Expanding this policy could cover all fleets for a more significant electrification impact.

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Transport – Flagship details Current national policies → EVs & other alternative fuel (AF) vehicles are exempt from road tax (this tax only applies to cars used for business purposes only, so it does not affect private individuals and only has a limited effect on businesses as the road tax is usually quite low)1,2 → No direct subsidies for the purchase of EVs exist today for non-entrepreneurs or private persons in CZ2 Current municipal policies → EVs enjoy some parking preference in Prague (i.e., lower parking fees)2 → Some dedicated parking spaces for EVs (with chargers) in some cities (Prague, Ostrava, Brno, Pilsen)2 → Czech municipalities may ask for state subsidies to buy AF vehicles, for cars or buses2 Since most electric cars today are more expensive than combustion models, incentives can be used carefully to accelerate the switch to electric cars.3

Government incentives in Czechia4

Image source: PWC, 2020

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Implementation: Financing instruments and reforms Proposed key reforms → Subsidies are a tried-and-true way of delivering state support to projects in Czechia.

→ However, financial instruments are more sustainable in the long-term and have the potential to make a greater impact as the funds are eventually repaid. → Therefore, subsides are not recommended in this flagship, as the impact of subsidies (as seen in the magnitude of RRP goals) is rather limited and the administrative burden to the consumer is high.1

Subsidies are a carrot (a reward or incentive for people who purchase an EV), but sticks can also be used effectively to discourage those who continue to buy polluting vehicles when clean ones are readily available.

Image Source: Agora Verkehrswende & Ellery Studio, 2021

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Reform 1: Policy – Establish a ZEV mandate for fleets → Such as, ‘any vehicle fleet must purchase 50% of its fleet as fully electric by 2025 and 100% by 2030.’ →

A ZEV mandate will signal to the market (manufacturers, OEMs, etc.) that an electrification wave is coming.

Others at Transport & Environment1, UK Electric Fleets Coalition2, and the Climate Group3 support such a mandate to make all purchased fleet vehicles fully electric by the year 2030.

→ Further support could come from an expansion of the Clean Vehicle Directive on the EU-level. →

Expanding the Clean Vehicle Directive to cover all corporate and private fleets (as mentioned before) could support a ZEV mandate of this kind.

→ Financing →

This reform requires no new financing, only political will to enact restrictions and punishments on those who do not comply with the measure.

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Reform 2: Financing – Varied financial incentives to aid company fleets in increasing EV intake → Option 1: Varying depreciation rates of cars linked to CO2 emissions

A variety of different financial incentives could help to convince multiple types of stakeholders (companies and employees) to electrify their company cars or vehicle fleets.

→ Allow for a >100% depreciation rate to reward companies with ZEVs/vehicles with no emissions and <100% depreciation rates for ICEs/vehicles with any emissions to tax fleets that continue to purchase polluting vehicles → This example comes from Belgium1:

Image Source: PWC, 2020

→ Cost: unknown, since it would depend on the purchasing decisions of fleets and would reduce a company’s taxable income, thus the tax given to the state 39

Reform 2: Financing – Varied financial incentives to aid company fleets in increasing EV intake These financial incentives are “carrots” that work to pressure companies to provide fully electric vehicles by giving the employee (Option 2) and company (Option 3) direct benefits if they purchase and/or use a ZEV.

→ Option 2: Decrease the Benefit in Kind (BIK) tax for the private use of an electric company vehicle →

This will help incentivize employees to choose fully electric company cars if given a choice.

→

Another example comes from Belgium where BEVs with CO2 emissions of 0 g/km receive the minimum taxable benefit in kind of 4% of the catalogue value of the car x degressivity coefficient x 6/7, with a min. of €1,360 per year2.

→

Could also increase the BIK tax for the private use of an ICE company vehicle (malus) to fund the program to reduce the tax on private use of EVs (bonus).

→

Cost: unknown, employees paying this tax in Czechia is not public information.

→ Option 3: Decrease VAT taxes on ZEV purchases, both new and second-hand →

Reduce the VAT tax on all ZEV purchases from the standard 21% rate to the reduced rate of 15% for all companies and private individuals.

→

Lowering the VAT taxes on a second-hand BEV to zero could provide an extra sense of security to leasing companies that they will be able to easily sell on any EVs after their use.

→

Cost: This proposal would result in less VAT taxes by an estimated €1.0 bn (CZK 25 bn) by 2030 if the reduced 15% VAT tax is taken and flagship targets are met (620,000 additional ZEVs).*

→

In Norway, electric cars are zero-rated for VAT purposes, both on unused and previously registered motor vehicles. Hybrid cars that run on fuel and electricity (PHEV) are not VAT exempt.3

40

Reform 3: Access – Increase financial access for SMEs to replace their business vehicles → Utilize financial instruments to provide loans or discounts to SMEs who would not typically be eligible for a commercial loan to help pay for the investment of an EV, due to slow pay-back period, small profits, or other issues.1 → The paperwork associated with financial instruments is considerably easier than in the case of subsidies. SMEs deal directly with a bank or financial institution and there is no need to announce a tender for supplies and services.1 → Option 1: Provide a financial guarantee to a SME for the purchase of an EV → A guarantee is a “written commitment to assume responsibility for all or part of a third party’s debt or obligation or for the successful performance by that third party of its obligations if an event occurs which triggers such guarantee, such as a loan default.”2 → A guarantee fund for SMEs could provide credit risk protection to reduce the barriers that SMEs face in accessing finance. It could leverage EU funds to support SME financing.2

→ Option 2: Provide an interest rate reduction to a SME for the purchase of an EV → Provide a 1% or 2% interest rate reduction to lower the financial barriers for a small company trying to reduce its GHG emissions by purchasing an EV for business purposes. → Cost: With current low-interest rates, an interest rate reduction could cost anywhere between €500-1000 per EV purchased. If half of the flagship target went to helping SMEs with the cost of purchasing an EV, this could cost €310 mln as a high cost estimate.* 41

Implementation: Financing instruments and reforms The EU should drive the transition → In addition to the initiatives Member States can take to promote sustainable mobility, the European Union should consider enacting the following policy measures across the continent: → Establish a ‘fleet renovation wave’ by implementing an EU-wide scrappage financial scheme to support ZEV sales & to remove high-polluting, older vehicles from the roads1. → A ‘European Sustainable Mobility Credits’ initiative2, where private car owners who offer their old cars for scrappage could benefit from a €1,500-2,000 voucher for sustainable mobility services (such as electric bike procurement, transit passes, or carsharing memberships1). → A European recognition & establishment of the ‘Right to Plug’ to all EV users. The European Commission can ensure all MS have a process to ensure installation of charging stations in all properties within three months of a request submitted by a citizen.1 → BEVs are still an unaffordable option for most taxi and PHVs. To make BEV technology more affordable for drivers, public bodies can make use of financial incentives to help make BEVs more viable and affordable3, including offsetting a driver’s lost time and income needed to recharge an electric vehicle.

42

Transport – Addressing national issues → Increasing the national uptake of EVs in Czech fleets is the quickest way to scale electrification6 & will help jumpstart the decarbonization of a road transport by: →

This flagship aims to take advantage of Czechia’s reliance on the used-car market by focusing on fleet vehicles, which are resold more quickly than private passenger vehicles (on average 3-4 years compared to 7 years).1

→ →

→

Driving a homegrown second-hand EV market (could be up to 40% larger by 2030 if a fleets-first strategy is adopted)1 Attracting EV manufacturers to sell in the CEE region Supporting the quicker decarbonization & transformation of Czech car manufacturers like ŠKODA AUTO Supporting national EV targets, like those in the NECP and NAP CM, which are currently not on track to meet EV car sales goals

→ The large second-hand car market in CZ will not change overnight & this will limit BEV growth for several more years.2 → However, the transformative potential of electrifying fleet vehicles is larger as fleet vehicles travel further & contribute two-thirds of all GHG emissions from road transport.3 → Any financial incentives could be phased out once EVs reach price parity with ICE vehicles after the period 2024-2027 (depending on vehicle type & geography).3,4,5

43

Best Practices and Success Stories → Recommendation: central fleet management1 & EV-by-default procurement2 → Decentralized management of vehicles can be a barrier to the electrification of a fleet. Higher organization of vehicle management can be achieved with a central fleet management system & make the introduction of EVs easier.1 → Mature EV cities now operate procurement so that municipal fleets buy EVs in all but exceptional circumstances.

→ City example: Stockholm2 → Stockholm has supported EV adoption in its municipal fleet by delivering a leading procurement strategy that considers EVs first for any vehicle replacement and transport service. The city’s fleet now consists of 99% clean vehicles of which 27% are fully electric and has a specific target of completely decarbonising by 2030. → Best practice: The fleet manager ensures there is a single annual procurement to create lower costs for the authority, replacing 100 vehicles per year across the city’s departments.

→ Recommendation: business engagement programs2 → Comprehensive communications plans for a business audience are important to understanding their concerns, persuading firms to make the switch to EVs, and generating support from a wide range of stakeholders.

44

Best Practices and Success Stories → Recommendation: road access & use tools1 → Many city fleets, like logistics companies and business owners, want access to city centres or business districts. Policy tools like clean air zones, congestion charging, or lane use can be effective in moving from early to mass adoption of EVs by these vehicle users. → City example: Oslo, Norway1 →

Oslo has implemented a Low Emission Zone (LEZ) in the form of three toll rings around the city, where the toll rates are dependent on type of fuel. Toll rates are most expensive for diesel cars, while EVs only pay 50% of petrol cars for entering the different zones. This has incentivized logistics companies to deploy ZEVs.

→ Recommendation: purchasing agreements or collaboratives to lower costs1 → Purchasing agreements or collectives can help to lower the cost for all parties involved. → City example: Los Angeles, USA1 →

The City of Los Angeles is electrifying its entire government fleet, with more than 800 EVs already deployed. One key mechanism to support this is the Climate Mayors’ Purchasing Collaborative: an online platform and resource portal that guides and encourages city leaders and public bodies across the USA to buy EVs collectively, reducing costs and sharing best practice on implementation.

→ Best practice idea: Nationwide coordination/procurement platform for purchase of EVs in the Czechia to lower the cost and to provide subsidized technical assistance for municipalities to purchase the vehicles together.

45

Potential Role for the EIB Accelerating the clean vehicle transition → The EIB utilized a Programme Loan to support both public and private promoters with €200 million in deploying the road EV fleet under public contracts in Italy.2 → This project contributes to the EU and EIB’s goals for Sustainable Transport and Climate Action and the bank’s Transport lending policy. Some of the Programme Loans fell under the EU’s Cleaner Transport Facility.

1

→ “ZEV commitments and long-term actions, such as setting fuel economy standards, send clear signals to the auto industry and private sector that decarbonising transport is a priority. As governments worldwide follow the lead and set clear targets to phase out fossil fuels, the uncertainty in the market is reduced and more businesses will support the transition.3” Image source: Author’s own

46

Transport - Conclusions → Massive transformation is needed in the Czech transport sector. However, the country is currently heavily dependent on private vehicles needs to substantially increase its uptake of electric vehicles. → Even when EVs reach price parity with new ICE vehicles, used ICE vehicles could still dominate the used car market unless a fleets first strategy to electrification is taken. → Fleet electrification and charging infrastructure must develop hand-in-hand. There are already many established funding options to install public charging infrastructure, but there is still a gap when it comes to financing vehicle replacement and, thus, fleet electrification. → This flagship, therefore, aims to fill this gap with three major reforms/measures: → (1) Accelerate EV adoption in corporate & private fleets with an EU-wide ZEV fleet mandate with (2) a financial mix of incentives which will encourage a quicker uptake of EVs in fleets, and (3) enable greater financial access for SMEs to replace their business vehicles.

47

Additional Slides Transport Flagship

48

Transport flagship ideas ruled out → Rail transport – there is a need for more electrification of rail in Czechia, but railway development and expansion is complex, time-consuming, & very expensive → A two-traction system further complicates investment plans → Electrifying public transport – there are already some cities in Czechia investing in electrifying their public bus fleets and converting to electric trolleybuses where possible → EV charging points – there are fewer public charging points (PCP) per 100,000 inhabitants than the EU average (12 in CZ vs. 28 in other EU MS1); home chargers will account for 87% of the total charging network by 20503; new Fit for 55 package proposes a revision to the AFID – which mandates the need for 1 kW PCP for each BEV on the roads4 → Research shows that the availability of public recharging has psychological impacts on willingness to buy an EV, but PCP availability only becomes more important than home access after the market share of EVs exceeds 5%2 → This may not apply as much for people who do not live in standalone homes and lack access to a home charger – 47.5% of households live in multi-dwelling buildings in Czechia5

→ Passenger EV cars for private individuals – the ability to purchase an EV is limited by real disposable income and the price at which the average Czech person is willing to pay for a car.6 Used cars are more prominent in the country and CEE region, as a whole.7 Therefore, focusing on subsidizing new cars to replace functioning cars may disproportionately benefit wealthier individuals in society.

49

Methodology Details Flagship investment assumptions:

→ The current vehicle fleet size is around 6 million passenger vehicles in Czechia6 → The current size of the company car fleet is approximately 1.4 million1, though over 2 million vehicles have been registered as company cars in Czechia over the past 50 years2 some could have been re-exported3 → we assume the company car fleet is thus 1.4 million in size → Approx. 200,000 passenger cars are sold per year in Czechia4,5 →

Companies purchased 74% of passenger cars sold in 20204

→

This means approx. 148,000 cars purchased in 2020 were registered by companies

→

Some cars are bought in Czechia and sold elsewhere (re-exported), so the actual number of company cars staying in Czechia is likely lower. Though it is practically impossible to know the statistics of new car registrations (the Czech Statistics Office doesn’t collect this information), anonymous car manufacturers estimate between 20-30% of cars are re-exported after purchase.3

→

Thus, we will take a low-end estimate and assume 20% of new registrations are re-exported and 80% of new registrations are kept in the country and added to the domestic company car fleet each year.

→ For a comparison, we will use Poland (neighboring country to Czechia, similar industrial mix) as a guide, due to the data availability from Dataforce (commissioned by T&E). In Poland, 428,444 cars were registered in the year 2020 and 73% of these were corporate registrations. This number is similar to the 74% found for Czechia. Furter, Dataforce found that corporate registrations accounted for 80% of all BEVs newly registered in Poland in 2020. Thus, we will use 80% as an estimate for the number of BEVs registered by corporations as well in Czechia.7 50

Methodology Details Flagship investment assumptions:

→ When calculating the emission savings for this flagship (with a T&E template), we utilized some of the basic principles from the Czech NECP’s energy saving calculation methodology1 presented here: → Methods of measuring emission savings: to calculate emission savings from the flagship incentives to purchase ZEVs with no direct fuel emissions, a “method of proportional savings based on technical-engineering estimates will be used through the normal efficiency of internal combustion engines” (Row 221 in Excel spreadsheet) and engines using electric motors (which produce no direct emissions) → Considering lifetime & reduction of emission savings over time: “the lifetime of individual measures is taken into account in the calculation of the cumulative [emission] savings. The contribution of individual measures in cumulated savings is taken into account in line with the Commission Recommendation on the transposition of mandatory [emission reductions]. The lifetime of emission savings corresponds to that of cars.” → How has the additionality criterion been taken into account? Emissions savings from the purchase and operation of ZEVs are emissions savings resulting from premature replacement before the end of the life of the original combustion vehicle or from the motivation to buy more efficient vehicles. Under standard conditions without policy measures, there would be little purchase of ZEVs due to the high price parity, low fuel prices, and low incentives to exchange existing vehicles. → How has the significance criterion been taken into account? “Given the identified market failure, in particular in relation to the low incentive to purchase [ZEVs] due to the high price and the long payback period, without the measures in question, i.e. without the investment aid, the target subjects would not be motivated to replace conventional vehicles or to purchase [ZEVs].” → Preventing double counting of savings: there are no other financial mechanisms for the same type of target groups in the Czechia 51

Methodology Details Flagship investment assumptions – Reform 2, Option 3: →

One source says in 2020, Czechia recorded the highest share of new EV passenger car registrations by companies being an average of 86% of their purchases3,4, but this data may be highly skewed as it only recorded <10,000 vehicles added to the true fleet registration data over one year, when multiple sources1,2 cite closer to 148,000 cars being registered as company cars in the same year.

→

Using T&E’s template and the following assumptions: →

BNEF data5 shows the annual growth rate of BEV sales in Eastern Europe for the “base case” scenario and “accelerated” scenario (which we will take to mean efforts from our flagship)” Name

Scenario

Region

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

BEV share of total sales (%) Base case

Eastern

1.5%

1.6%

1.8%

2.0%

2.5%

3.3%

4.7%

7.2%

11.5%

18.1%

BEV share of total sales (%) Accelerated Eastern

2.1%

2.6%

3.3%

4.5%

6.5%

9.6%

14.5%

21.6%

31.5%

44.0%

Annual change

Base case

Eastern

0.1%

0.1%

0.1%

0.3%

0.5%

0.8%

1.4%

2.5%

4.2%

6.7%

Annual change

Accelerated Eastern

0.7%

0.5%

0.7%

1.2%

2.0%

3.1%

4.8%

7.1%

9.9%

12.5%

Source: Data from Transport & Environment

→

Using past registration data in Czechia from the Association of Automobile Importers (SDA CIA) for total number of new registrations of passenger cars per year and assumptions on re-exports (previous slide), we are able to estimate the corporate car registrations based on what we know about the corporate car population size in 2021: Name New registrations (incld. Re-exports) New registrations (excld. Re-exports)

Scenario Category Region

Country

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

All

All

Eastern Czechia

225,008

225,008

225,008

225,008

225,008

225,008

225,008

225,008

225,008

225,008

All

All

Eastern Czechia

180,006

180,006

180,006

180,006

180,006

180,006

180,006

180,006

180,006

180,006

New registrations

All

CorporateEastern Czechia

133,205

133,205

133,205

133,205

133,205

133,205

133,205

133,205

133,205

133,205

Total passenger cars

All

CorporateEastern Czechia

2,071,477

2,204,681 2,337,886 2,471,091 2,604,296

1,405,453 1,538,658 1,671,862 1,805,067 1,938,272

Source: Data from Transport & Environment

52

Methodology Details Flagship investment assumptions – Reform 2, Option 3: → Using the BNEF data1 (the annual growth rate of BEV sales in Eastern Europe) and past data on BEV sales from CIVINET2, we can estimate the growth in uptake of BEVs and total number of BEV registrations for the future for both the “base case” scenario and an “accelerated” scenario which we will take to be due to our flagship reforms and investments: Name BEV uptake

Scenario

Category Region Country

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Base case Corporate Eastern Czechia

2.2%

2.3%

2.4%

2.7%

3.2%

4.0%

5.4%

7.9%

12.2%

18.8%

28.6%

41.0%

54.5%

66.9%

76.6%

BEVs #

Base case All

Eastern Czechia

8,235

35,535 40,941

48,758

61,180

82,290 119,474 185,456 300,303 490,772

781,649 1,175,915 1,636,797 2,098,671 2,505,286

BEVs # BEV uptake

Base case Corporate Eastern Czechia

6,588

28,428 32,753

39,007

48,944

65,832 95,579 148,365 240,242 392,618

625,319

Accelerated Corporate Eastern Czechia

2.8%

5.2%

7.2%

BEVs #

Accelerated Corporate Eastern Czechia

3.3%

4.0%

39,648 50,337 67,115

10.3%

15.2%

22.3%

32.2%

44.7%

58.9%

940,732 1,309,438 1,678,937 2,004,229 73.1%

85.6%

95.5%

100.0%

94,421 139,566 214,020 334,390 521,588 795,650 1,164,726 1,612,886 2,098,862 2,572,490 2,996,765 3,270,319 Source: Data from Transport & Environment

→ The accelerated scenario will allow corporate registrations to be fully electric by 2035, which is more in line with EU climate goals, as opposed to the current trajectory of Czechia’s EV growth.

53

Methodology Details Cost estimate of key reforms – Reform 2, Option 1: Reform: varying depreciation rate for companies based on emission level of vehicle → If companies write off the cost of an ZEV within 2 years instead of the standard 5-year period in Czechia2, companies’ taxable income will be decreased by the purchase price of any ZEV they add to their fleet 3 years sooner than before. → In reality, this reform and associated tax write-off is no different than before, except that it will lower companies’ taxable income sooner, rather than 3 years later. → Based on the definition of net present value, money is worth more now than the same amount later on3, so if a company reduces its income for vehicles purchases sooner rather than later, this is actually slightly advantageous for companies so they can ideally invest the money they would have spent on taxes sooner rather than later, but it is difficult to calculate exactly how much this will “cost” the government, especially over such a short period of 3 years time difference in the tax reductions if this reform is implemented.

54

Methodology Details Cost estimate of key reforms – Reform 2, Option 2: Assumptions: → The price of an electric car in Czechia starts at around CZK 500,000 for a Škoda Citigo iV mini car. The cheapest electric SUVs, including the Hyundai Electric or Mazda MX30, cost approximately CZK 850,000.1 → €20,000 – 33,500 (CZK 500,000 – 850,000) → VAT Tax (normal rate of 21%) = €4,200 – 7,035 → VAT Tax (proposed reduced rate of 15% for EVs) = €3,000 – 5,025 → Loss of VAT Tax if EVs are charged at the reduced rate = €1,200 – 2,010 per vehicle Reform: decrease the employee tax paid for using a company EV for private purposes → An employee who uses a company car for private purposes has his tax base for personal income tax purposes increased by an amount that equals 1% of the price of the car (including VAT) per month. The increase is at least CZK 1,000 per month.2 → The proposed reduction in employee tax is 0.5% → There is no guarantee that a company car will be used for private purposes. One cannot estimate what percentage of company cars are used for private purposes currently, thus we cannot estimate how much revenue the government may lose if a reduction of the employee tax on using a company car for private purposes is implemented.

55

Methodology Details Cost estimate of key reforms – Reform 2, Option 3: Assumptions: → The price of an electric car in Czechia starts at around CZK 500,000 for a Škoda Citigo iV mini car. The cheapest electric SUVs, including the Hyundai Electric or Mazda MX30, cost approximately CZK 850,000.1 → €20,000 – 33,500 (CZK 500,000 – 850,000) → VAT Tax (normal rate of 21%) = €4,200 – 7,035 → VAT Tax (proposed reduced rate of 15% for EVs) = €3,000 – 5,025 → Loss of VAT Tax if EVs are charged at the reduced rate = €1,200 – 2,010 per vehicle (avg. €1,605 per vehicle) Reform: decrease VAT taxes on EV purchases from the current 21% rate to a reduced 15% rate → The number of BEVs in the “accelerated” scenario – the number of BEVs in the “base case” scenario = additional 772,000 BEVs (by 2030) needed to achieve flagship targets of 45% electrified fleet vehicles by 2030 and 100% by 2035. → If 772,000 additional EVs are sold to companies with a reduced VAT rate → reduction €1.2 billion in reduced VAT tax over a period of 8 years (2022-2030) → Employers are obliged to reduce the input VAT claimed (from the acquisition price or financial lease fees) proportionately between the private & business use of the employee.2 This reform also accordingly reduces the VAT tax employers can claim, but only in accordance with the lowered VAT tax rate of the vehicle. The VAT tax claimed is not lowered further if the employee uses the car for private purposes

56

Methodology Details Cost estimate of key reforms – Reform 3, Option 2: Assumptions: → The price of an electric car in Czechia starts at around CZK 500,000 for a Škoda Citigo iV mini car. The cheapest electric SUVs, including the Hyundai Electric or Mazda MX30, cost approximately CZK 850,000.1 → The price of an electric car in Czechia starts at around CZK 500,000 (€20,000) for a Škoda Citigo iV mini car. The cheapest electric SUVs, including the Hyundai Electric or Mazda MX30, cost approximately CZK 850,000 (€33,500).1 → As of July 2021, the Czech National Bank lists average recorded short- and long-term loan interest rates for non-financial corporations (non-bank entities). We will use the listed interest rate of 2.91%.2

Reform: finance an interest rate reduction for SMEs to purchase EVs → The number of BEVs in the “accelerated” scenario – the number of BEVs in the “base case” scenario = additional 620,000 ZEVs (by 2030) needed to achieve flagship targets of 45% electrified fleet vehicles by 2030 and 100% by 2035.

57

Methodology Details Cost estimate of key reforms – Reform 3, Option 2 (continued):

Reform: finance an interest rate reduction for SMEs to purchase EVs → If 620,000 additional EVs are sold to SMEs at a reduced interest rate: →

Would cost €327.5 mn if all 620,000 EVs are lower-priced models purchased by SMEs with a 1% interest rate reduction

→

Would cost €650 mn if all 620,000 EVs are lower-priced models purchased by SMEs with a 2% interest rate reduction

→

The cost to finance a 1% interest rate reduction is approx. €500 per vehicle and €1000 per vehicle with a 2% interest rate reduction

→ These favorable interest rate conditions can be combined with other financial instruments to produce a comprehensive package to incentivize accelerated EV uptake, especially for SMEs, which employ 66.4% of all Czech persons employed and contribute 56% of all value added in Czechia.3 Principle Scenario 1: SME purchase € 10 mid-size Evs 334,000.00 € 334,0 Reduce interest rate by 2% 00.00 € 334,0 Reduce interest rate by 1% 00.00 Scenario 2: SME purchases € 10 cheaper-model Evs 200,000.00 € Reduce interest rate by 2% 200,000.00 € Reduce interest rate by 1% 200,000.00

Interest rate Term Interest Total Interest reduction funded in yr Rate Paid by grants Cost to lower interest rate 5 5

2.91% € € 0.91%

5

1.91% €

25,291.63 7,782.72 € 91 € 16,467.84 9

5

2.91% €

15,144.69

5

0.91% €

5

1.91% €

€ 4,660.31 10,484.37 € 9,860.98 5,283.70

17,508.

€ ,171.86 8,823.7 € 685.88

1,085,552 547,074,

€ 650,031,240.64 € 327,589,632.27

Total cost of program interest rate reduction of 2 points interest rate reduction of 1 point

interest rate reduction of 2 points interest rate reduction of 1 point Source: author’s own calculations

58

Background info: Transport in CZ

59

Transport in CZ – current state of EV charging Key facts

→ Public charging points (2021): around 1,309, including 681 fast chargers (>22 kW).1 → The uptake of ZEVs remains low in CZ. In 2019, only 0.5% of newly registered vehicles were BEV or PHEV. The deployment of charging infrastructure follows the slow growth pass of ZEVs.5

Government targets → National Action Plan for Clean Mobility set the goal of 1,300 charging stations (800 fast and 500 normal) in operation by 2020.2

→ NECP estimates about 6,200 charging points are planned for 2025, & will be increased to 19,000 by 2030. However, if 500,000 EVs are in the vehicle fleet (high estimate), 11,000 chargers are needed by 2025 and 35,000 by 2030.3 → Prague aims to have 750 EV charging stations by 2025 and >4,500 EV charging stations available in parking spaces by 2030.4 → National Action Plan for Smart Grids predicts 1.7 million electric cars will be on Czech roads by 2040 and each will have it’s own charging point; also calls for the installation of 1,000 charging stations, each with 6 charging points6

60

Transport in CZ

Image source: Transport & Environment, 2020

61

Transport in CZ: Financial Instruments Toolbox Direct consumer incentives

Local incentives

Charging infrastructure installation incentives (public & private)

Complementary policies

-

Fiscal: subsidies for individuals purchasing EVs (w/ max limit of purchase price)

-

Fiscal: exemption/lowering of car registration tax, road tax, or company car tax on new EVs

-

Fiscal/ policy: to promote the use of EVs, such as tax exemptions, free passes on toll roads, access to bus & taxi lanes, or free parking in public parking spaces4

-

Policy: adjust municipal codes & zoning to allow for easier installation of charging infrastructure & streamline the permitting process3

-

Investment: EV curb-side charger and lamppost charging program3

-

Fiscal/ policy: subsidies for EVs in public transport (e.g. buses); mandate a certain share of RES in a municipality’s public transport by a certain year

-

Fiscal: subsidies or grants for installing public charging points, incremental based on kW, at domestic properties, workplaces, or on-street residential spots

-

Fiscal: tax exemptions for companies operating public charging infrastructure (phasing out after a certain year)

-

Investments: expansion of EV charging infrastructure via direct installation or providing land for private installation3

-

Policy: The ‘right to plug’ in residential buildings or at public parking spots2, vehicle-ready building codes which mandate capacity for charging in new construction3

-

Investment/ fiscal/ policy: demanding a certain share of any company, car rental, or taxi fleet fleet to be EVs by a certain year and offer subsidies in a transition period to companies 62

Transport in CZ: Private car fleets Electrification of private car fleets (delivery vans, taxis, ride-hailing, and company cars) → Electrifying urban fleets can mitigate over 70% of mobility CO2 urban emissions, remove 50% of city air pollution, & electrify rides for everyone – making the electrification transition more effective & equitable.1 → While electrifying vehicle fleets cannot yet deliver large economies of scale, scaling up deployment of commercial vehicle fleets can drive model development & scale-up of production, & make electric LCVs more cost competitive. → By electrifying fleets, we can accelerate electrification by 3-4 times during this decade.2 → This aims to accelerate the electrification of the taxi & ride-hailing fleet by installing x# rapid charging hubs and/or charge points across x# cities to allow for easy recharge at taxi stations/places ride-hailing vehicles usually wait. → These charging hubs could also provide a charging dock for e-bikes or e-scooters.

→ Charging hubs for taxis & private hire vehicles should provide DC fast chargers for a quick recharge.

63

Acknowledgements → Experts we spoke to: → Aaron Fishbone, Director of Public Policy at Greenway Network → Michal Kadera, External Affairs Director at ŠKODA AUTO → Robert Brückmann & Boris Valach, Eclareon Consulting Firm → Günter Hörmandinger, Deputy Director at Agora Verkehrswende → Griffin Carpenter, Company Cars Analyst, & Saul Lopez, Manager of Electric Fleets Program, at Transport & Environment → Nikos Lysigakis, Public Affairs Manager | Greece & Poland, at FREE NOW; Zuzana Pucikova, Director of EU Public Policy at Uber; Florian Steuerer, Senior Public Affairs Manager, at EU Strategy → Maxim Blankschein, Scientific Consultant, Katharina Csillak, Research Associate, and Friederike Pfeifer, Research Fellow, at IKEM - Institute for Climate Protection, Energy and Mobility → Others who connected us to the right people or provided useful information: → Lucien Mathieu, Manager of Road Vehicles and Emobility Analysis at Transport & Environment → Carlos Calvo Ambel, Senior Director of Non-Road and Analysis at Transport & Environment

64

65

Annex – Footnotes, Abbreviations & Glossary Electrifying fleet vehicles Slid e 1 2 3 4 5 6

7 8

9

10

11

Footnotes and sources 1 This estimate of €12-20 bn (CZK 307-512 bn) needed from private investment is the total cost of the purchase of 620,000 ZEVs ranging from a sticker price of €20,000-33,400 (range of EV prices in Czechia for small Evs to mid-size SUVs). €1 bn is the cost estimate of public funding instruments needed to incentivize companies to invest in the purchase of ZEVs for their company fleets.

1 Czech Government, NAP CM Update, 2019 2 Czech Government, National Action Plan for Smart Grids, 2015 3 EIB, Access to finance study on innovative road transport, 2018 1 McKinsey and Company, Pathways to decarbonization in Czech Republic, 2020 2 Czech Ministry of Transport, Transport Yearbook 2019, 2020 3 ACEA, Vehicles in Use Europe report, 2021 4 Statista, 2021 https://www.statista.com/statistics/451522/share-of-the-rail-network-which-is-electrified-in-europe/ 5 Czech Ministry of Transport, The Transport Policy of the Czech Republic for 2014-2020 with the Prospect of 2020, 2013 6 Ministry of Transport, Transport Handbook 2019, 2020 7 Czech Ministry of Industry and Trade, Update to the NAP CM, 2019 8 T&E, Plugged-in: T&E‘s EV market watch, 2021 1 Czech Ministry of Industry and Trade, National Action Plan for Clean Mobility, 2015 2 McKinsey & Company, Net-Zero Europe, 2020 3 EUKI Report, Emission reduction strategies for the transport sector in Poland, 2019 4 Recharge EU, Transport & Environment, 2020 5 https://www.justtransition.eu/ 6 Research for TRAN Committee, Charging Infrastructure for electric road vehicles, European Parlaiment, 2018 Taxes on transport vehicles are well below the EU average, but the tax burden on fuel is higher than the EU average.5 European carmakers lack a regulatory push to invest in sufficient capacity & increase sales of EVs. 3 1 Public Transport Concept 2020-2025 with a view to 2030, prepared by the Ministry of Transport 2 https://www.theclimategroup.org/our-work/news/how-zero-emission-vehicles-can-support-governments-achieve-green-recovery 3 European Commission, ‘Fit for 55’ Communication, 2021 1 European Commission, SWD(2020) 502 final report, Country Report Czechia 2020

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2 European Commission, COM(2019) 503 final, Council Recommendation on the 2019 National Reform Programme of Czechia 3 European Commission, COM(2020) 503 final, Council Recommendation on the 2020 National Reform Programme of Czechia 1 https://ec.europa.eu/info/sites/default/files/amendment-renewable-energy-directive-2030-climate-target-with-annexes_en.pdf 2 Government of the Czech Republic, National Energy and Climate Plan (NECP), 2019 https://ec.europa.eu/energy/sites/default/files/documents/cs_final_necp_main_en.pdf 1 European Commission, SWD(2020) 902 final, Commission Staff Working Document: Assessment of the final national energy and climate plan of Czechia, 2020 https://ec.europa.eu/energy/sites/default/files/documents/staff_working_document_assessment_necp_czechia_en.pdf 1 Government of the Czech Republic, Czech Recovery and Resilience Plan, 2021 http://www.planobnovycr.cz/ CZ RRP Assessment https://ec.europa.eu/info/recovery-and-resilience-plan-czechia_en *Investment 2 Milestone (https://ec.europa.eu/info/sites/default/files/com-2021-431_annexe_en.pdf): Czechia shall provide, before the network investment is completed, a concrete plan for investment in heat/power generation facilities compliant with the Guidance ‘Do no significant harm’ Technical Guidance (2021/C58/01), in particular the criteria for natural gas-based heat and power set out in Annex III of the Guidance, in case natural gas shall be utilised, including through contractual obligations taken up by the Czech government to commission the relevant work.

Refurbishment of the heat and power generation facility shall start within three years of the modernisation of the network, in order to comply with the definition of ‘efficient district heating and cooling’ in Article 2(41) of the Directive 2012/27/EU (“a district heating or cooling system using at least 50 % renewable energy, 50 % waste heat, 75 % cogenerated heat or 50 % of a combination of such energy and heat”).

1 Government of the Czech Republic, Czech Recovery and Resilience Plan, 2021 http://www.planobnovycr.cz/ 1 European Commission, Czechia Factsheet, 2021 2 European Commission, Commission Staff Working Document: Analysis of the recovery and resilience plan of Czechia, 2021 https://ec.europa.eu/info/recovery-and-resilience-plan-czechia_en 1 The Network of Independent Fiscal Institutions, European Fiscal Monitor – June 2021, 2021 2 Green Recovery Tracker, Czech Country Report, 2021 https://www.greenrecoverytracker.org/country-reports/czech-republic 3 BankWatch, https://bankwatch.org/blog/czech-recovery-plan-a-few-steps-away-from-being-on-the-right-path and https://bankwatch.org/wp-content/uploads/2021/05/2021-05-07_Czech-RepublicRRF-assessment.pdf, 2021 4 Government of the Czech Republic, Czech Recovery and Resilience Plan, 2021 http://www.planobnovycr.cz/ 1 FREE NOW, Need for speed report, 2021 2 Agora Verkehrswende & Ellery Studio, Future Ahoy! An infographic novel about sustainable transport, 2021 1 FREE NOW, Need for speed report, 2021 2 Uber, Spark! Partnering to electrify in Europe, 2021 3 LeasePlan, Car Cost Index 2020, September 2020 *segment B1 & C1 1 Transport & Environment, “how clean are electric cars” online tool, April 2020 2 ICCT, Why are electric vehicles the only way to quickly and substantially decarbonize transport?, 2021 Why are electric vehicles the only way to quickly and substantially decarbonize transport? | International Council on Clean Transportation (theicct.org) 1 Interreg Europe, Report on EV charging pricing, regulatory framework and DSO role in the e-mobility development 2 CMS, Expert Guide to EV regulation & law, CZ, 2018 3 The Council on Czech Competitiveness, New programme period: one trillion Czech crowns and simpler procedures for applicants, 2021 http://www.czechcompete.cz/economic-policy/macroeconomicindicators-economic-growth/new-programme-period-one-trillion-czech-crowns-and-simpler-procedures-for-applicants

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4 DotaceEU, Five of the nine programmes for 2021-2027 were approved today by the government, 2021 https://www.dotaceeu.cz/cs/evropske-fondy-v-cr/novinky/pet-z-deviti-programu-pro-obdobi-20212027-dnes-sc 5 Transport & Environment, “how clean are electric cars” online tool, April 2020 1 Czech Ministry of Transport, Transport Yearbook 2019, 2020 2 Transport & Environment, Plugged-in: T&E‘s market watch tool, 2021 3 Czech Ministry of Industry and Trade, National Action Plan for Clean Mobility, 2015 1 LeasePlan, LeasePlan‘s 2021 EV Readiness Index Report, 2021 2 Own image 1 LeasePlan, LeasePlan‘s 2021 EV Readiness Index Report, 2021 1 Transport & Environment, Company cars briefing: how European governments are subsidising pollution and climate change, October 2020 2 Demand for EVs in Czech Republic still at rock bottom - CzechTrade Offices, 2020 3 Mileu, Legal study on EU legislation for corporate fleet electrification, 2021 4 Figure from Transport & Environment, Why the EU needs a ZEV Fleets Regulation & how to do it, 2021 5 Uber, Spark! Partnering to electrify in Europe report, 2021 Definition of fleets from Transport & Environment, Why the EU needs a ZEV Fleets Regulation & how to do it, 2021 Own image 1 Transport & Environment, Decarbonising corporate fleets – Electromobility Platform Paper, 2021 2 Platform for electromobility, The Platform‘s proposals to boost zero-emission vehicles in corporate and urban fleets, 2021 3 LeasePlan, Mobility Insights Report: Evs and Sustainability Edition, 2021 4 European Union, „Regulations, Directives and other acts“, 2020 https://europa.eu/european-union/law/legal-acts_en 1 Uber, Spark! Partnering to electrify in Europe Report, 2021, author-modified (circled in yellow) 1 Green Alliance, Going electric how everyone can benefit sooner, 2019 2 Prague Business Journal, Czech new car sales fell 19% in 2020, 2021 https://praguebusinessjournal.com/czech-new-car-sales-fell-19-in2020/#:~:text=Sales%20of%20new%20passenger%20cars,due%20to%20the%20coronavirus%20epidemic.

3 EEA, Fiscal instruments favouring electric over conventional cars are greener, 2019 4 OECD Environmental Performance Review: CZ 2018 5 ICCT, Electrifying public & private fleets Workshop Report, 2020 6 IRENA, The Post-COVID Recovery Report, 2020 7 IEA, Sustainable Recovery Report, 2020 1 European Commission, COM(2021) 556 final, Amendment of Regulation (EU) 2019/631 – strengthening of CO2 emission performance standards for new passenger cars & new light commercial vehicles, 2021 *calculations for this graph can be found in the Methodology section in “Extra slides – transport” 1 Czech Ministry of Industry and Trade, National Action Plan for Clean Mobility, 2015 2 Transport & Environment, Charging Infrastructure Report, 2018 3 Registered vehicles in the Czech Republic, 2021 https://registrovanavozidla.cz/ *calculations for this graph can be found in the Methodology section in “Extra slides – transport” 1 Czech Ministry of Industry and Trade, National Action Plan for Clean Mobility, 2015

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2 Transport & Environment, Charging Infrastructure Report, 2018 3 Registered vehicles in the Czech Republic, 2021 https://registrovanavozidla.cz/ 4 Government of the Czech Republic, Czech Recovery and Resilience Plan, 2021 http://www.planobnovycr.cz/ 1 Czech Ministry of Transport, Operational Program Transport, 2021 https://www.opd.cz/stranka/opd3 2 Czech Ministry of Industry and Trade, The government has approved the OP TAK, which will support the development of Czech companies in the coming years, 2021 https://www.mpo.cz/cz/podnikani/dotace-a-podpora-podnikani/optak-2021-2027/aktualni-informace/vlada-schvalila-op-tak--ktery-v-pristich-letech-podpori-rozvoj-ceskych-firem--263692/ 1 EIB/InnovFin, Financing innovation in clean and sustainable mobility: study on access to finance for the innovative road transport sector, 2018 1 European Commission, Directive 2009/33/EC of the European Parlaiment and of the Council 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles, 2009 2 European Commission, Revised Clean Vehicles Directive (2019/1161), 2019 https://ec.europa.eu/transport/themes/urban/clean-vehicles-directive_en 1 Report to TRAM Committee 2 CMS Expert Guide to EV regulation & law, CZ, 2018 3 Agora Verkehrswende & Ellery Studio, Future Ahoy! An infographic novel about sustainable transport, 2021 3 T&E Company Cars: How European governments are subsidizing pollution and climate change report, 2020 4 PwC, 2020 Global Automotive Tax Guide 1 https://www.dotaceeu.cz/cs/evropske-fondy-v-cr/financni-nastroje 2 PWC Global Automotive Tax Guide, 2020 1 Transport & Environment, Company cars: how European governments are subsidizing pollution & climate change, October 2020 2 UK Electric Fleets Coalition, 2021 Policy Paper, 2021 3 Climate Group, Fleets first: How accelerating fleet electrification can unlock the shift to clean road transport, July 2021 1 PWC Global Automotive Tax Guide, 2020 1 Green Alliance, Going electric how everyone can benefit sooner, 2019 2 ICCT, Electrifying public & private fleets Workshop Report, 2020 3 PWC Global Automotive Tax Guide, 2020 Illustrations: New peer forum series supports governments to accelerate the zero emission vehicle transition | Climate Group (theclimategroup.org) * See extra slides – transport for methodology details & calculations 1 https://www.dotaceeu.cz/cs/evropske-fondy-v-cr/financni-nastroje 2 EIB, Financial instrument products: loans, guarantees, equity and quasi-equity, 2015 * See extra slides – transport for methodology details & calculations 1 FREE NOW, Need for speed report, 2021 2 IEA, Sustainable Recovery, 2020 https://www.iea.org/reports/sustainable-recovery/transport 3 Uber, Spark! Partnering to electrify Europe report, 2021 1 Climate Group, Fleets First Report, 2021 2 T&E & BloombergNEF, Hitting the EV inflection point, 2021 3 Climate Group, Fleets First Report, 2021 4 BloombergNEF, Hitting the EV inflection point, 2021 5 BloomgbergNEF, New Energy Outlook, 2020 6 EY, Accelerating fleet electrification in Europe, 2021

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1 IKEM, Electromobility concept Frankfurt (Oder), 2020 2 IEA, EV City Casebook and Policy Guide, 2021 1 IEA, EV City Casebook and Policy Guide, 2021 1 EIB, https://www.eib.org/en/press/all/2019-234-la-bei-octroie-un-financement-de-250-millions-d-euros-a-ald-pour-accelerer-la-croissance-de-sa-flotte-de-vehicules-hybrides-et-electriques, 2019 2 EIB, https://www.eib.org/en/projects/pipelines/all/20200095, 2020 3 https://www.theclimategroup.org/our-work/news/ZEVs_greenrecovery 1 EV Charging Station Statistics in US, UK, & Europe [2021] (muchneeded.com) 2 Transport & Environment, Charging Infrastructure Report 3 BloombergNEF Electric Vehicle Outlook 2021 4 Transport & Environment, EU takes big step towards making charging anxiety a thing of the past, 2021 EU takes big step towards making charging anxiety a thing of the past | Transport & Environment (transportenvironment.org) 5 Ministry of Regional Devvelopment of the CR, Housing in the Czech republic in Figures (August 2018), web 12.9.18 v 15hod, web (ohchr.org) 6 IDEA study conducted in 2019 by the Institute for Democracy & Economic Analysis in CZ (Elektromobil: nejdříve do vesmíru, do Česka až po slevě - Electric car reaches space, but only makes it into the Czech Republic after a discount) 7 BloombergNEF, Hitting the EV inflection point, 2021 $USD41,737 GDP in 2020 10.6 million people in CZ Czech Republic - OECD Data In the Czech Republic, the average household net-adjusted disposable income per capita is USD 21 453 a year, lower than the OECD average of USD 33 604 a year. But there is a considerable gap between the richest and poorest – the top 20% of the population earn nearly four times as much as the bottom 20%. OECD Better Life Index Czech Republic gdp per capita for 2020 was $22,762 Czech Republic GDP Per Capita 1993-2021 | MacroTrends 1 Registrovanavozidla.cz, Registered vehicles in the Czech Republic - registration of vehicles in numbers (registrovanavozidla.cz) 2 Autoweb.cz, Company car sales statistics: Most are bought on lease, but can you guess the most popular brand? I'm Autoweb.cz 3 iDNES.cz, Czech car sales are at record levels. Who buys them is a mystery - iDNES.cz https://www.idnes.cz/auto/zpravodajstvi/prodej-aut-reexport-zakaznik-statgstika-leasing-operativni-uverretail.A180529_164542_automoto_fdv 4 Czech New Car Sales Fell 19% In 2020 | Prague Business Journal 5 Transport & Environment, EV Market Watch – quarterly registration data from ACEA 6 Czech Ministry of Transport, Transport Yearbook 2019 7 Dataforce data from Transport & Environment 1 Government of the Czech Republic, National Energy and Climate Plan (NECP), 2019 https://ec.europa.eu/energy/sites/default/files/documents/cs_final_necp_main_en.pdf (pg. 356-

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1 Czech New Car Sales Fell 19% In 2020 | Prague Business Journal Prague Business Journal, Czech New Car Sales Fell 19% in 2020, 2021 https://praguebusinessjournal.com/czech-new-car-sales-fell-19-in2020/ 2 Transport & Environment, EV Market Watch – quarterly registration data from ACEA

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3 Czech Ministry of Transport, Transport Yearbook 2019 4 https://theicct.org/blog/staff/phev-europe-company-cars-apr2021 5 Dataforce data from Transport & Environment 6 SDA CIA, http://portal.sda-cia.cz/stat.php?n#str=nova, 2021 1 Dataforce data from T&E, 2021 2 CIVINET, https://www.civinet.cz/registrace-vsech-cistych-vozidel-v-cr/, 2021 SDA CIA, http://portal.sda-cia.cz/stat.php?n#str=nova, 2021 1 https://tekdeeps.com/electric-skoda-enyaq-will-cost-over-a-million-czk/ 2 PwC, 2016 Global Automotive Tax Guide 3 Corporate Finance Institute, Net Present Value (NPV) - Definition, Examples, How to Do NPV Analysis (corporatefinanceinstitute.com) 1 https://tekdeeps.com/electric-skoda-enyaq-will-cost-over-a-million-czk/ 2 PwC, 2016 Global Automotive Tax Guide 1 https://tekdeeps.com/electric-skoda-enyaq-will-cost-over-a-million-czk/ 2 PwC, 2016 Global Automotive Tax Guide 1 https://tekdeeps.com/electric-skoda-enyaq-will-cost-over-a-million-czk/ 2 https://www.cnb.cz/cnb/STAT.ARADY_PKG.VYSTUP?p_period=1&p_sort=2&p_des=50&p_sestuid=58867&p_uka=1%2C2%2C5%2C6%2C7&p_strid=AAABC&p_od=200401&p_do=202107&p_lang=EN&p_for mat=0&p_decsep=.

3 European Commission, 2019 SBA Fact Sheet – Czechia, 2019 1 https://tekdeeps.com/electric-skoda-enyaq-will-cost-over-a-million-czk/ 2 https://www.cnb.cz/cnb/STAT.ARADY_PKG.VYSTUP?p_period=1&p_sort=2&p_des=50&p_sestuid=58867&p_uka=1%2C2%2C5%2C6%2C7&p_strid=AAABC&p_od=200401&p_do=202107&p_lang=EN&p_for mat=0&p_decsep=.

3 European Commission, 2019 SBA Fact Sheet – Czechia, 2019 https://english.radio.cz/czechs-lagging-most-europe-electric-car-charging-stations-8702232 Overall narrative hindering uptake of electric vehicles in the market in CZ is the national focus on natural gas as a „transition fuel“ 1 Transport & Environment 2 NAP CM 3 NECP 4 Prague Plans to Install Over 750 Charging Stations for Electric Cars (praguemorning.cz) 5 European Semester CSR 3, 2019 for CZ 6 Czech Ministry of Industry and Trade, National Action Plan for Smart Grids (NAP SG), 2015 Image: Transport & Environment, ReCharge EU: How many charge points will Europe and its Member States need in the 2020s, 2020 https://www.transportenvironment.org/wpcontent/uploads/2021/07/01%202020%20Draft%20TE%20Infrastructure%20Report%20Final.pdf 1 OECD Environmental Performance Review: CZ 2018 2 Recharge EU, Transport & Environment, 2020 3 Charging Infrastructure in Cities: working paper 2020-17, International Council on Clean Transportation ICCT, 2020

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4 Deliverable C3.8 (Good practices for boosting climate action in CEE), LIFE PlanUp, 2019 1 Transport & Environment, Electric fleets can fuel decarbonization efforts, 2021 2 OECD/ITF, How urban delivery vehicles can boost electric mobility, 2020 1 EV Charging Station Statistics in US, UK, & Europe [2021] (muchneeded.com) 2 Transport & Environment, Charging Infrastructure Report 3 BloombergNEF Electric Vehicle Outlook 2021 4 Transport & Environment, EU takes big step towards making charging anxiety a thing of the past, 2021 EU takes big step towards making charging anxiety a thing of the past | Transport & Environment (transportenvironment.org) 5 Ministry of Regional Devvelopment of the CR, Housing in the Czech republic in Figures (August 2018), web 12.9.18 v 15hod, web (ohchr.org) 6 IDEA study conducted in 2019 by the Institute for Democracy & Economic Analysis in CZ (Elektromobil: nejdříve do vesmíru, do Česka až po slevě - Electric car reaches space, but only makes it into the Czech Republic after a discount) 7 BloombergNEF, Hitting the EV inflection point, 2021 $USD41,737 GDP in 2020 10.6 million people in CZ Czech Republic - OECD Data In the Czech Republic, the average household net-adjusted disposable income per capita is USD 21 453 a year, lower than the OECD average of USD 33 604 a year. But there is a considerable gap between the richest and poorest – the top 20% of the population earn nearly four times as much as the bottom 20%. OECD Better Life Index Czech Republic gdp per capita for 2020 was $22,762 Czech Republic GDP Per Capita 1993-2021 | MacroTrends

Acronyms BAU

Business as Usual

BEV

Battery electric vehicle

BIK

Benefit in kind

CAPEX

Capital Expenditures

CC

Carbon Capture

CCU

Carbon Capture and Use

CCUS

Carbon Capture, Use and Storage

CCS

Carbon Capture and Storage

CCfD

Carbon Contract for Difference

CDA

Carbon Direct Avoidance

CEE

Central and Eastern European region

CEF

Connecting Europe Facility

CF

Cohesion Fund

COM

European Commission

CSP

Clean Steel Partnership

CZ

Czechia / Czech Republic

DNSH

Do no significant harm principle

EA

Emission Allowances

ECSC

European Coal and Steel Community

EED

Energy Efficiency Directive

EIB

European Investment Bank

EPBD

Energy Performance of Buildings Directive

ESF+

European Social Fund

ESIF

European Structural and Investment Funds

ERDF

European Regional Development Fund

EU ETS

EU Emissions Trading System

GBS

Green Bond Standard

H2

Hydrogen gas-powered vehicles

ICE

Internal combustion engine

IEA

International Energy Agency

JTF

Just Transition Fund

LTRS

Long-term Renovation Strategy

MFF

Multiannual Financial Framework

MoIT / MPO

Ministry of Industry and Trade

MWt

Megawatt thermal

NACE

Nomenclature of Economic Activities

NECP

National Energy and Climate Plans

NG

Natural Gas (fossil gas)

NGEU

Next Generation EU

OPEX

Operating Expenditures

PHEV

Plug-in hybrid electric vehicles

R&D

Research and development

RRF

Recovery and Resilience Facility

RRP

Recovery and Resilience Plan

SMEs

Small and medium-sized enterprises

TA

Technical Assistance

TCP

Technology Collaboration Programme

TEN-E

Trans-European Networks for Energy

TEN-T

Trans-European Transport Network

TJTP

Territorial Just Transition Plan

TWh

Terawatt hours

VAT

Value added tax

ZEV

Zero-emission vehicle

Definitions Agrivoltaics

Blast Furnace

This technology generates renewable electricity through large ground-mounted photovoltaic systems installed on farmland that is simultaneously used for food production. It has the potential to reduce land competition through a dual use of the land. With a suitable technical design, agrivoltaics can increase resilience of crops and agricultural yields beyond just improving land use efficiency.

BF

Blended Finance Instruments

Integrated blast furnace is a type of metallurgical furnace used for smelting to produce industrial metals, generally pig iron, but also lead or copper.

The strategic use of finance to attract or mobilize additional funds through other EU financial instruments, member state co-financing, or private sector investment to achieve policy objectives. Instruments are often designed to provide financial safety nets or hedge certain risks through e.g. credit insurance facilities.

Building-integrated photovoltaics

BIPV

Building components which fulfil classic functions such as thermal insulation, protection against wind and weather or also architectural functions, in addition to generating electricity.

Basic Oxygen Furnace

BOF

A vessel used to convert pig iron into steel

Building Performance Institute Europe

BPIE

A thinktank on the sustainability and decarbonization of the building sector, founded by the European Climate Foundation and partly funded by Horizon.

Battery Electric Vehicle

BEV

Also called, all-electric vehicle, only electric vehicle, pure electric vehicle, or zero-emission vehicle (ZEV). BEVs use chemical energy stored in rechargeable batteries without secondary sources of propulsion. They do not use internal combustion engines (ICEs) but electric motors or motor controllers. Often BEV refers to light-weight automobiles, but can also include bikes, vans, trucks, etc.

Business-As-Usual Scenario

BAU

A baseline scenario that examines the consequences of continuing development of current trends in e.g. the economy, demographics, technological innovation, climate change and human behaviour. Often refers to an outcome of a scenario analysis, e.g. as a contrast to the outcomes of EUCO scenarios.

Carbon contracts for difference

CCfDs

CCfDs are policy instruments for supporting the deployment of new ultra-low carbon projects by ensuring a guaranteed carbon price to make up the cost-difference relative to a reference technology. They can be designed to reduce the up-front investment cost for

developers, give creditors a higher security for their loans and minimize the downstream costs for consumers. CCfDs work to accelerate R&D and ensure new innovative low carbon/deep decarbonization technologies become commercially viable sooner relative to conventional technologies and have a shorter time period required for commissioning.

Carbon pricing Carbon capture, utilization and storage

Putting a price on carbon that captures the external costs caused by their emissions. Carbon prices can be set via taxation or cap-and-trade schemes.

CCUS

Circular economy

Carbon capture and storage (CCS) and carbon capture and utilization (CCU) technologies that aim to capture CO2 emissions from point sources, such as industrial sources, to prevent emissions from entering the atmosphere.

The purpose of a circular economy is to decouple economic growth from the consumption of non-renewable resources. It is a method of economic development that benefits enterprises, society and environment because of its restorative and regenerative characteristics. The circular economy can be achieved via new resource management systems, nutrient flow systems and reverse logistics systems, which makes it possible to return, classify and reuse products. A circular economy follows the 3R principle of Reducing, Reusing and Recycling materials.

Cleaner Transport Facility

CTF

Initiative of the EIB to support the funding of the development and deployment of cleaner vehicles and their needed infrastructure. It is a one-stop shop that provides technical assistance and access to transport-related loans of the EIB itself and grants, loans, debt guarantees of CEF, TEN-T, Horizon and through JASPERS (technical assistance) and ELENA (technical assistance).

Combined heat and power

CHP

Also known as cogeneration, this implies that heat and electricity are produced simultaneously in one process. Use of combined heat and power helps to improve the overall efficiency of electricity and heat production as these plants combine electricity production technologies with heat recovery equipment.

Component (RRF context)

Recovery and Resilience Plans should be composed of reforms and investments grouped into components. A component is a constituent element or a part of the RRP. Each component should reflect related reform and investment priorities in a policy area or related policy areas, sectors, activities or themes, aiming at tackling specific challenges, forming a coherent package with mutually reinforcing and complementary measures.

Concessional loans

Also known as “patient debt”, these are loans that allow more flexibility on the part of the borrower, often in terms of longer maturities, longer grace periods, lower collateral requirements, subordinated debt or technical assistance. Concessional loans are often issued by financial non-governmental organizations or development banks as opposed to commercial banks.

Deep renovation

Achieve a 60% reduction of energy demand in a given building, as compared to 30% for shallow renovations and 40% for medium renovations.

Digital target (RRF context)

Each Recovery and Resilience Plan should allocate at least 20% of the total plan allocation to digital measures.

District heating system

DH

A system where heat is distributed from a central point through a network of insulated pipes fed by various heat sources, such as heat from heat and power plants, excess heat from industry, and heat from fossil combustion. In the future, district heating may be fed by heat and power plants fuelled by (sustainably produced) biomass, surplus heat from industry, and a combination of other renewables such as solar, geothermal, or heat pumps.

Do it yourself (building renovation context)

DIY

The DIY market aims to help customers improve their home without the need for any extra professional help. Oftentimes, these renovations are shallow, low-quality, step-by-step renovations that do not make a substantial difference in lowering energy use of a home.

Do no significant harm principle

DNSH

Principle under the EU Sustainable Finance Taxonomy: there are six environmental objectives to which no significant harm should be done: (i) climate change mitigation, (ii) climate change adaptation, (iii) water and marine resources, (iv) the circular economy, (v) pollution prevention and control, and (vi) biodiversity and ecosystems. For the RRF, technical guidance has been published on the application of the principle.

Direct Reduced Iron

DRI-C/H

Iron ore in the form of lumps, fines or pellets that has the oxygen removed by using hydrogen (H) or carbon monoxide (C)

Electric Arc Furnace

EAF

A furnace that heats material by means of an electric arc, especially for steel-making

Energy Service Company

ESCO

Companies that supply and install equipment that incur energy savings. ESCOs can also arrange the financing of their operation, sometimes tying their level of success to their renumeration.

EURO 7

European emissions standards for petrol and diesel cars. Rounds of proposals and feedback have been completed for a revision and Commission adoption is planned for Q4 of 2021.

European Fund for Strategic Investment

EFSI

Also known as the Juncker Plan. Initiative launched in 2015 by the EIB Group and the COM to boost the economy by mobilizing private financing for strategic investments.

European Investment Bank

EIB

The long-term lending institution of the EU; a public bank owned by the 27 member states, shared based on economic weight at the time of member state accession. Its activities are funded via bond issuance in international capital markets.

EU Climate Law European Semester

Aims to write into law the goal set out in the European Green Deal – namely, for Europe’s economy and society to become climate-neutral by 2050.

ES

An annual cycle of coordination and monitoring of the EU’s economic policies and national budgets.

EU Emissions Trading System

EU ETS

A cap-and-trade system administered by the EU. Consists of carbon emissions ceilings (caps) that are lowered over time. Companies can buy or sell emission allowances, trading them when needed.

Electric Vehicle

EV

An electric vehicle uses one or more electric motors for propulsion. Can include only electric motors or battery electric vehicles (see BEV) or combustion motors or plug-in hybrid electric vehicles (PHEV).

Flagship

As used in this assessment context, taken as country-specific recommendations for future key transformative investments and policy reforms that can be used to accelerate climate action

(New) Green Savings Programme

(N)GS

The Czech Ministry of the Environment administers this energy savings program in family houses and apartment buildings funded by the State Environmental Fund of the Czech Republic. It supports the reduction of the energy intensity of residential buildings (complex or partial thermal insulation), construction of houses with very low energy intensity, environmentally friendly and efficient use of energy sources and renewable sources of energy (RES).

Greenhouse gases

GHG

Gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and emit radiation, which together causes the greenhouse effect. Water vapour, carbon dioxide, nitrous oxide, methane, and ozone are the primary GHGs in the Earth’s atmosphere.

Grant

Grants are non-repayable funds that are given from a government, foundation, corporation to a recipient, for specific projects for reimbursement of necessary costs. Grants often require some level of conditions and mandatory reporting of activities and results.

Green hydrogen

Hydrogen that is produced with sustainable energy, most often through electrolysis where water is split into hydrogen and oxygen.

Green Public Procurement

A voluntary instrument streamlining and promoting the sustainable production and consumption of goods and services by the EU’s public institutions with comprehensive and verifiable environmental criteria.

Green Bonds

A fixed-income instrument to finance climate-related or other environmental projects, often linked to specific assets like hydropower projects. The first green bonds were issued by the World Bank in 2009. They are often combined with tax incentives to make them a relatively attractive investment. The sustainability of green bonds is verified by third parties.

Financial Guarantee

A financial commitment of third-party (guarantor) to repay a percentage of losses in case a borrower cannot honour his repayments to a credit provider, both interest and principal components. Guarantees are insurance policies that often allow investors some financial breathing space to invest a larger share of their funds.

Heat pump Investment

HP

Device used to heat or cool building by transferring thermal energy from a warmer to a cooler place or vice versa.

The RRF uses a broad concept of investment as capital formation in areas such as fixed capital, human capital and natural capital. This would also cover for instance intangible assets such as R&D, data, intellectual property and skills.

Internal Combustion Engine

ICE

Heat engine in which the ignition and combustion of and fuel occurs within the engine itself, i.e. with an oxidant (usually air) to convert the energy from combustion chamber that is an integral part of the working fluid circuit. ICE can be powered with fossil fuels, biofuels or efuels.

Important Projects of Common European Interest

IPCEI

Special projects that can promote the innovation of a specific technology up to industrial scale on the basis of a common European interest. This allowance is rather new as innovations are generally only regionally allowed as R&D projects to avoid unfair competition between MS. IPCEI’s are currently limited to microelectronics and batteries but an IPCEI for hydrogen technology is being implemented.

Lead market

In innovation theory, a first sub-market where a specific innovation can be early adopted to spur adoption also by other “lag” markets, e.g. by internationalization. Policies to create lead markets are focussed on creating demand for a specific technology or concept.

Lock-in effects

Lock-in effects come into play when there are substantial costs or other barriers for consumers to get a similar product or service from another vendor. Consequently, consumers or businesses become dependent on one provider. Furthermore, lock-in effects may create serious barriers to market entry, therefore undermining fair competition.

Long-term renovation strategy

LTRS

Strategy enacted by the EU (Directive 2010/31) to support the renovation of Member States’ national stocks of residential and nonresidential buildings, both public and private, into a highly energy efficient and decarbonised building stock by 2050, facilitating the costeffective transformation of existing buildings into nearly zero-energy buildings.

Minimum Energy Performance Regulations

MEPR

Performance requirements for any energy-using technology, effectively limiting the amount of energy that may be used for a particular task.

Minimum Energy Performance Standards

MEPS

Regulations that require buildings to meet a minimum performance standard, specified in terms of a carbon or energy rating or minimum renovation measures, by a certain deadline or at a certain point in the natural life of the building, e.g. at the time of sale or when other construction work is undertaken.

Mobility as a Service

MaaS

Denotes a shift away from personally owned modes for transportation towards shared vehicles that can be booked, planned through joint digital channels. Examples for urban mobility include the business models of companies like Uber and Lyft.

Multiannual Financial Framework

MFF

Also called the financial perspective, the MFF is a 7-year framework regulating the EU’s annual budget by setting ceilings of spending for broad policy themes.

National Energy and Climate Plans NECP

EU countries needed to establish a 10-year integrated national energy and climate plan (NECP) for the period from 2021 to 2030 to show how they meet the 2030 energy and climate targets (within the Energy Union governance).

Next Generation EU

The temporary instrument designed to boost the recovery from the COVID-19 pandemic, includes the recovery and Resilience Facility

NGEU

One-stop shop

A facility or location where a “customer” can get all the help they need in one go to reach a certain goal, delivered by one provider at a clear central location with low administrative barriers.

Plug-in Electric Vehicle

PEV

Includes battery electric vehicles and plug-in hybrid electric vehicles. Road vehicles that be charged with external sources of electricity, stored in battery packages.

Plug-in Hybrid Electric Vehicle

PHEV

Hybrid electric vehicle that uses batteries to power an electric motor and another fuel, such as gasoline, to power an internal combustion engine (ICE).

Power Purchasing Agreement

PPA

PPAs are long-term contract where a business or public entity agrees to purchase electricity directly from an energy generator, with agreed price terms for the sake of financial stability often for a period of 15 to 25 years.

Quasi-equity

Quasi equity instruments are long-term financial instruments, with multiple variants that fall between debt and equity, including subordinated loans, convertible bonds and preferred stocks. Can be more complicated and costly to administer.

Recovery and Resilience Facility

RRF

Makes €672.5 billion in loans and grants available to support reforms and investments undertaken by EU countries with the aim to mitigate the economic and social impact of the coronavirus pandemic and declared objective to make economies and societies more sustainable, resilient and better prepared for the challenges and opportunities of the twin transition

Recovery and Resilience Plan

RRP

Every Member States wishing to access recovery funding under the RRF has to prepare a Recovery and Resilience Plan.

Reform (RRF context)

An action or process of making changes and improvements with significant impact and long-lasting effects on the functioning of a market or policy, the functioning or structures of an institution or administration, or on progress to relevant policy objectives, such as growth and jobs, resilience and the twin transitions.

Renovation Wave

Comprehensive EU strategy put forward by the EC in 2020 to support climate neutrality, economic recovery through actions in building sector with detailed list of policies, measures and tools that must be put in place to overcome existing barriers to renovation and mobilize all actors, including citizens, local authorities, investors and the construction industry. The strategy has a dual ambition of energy gains and economic growth and aims to double annual energy renovation rates in the next 10 years.

Repayment grant

Grant repayment, i.e. if the project achieves a certain energy performance level.

Retrofitting

Process of adding something new to the original building or structure, aiming to improve the functionality of the building by adding new technology, building systems or equipment, such as heating systems, but it might also refer to the fabric of a building, for example, retrofitting insulation or double glazing.

Scenario

Explain use of scenarios?

SECAP

Sustainable Energy and Climate Action Plan; local authorities which join the Covenant of Mayors for Climate and Energy – Europe initiative commit to submitting an action plan within 2 years of sign-up. This action plan is a key implementation tool. It defines mitigation and adaptation goals and is based on a Baseline Emission Inventory and a Risk & Vulnerability Assessment, which provide an analysis of the current situation.

Shallow renovation

A building renovation that is performed quite often (rate of 3%) with an average energy efficiency ambition level reduction of 32% (in energy use for space heating by 2050 compared to 2010), may fail to treat the building envelope as a whole, and includes a low use of renewable energy. This type of renovation misses both environmental targets (CO2-emission and final energy savings) while not providing substantial economic advantage compared to a deep renovation.

Soft Loan

Loans with no interest or below-market rate of interest. May also have lenient terms, such as extended grace periods or interest holidays.

OFten used to encourage investment supporting energy policies and are often complementary to subsidies of fiscal incentives.

Small and medium-sized enterprises

SMEs

SME status depends on both the size and resources of a private enterprise. SMEs have a workforce of under 250 people and have either an annual turnover lower than €50 million or a balance sheet total lower than €43 million.

Structural reforms

Structural reforms generally refer to liberalizing economic structures in the national context, including making labour markets more adaptable, liberalizing services, altering taxation systems and restructuring the welfare state.

EU Taxonomy for sustainable activities

The EU Taxomony regulates a sustainability-related classification system of financial products. Providers of financial products and services need to use the taxonomy to report the sustainability of their portfolios. To comply with the EU Taxonomy, companies need to prove that their activities make or enable a “substantial contribution” to climate mitigation or adaptation and fulfil the do-no-significant-harm principle for biodiversity, water, the circular economy and pollution targets.

Territorial Just Transition Plans

TJTP

Central element of the EU Just Transition Mechanism, which defines territories in which the Just Transition Fund will be used and outlines challenges in each territory, development needs and 2030 targets.

Total cost of ownership

TCO

The total cost of ownership of a vehicle is typically calculated for financial purposes by companies to determine the direct and indirect costs of owning the vehicle. In this case, it includes the purchase price of the vehicle plus the costs of operating it over an expected period of time.

Twin transition

The green transition and digital transformation

Trigger points (for renovation)

Key moments in the life of a building (I.e. rental, sale, change of use, extension, repair or maintenance work) when carrying out energy renovations would be less disruptive and more economically advantageous than in other moments. Taking advantage of these moments would facilitate investment decisions to undertake energy renovation works.

Trans-European Transport Network

TEN-T

A planned network of roads, railways water infrastructure and airports across Europe, with ten core networks to be completed in 2030 and a larger comprehensive network to be completed in 2050. The ultimate purpose of the network is to ensure the cohesion, interconnection and interoperability of the trans-European transport network, as well as access to it.