Estonia supports the stability and predictability of the unit price of emissions

"The European Union's emissions trading system has been the cornerstone of European climate and competitiveness policy for over 20 years. It has justified itself. Emissions have decreased strongly and will continue to decrease, the economy has grown and Europe's dependence on imported fossil fuels has decreased. It is in the interest of energy security growth and a stable economy that the emissions system should continue to be reliable and as predictable as possible for companies," said Minister of Energy and Environment Andres Sutt. "Companies must have the time and opportunity to invest in cleaner technologies, without sudden price jumps or too quickly decreasing support damaging their competitiveness."

The European [EC1][EC2] Commission proposed to change the calculation basis for the heat and fuel processes of the units that can be allocated free of charge for the years 2026-2030. The purpose of the change is to mitigate the growth of costs and support the competitiveness of European companies in a difficult economic situation. Companies want to be given more opportunities to invest in cleaner and lower emission production. If according to the original methodology the number of free units would have decreased by approximately 34%, with the change the decrease would be approximately 18%. Estonian production companies, which are part of the emissions trading system, win an estimated total of 20,000 free units, or approximately 1.5 million euros per year.

Estonia requests that the oil shale sector be included in the renewal of heat and fuel benchmarks. It supports Ida-Virumaa's fair and smooth transition to a cleaner economy.

After 2030, one of the most important changes is slowing down the pace of emissions reductions: while the current directive would see the addition of new units to essentially zero around 2039, the proposal would extend the trajectory to around 2047-2048. up to a year. Estonia supports the continued reduction of emissions, but considers it important that its pace is consistent with the possibilities of introducing cleaner technologies.

It is important for Estonia that the allocation of free units continues in sufficient volume until companies are able to make their production cleaner. The purpose of the free units is to enable companies to make the investments necessary for the transition in a situation where the next technology that significantly reduces emissions is not yet market-ready. For example, in the shale oil industry, further significant emission reduction requires the use of carbon capture and storage technology, which is not yet economically viable or widely used. Therefore, Estonia considers that such an industry must be granted an exception, so that the receipt of free units continues in sufficient volume even after 2030. Also, companies that have already invested in reducing emissions must not be in a worse situation - they must also be able to receive free units after 2030.

Estonia also considers the stability and predictability of the unit price of the emissions system to be important. The Commission's proposal includes market stability measures, but Estonia wants a more efficient mechanism that would allow additional units to be brought to the market if the price rises too quickly or if a certain price threshold is exceeded. This would reduce sudden price jumps and give companies more confidence to make investments.

The third important issue is the auction revenue from the trading of greenhouse gas emission units of the member states. The proposal envisages new central funding, financing the Commission's administrative costs and reserving units, which would result in less revenue for Member States. Estonia does not support redistributions at the expense of member states' income in the scope proposed by the European Commission and considers it important to maintain sufficient flexibility for countries in the use of their auction income. These funds allow countries to invest in emissions reductions, cleaner energy, energy efficiency and other solutions that support a green economy.

In the case of new financial instruments, including the investment accelerator, their volume, conditions and impact on member states' revenues must be specified. It is important that smaller economies and countries with a smaller industrial base also have real access to central EU funding. The system must also recognize countries and companies that have already significantly reduced emissions.

The European Commission's proposal is to extend the emissions trading system to smaller ships and the incineration of household waste. In maritime affairs, it is important for Estonia to consider inter-island connections and ice conditions. A double burden on companies must also be avoided if international measures are agreed to reduce maritime emissions. In the case of waste, according to Estonia, already implemented national measures must be taken into account, including environmental and carbon dioxide fees applicable in Estonia.

Estonia has been a net beneficiary of the emissions system. Since 2013, Estonia has received more than 2.3 billion euros in revenue from the auction of CO₂ units, which has been used, among other things, for the development of public transport and railways, making buildings more energy efficient and supporting renewable energy.

Communications Office, State Chancellery

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