A carbon-intensive energy system in the Czech Republic contributes to one of the highest ratios of greenhouse gas (GHG) emissions in the OECD. While EU emission reduction commitments provide the most visible and binding motivation for changing the way in which the country produces and uses energy, action is also required to improve energy security and public health and to avoid an adverse impact of emission reduction on economic growth and living standards. Energy system transformation requires ensuring a comprehensive, consistent and stable policy framework with stronger ex ante and ex post evaluation. A single carbon price should be achieved through the Emission Trading System (ETS) and carbon taxation. Excise tax rates on all fossil energy sources and products should be realigned, based on their carbon content and other environmental externalities, notably by increasing the relative taxation of diesel. The authorities should support implementation of carbon taxation at the EU level. Sectoral policies that complement carbon pricing in promoting greener energy sources, energy efficiency and less fuelintensive transport need to be strengthened. The most important measures include rebalancing support for renewable energy, streamlining energy efficiency support programmes, upgrading the transport infrastructure, increasing the attractiveness of public transport and stimulating the renewal of the road fleet.