The Czech government approved a plan on Wednesday to allocate a part of carbon dioxide emission allowances for free to electricity producers in 2013-2020 and will raise energy taxes to make up for the lost revenue.
The plan marks a compromise among the finance, industry and environment ministries following a row over the free allocations.
It will give majority state-owned utility CEZ around 78 million free credits.
Environment Minister Tomas Chalupa, announcing the move, said the recipients of free permits must invest in environmental improvements.