Baltic Team
1 August 2019

Estonia’s climate policy in light of the European Union’s 2050 climate neutrality (Aleksandra Kuczyńska-Zonik)

Estonia’s climate policy in light of the European Union’s 2050 climate neutrality (Aleksandra Kuczyńska-Zonik)

Estonia has been objecting to the EU’s 2050 climate neutrality strategy. The country’s decision-makers argue that the EU member states ought to enjoy enough flexibility as to select domestic instruments of climate policies in relation to the level of the country’s development and social justice. The issue revolves around Estonia being able to introduce incremental changes while maintaining the competitiveness of the country’s economy which pivots around the extraction of oil shale whose processing entails high CO2 emission. Estonia’s prospective position towards the EU’s climate strategy will be determined by the results of analyses outlining solutions offering the capability to shift to climate-neutral economy in the country. These are to be presented to the government in the autumn of 2019.

Oil shale is a type of sedimentary rock containing high volumes of bitumen. The substance is processed to obtain liquid hydrocarbons, the so-called shale oil, whose chemical composition, properties and application resemble those of crude oil. Estonia is the largest processor of oil shale worldwide (70% of global oil shale extraction). The shale is processed to generate 90% of Estonia’s electric energy. This makes the country the least dependent upon imported fuels when compared with the remaining EU member states.

Estonia’s objective in the climate policy is to be a competitive economy with low CO2 emission. There exist ambitious plans in the country to shift to low-carbon economy in the long-term perspective. This entails a three-stage reduction of greenhouse gasses (GHG): by 70% up to 2030, by 72% up to 2040, and ultimately by 80% up to 2050, all in relation to the 1990 level. Moreover, in accordance with the National Development Plan of the Energy Sector, the share of renewable energy sources in the domestic energy consumption and production is to be increased to 50% by 2030. 

Estonia supports the EU’s climate policy, as well as any action towards reducing GHG emission and implementing environment-friendly technologies. However, during the latest European Council summit (20 June 2019), Estonia, much like Poland, the Czech Republic and Hungary, opposed the EU 2050 climate neutrality strategy. Despite objections towards the original regulations, the country would be willing to adopt less strict terms. Estonia is in favor of the pursuit of climate neutrality (the “pursuit” of neutrality denotes that the term “achievement of neutrality” has not been established yet). However, the country’s decisions are determined by the European Commission’s position, as well as by domestic research results. The analysis commissioned by the Office of Government, on initiative of the Ministry of Environment, is to be completed by October. The analysis will include propositions pertaining to the opportunities and solutions to be applied in the shift to climate-neutral economy.

Climate, economic and social challenges. The reduction of dependence upon oil shale as an electric power resource constitutes a fundamental environmental, economic and social challenge. The shale presents the greatest source of high CO2 emission in Estonia. The country is the second largest CO2 per capita emitter in the EU (14 t CO2/per capita.; EU average amounts to 7 t CO2/per capita). It is also characterized by the highest emission index among the EU’s economies (GHG Intensity of Economy). According to November 2018 estimates by the Viru Keeia Group (VKG), an Estonian energy company, the reduction in the oil shale extraction would result in an increase in the price of electric energy. In addition, it would lead to the decline in tax payments and Estonia’s export revenue which currently amounts to approx. 100-150 million EUR. The decline in the competitiveness of oil-shale-based energy, in relation to the one imported from Russia due to Estonia’s climate-related obligations, is already visible. Moreover, significant social cost is associated with the extraction of oil shale. The largest oil-shale-fired power plant is located in the north-eastern region of the country (Ida-Viru). Russian-speaking citizens compose 77% of the region’s population. They are under the most significant threat of poverty and unemployment. Strong air, soil and water pollution has been observed in the region for years. In addition, the citizens suffer from respiratory and circulatory conditions. On the other hand, any cuts in the extraction may result in the disappearance of approx. 13 thousand jobs in the region and extensive costs associated with the reorganization of employment in the energy sector. In face of international obligations concerning climate change and environment protection, oil-shale-based energy production may be reduced, and stronger attention devoted to the development of alternative energy sources.

Significance of renewable energy sources. The exploitation of renewable energy is perceived as a critical element of the EU’s energy policy. It reduces the dependence upon resources imported externally, curbs CO2 emission and separates the cost of energy production from petroleum prices. The significance of renewable energy has been on a steady rise in Estonia. At present, wind energy, and biomass and waste products (41% and 56% respectively) have the greatest share in renewable energy in the country. According to Eurostat, the share of renewable energy in Estonia’s domestic gross consumption in 2015 amounted to 28% and exceeded the EU average (17%). As a consequence, the country ranked among 11 who were able to meet the scheduled 2020 national thresholds for renewable energy in the energy mix. In addition, strong dynamics can be observed with regard to the share of renewable energy in the production of electricity. While in 2010 Estonia produced 10.4% of electricity from renewable sources, in 2017 the share almost doubled to amount to 18%. Still, it is significantly lower than the share in Latvia (52% owing to hydroelectric power plants) and below the EU average (28%).  

Conclusions. Estonia does not question the necessity of changes in the energy sector which emerge from the EU’s energy policy. However, severe dependence upon the high-CO2-emission oil shale in energy production results in the fact that the political, economic and social costs of adaptation may be high. While politicians are in accord as to the general course of Estonia’s climate policy, methods and instruments remain to be decided upon. So far, no political consensus has emerged, and climate policy was not a pressing subject prior to the latest elections to Estonian parliament- Riigikog (3 March). The Estonian Reform Party favors a swift reduction in the oil shale extraction and abandonment of the resource in energy production by 2040. On the other hand, the Estonian Centre Party, being at the helm along with its coalition partners, draws attention to high social cost of restructuring in the mining sector and the necessity of importing electric energy from Russia. The populist EKRE debate on the development of an atomic power plant in the country. Estonia remains a natural ally of Poland in the EU in the matters such as the maintenance of structural funds, development of a uniform market of electronic services, and the development of infrastructural projects enhancing energy security. It seems that until Estonia pursues radical decisions concerning the reduction of CO2 emission, and consequently, lowers the extraction of oil shale, both countries will present a similar position regarding the issue of climate neutrality.