Country Profile Estonia

Transcription

1 Review of Status of Emissions Trading Activities in CG11 Countries Miroslav Malý - ENVIROS, Prague Jaroslav Jakubes - ENVIROS, Prague Jiřina Jílková - IREAS o.p.s., Prague Eva Šnajdrová - IREAS o.p.s., Prague Working version for CG11 workshop in Zagreb, Croatia, May 2002 Project No.: ECZ-2024

2 TABLE OF CONTENTS 1. LATEST POSITION WITH REGARD TO RATIFICATION OF THE KYOTO PROTOCOL 2 2. BRIEF DESCRIPTION OF THE ENERGY SECTOR AND STATUS OF ENERGY SECTOR REFORM PRIMARY ENERGY RESOURCES ENERGY UTILITIES, OWNERSHIP AND PRIVATISATION OF POWER SECTOR 2 Power generation, transmission and distribution... 2 Privatisation of power sector... 2 Electricity market liberalisation ELECTRICITY PRODUCTION, CONSUMPTION, IMPORT AND EXPORT STRUCTURE OF INSTALLED CAPACITY AND POWER GENERATION FUTURE INVESTMENT PLANS DISTRICT HEATING / COMBINED HEAT AND POWER TYPICAL ELECTRICITY AND NATURAL GAS PRICES TO INDUSTRIAL AND DOMESTIC USERS 4 3. CURRENT NATIONAL CLIMATE CHANGE RELATED POLICIES ENERGY RELATED TAXES AND SUBSIDIES TRANSPORT POLICIES TECHNICAL STANDARDS AGRICULTURAL POLICIES INFORMATION AND AWARENESS PROGRAMMES ON ENERGY EFFICIENCY 6 4. OPPORTUNITIES FOR COST EFFECTIVE, LOW COST AND HIGH COST GHG EMISSION REDUCTION POTENTIALS 6 5. CURRENT AND FUTURE AVAILABILITY OF DOMESTIC AND INTERNATIONAL CAPITAL FOR ENERGY SECTOR PROJECTS 6 6. ATTITUDE TO FUTURE COMMITMENT PERIODS 7 7. SPECIFIC COMMENTARY ON THE APPROACH IN EACH COUNTRY FOR USE OF FLEXIBLE MECHANISMS 7 8. CAPACITY BUILDING NEEDS WITH REGARD TO CLIMATE CHANGE STRATEGY 7 9. LIST OF THE KEY EMISSIONS TRADING STAKEHOLDERS AND PLAYERS GOVERNMENTAL SECTOR 7 Ministry of Economic Affairs - Energy Department PRIVATE SECTOR (ENERGY AND HEAT PRODUCTION, INDUSTRY, ASSOCIATIONS) NGO S AND OTHERS 8 SEI Stockholm Environment Institute REFERENCES SUMMARY TABLE 9 1 -

3 1. LATEST POSITION WITH REGARD TO RATIFICATION OF THE KYOTO PROTOCOL Ratification of the Kyoto Protocol in Lithuania is in the process. Kyoto target is 8% reduction in comparison to 1990 base year. There are no problems expected with fulfilment of this objective. 2. BRIEF DESCRIPTION OF THE ENERGY SECTOR AND STATUS OF ENERGY SECTOR REFORM 2.1 Primary energy resources Estonia is the only country in the world where oil shale is the key primary source of energy. The structure of Estonia s primary energy sources is given in the following table. The energy sources import dependency of Estonia is approx. 40%. The share of fossil fuels on total primary energy consumption is very high approx. 90%. Table 1: Primary energy sources balance of Bulgaria (1999) in PJ (PJ) Domestic production coal (incl. oil shale) crude oil petrol. products gas nuclear hydro RES + waste electricity heat TOTAL 94,3 21,3 116 net imports 11,5 42,4 24,1-2,1 76 stock changes 3,8-4,4-0,1-1 TPES Source: IEA 2.2 Energy utilities, ownership and privatisation of power sector Power generation, transmission and distribution Prior to 1995, the country's electricity had been produced entirely by Eesti Energia, the state-owned electric company, but in 1996, the first steps towards privatisation were taken with the establishment of the joint-stock company Kohtla-Järve Soojus comprising Estonia's two smaller oil shale-fired power plants, the Ahtme and Kohtla-Järve Power Stations. Currently, Eesti Energia AS is a 100 per cent state-owned vertically integrated public limited company, engaged in power production, transmission, distribution and sales as well as other power-related services. Privatisation of power sector Privatisation in Estonia's energy sector has been continuing, and in June 2000 sold the 49% share in Narva Power Plants consisting of two oil-shale generation plants and supplying together more than 90% of Estonia's electricity, to US company NRG Energy (Eesti Energia will own 51%). Electricity market liberalisation In 2001, the Estonian Government began a phased-in liberalisation of its electricity sector, so as to keep on track for its expected accession into the European Union. In January 2001, new electricity tariffs were established that will allow customers to choose their electricity supplier. In 2001, only the largest consumers using annually more than 40 GWh were eligible. By the spring of 2002, all electricity users will be covered by this liberalisation. As Estonia strives to liberalise its energy market in line with EU directives, the country wants the EU to recognise the importance of oil-shale-fired power generation to its economy. If the local power market 2 -

4 is opened to imported electricity immediately upon the country's entry into the EU (in keeping with the union's competition policy), Estonian officials are worried that it would lead to a steep drop or even a cessation of oil shale-fuelled power generation, creating a social and economic crisis in north-eastern Estonia. As a result, Estonia wants the EU to recognise and to accept that the majority of the country's electricity will come from oil shale-fuelled power plants until at least Electricity production, consumption, import and export In 1999, Estonia's total electricity-generating capacity was 2,7 GW and the country generated 7,8 TWh of electricity. Although this was more than enough power to supply the country's 7,4 TWh consumption in 1999, the country's net exports (mostly to Latvia, but also to north-west Russia) slipped to just 0.4 TWh. Eesti Energia's preliminary figures for 2000 show Estonia's electricity generation at nearly the same rate as 1999, but with an increase in exports of more than 25%. 2.4 Structure of installed capacity and power generation In 1999, Estonia's total electricity-generating capacity was 3,25 GW. Estonia's two large oil-shale-fired electric power plants in the north-east of the country, the MW Eesti Elektrijaam and the MW Balti Elektrijaam. The two power stations, which together make up the, were built during the Soviet era to supply Estonia and St. Petersburg with electricity. Narva Power Plants currently supply approximately 95% of Estonia's electricity. Although Estonia has a small amount of hydropower and other renewable energy capacity, the power produced at these facilities costs twice as much as the electricity generated at the oil-shale-fired power plants. Picture 1 : Installed Electricity Generation Capacity in Estonia (MW) in 1999 Structure of installed capacity - Estonia (MW) oil shale gas oil Source: DOE/EIA 3 -

5 Picture 2 : Structure of power generation in Estonia in 1999 Structure of domestic power generation - Estonia % 4% oil shale oil and oil products gas nuclear hydro (excl. storage) geothermal / solar / wind biomass / waste 93% Source: DOE/EIA 2.5 Future investment plans NRG Energy and Eesti Energia have agreed on the renovation of Narva Power Plants. In September 2001, Eesti Energia and NRG Energy signed a contract with three international banks for a 14-year, USD 280-million loan to begin renovation of the Narva Power Plants. Two energy blocks at the Eesti and Balti power plants will be renovated by Finland's Foster Wheeler Energia. The renovation should start from the eighth energy block of Eesti Elektrijaam and was scheduled to start in summer In addition, a portion of the loan money will be spent on reconstruction of Eesti Polevkivi oil shale mines. 2.6 District Heating / Combined Heat and Power At present, the energy sector is characterised by the large share of district heating and large share of co-generation for district heating. The district heating market share is approx. 52 % and in large towns, it is close to 90 %. Coal had been used for district heating in many towns in former days, but it has been largely replaced by natural gas imported from Russia. Currently, over 90% of the heat for Estonia's district heating stations comes from natural gas. Share of CHP heat in total heat production is about 20-25%. Iru SEJ is a natural gas-fuelled combined heat and power (CHP) plant which provides district heating and electricity for the city of Tallinn. During the fiscal year of April 2000-March 2001, the Iru power plant produced 424 GWh of electricity and GWh of heat. Located in north-eastern Estonia, AS Kohtla-Järve Soojus has the country's second-largest district heating network and is the third-largest electricity producer and heat seller. The company owns the CHP facilities at Kohtla-Järve and Ahtme and also the district heating networks in those two cities. The Kohtla-Järve power plant was originally part of Eesti Energia but left their purview when Kohtla-Järve Soojus was formed in Both the Kohtla-Järve and Ahtme CHP facilities burn oil shale for fuel. 2.7 Typical electricity and natural gas prices to industrial and domestic users The following table gives a brief review of average electricity and natural gas prices for households and industry in Romania in

6 Table 2: Average end-user electricity and natural gas prices in Romania (USD/kWh) electricity natural gas year households industry households industry ,0126 n/a ,0127 0, ,0127 0,0082 2Q/2001 0,040 0,079 0,0189 0,0139 Source: IEA, International Gas Union 3. CURRENT NATIONAL CLIMATE CHANGE RELATED POLICIES Estonia is preparing the National Programme for the Reduction of the GHG Emissions, which is expected to be ready by the end of Energy related taxes and subsidies In Estonia, excise taxes are imposed on most of the energy products, the rates (in Euro) are summarised in the following table, together with VAT rates. Both taxes are the revenue rising type and the revenue goes into the central budget. Objective of the tax Excise tax rate VAT rate Unleaded petrol 223 EUR/kl 18% Diesel 165 EUR/kl 18% Diesel for special purposes 32 EUR/kl 18% Liquified gas (as propellant) 96 EUR/t 18% Compressed gas (as propellant) 83 EUR/t 18% Light fuel oil 32 EUR/kl 18% Aviation petrol 96 EUR/t 18% Other energy products such as heavy fuel oil, coal, coke, natural gas, and electricity are subject to 18% VAT rate. District heating is a subject to 5% VAT rate. In Estonia, there are plans to introduce a CO 2 tax. Estonia also uses a CO 2 emission charge, imposed on CO 2 emissions from combustion plants over 50 MW, the revenue goes into the central budget and is earmarked for environmental protection. 3.2 Transport policies The following CHG mitigation policies are priority ones in Croatia: Quality equirements for liquid fuels Requirements for transport and storage of petrol Motor Vehicles Excise Act Heavy Goods Vehicle Tax Act In March 1999 the Government approved the Development Plan of the Transport Sector for As to the environment, it is stated that the general aim is retarding the growth of absolute amounts of all damaging emissions from transport. The next step should be to stop the growth at a certain level (e.g. starting from 2003), followed by later emission reduction. The use of leaded petrol and diesel with sulphur content higher than 0.05% must end starting from

7 3.3 Technical standards Introduction of labelling of energy equipment and its efficiency standards is in progress in Estonia. 3.4 Agricultural policies Agricultural GHG emission covers about 6-7% of the total GHG emission in Estonia. The Rural Development Plan (RDP) has been drafted in accordance with the programming requirements of Article 4 of Council regulation (EC) No 1268/1999. The Regulation lays down the framework for pre-accession assistance to agriculture and rural development (SAPARD) in the Central and Eastern European Countries for the period This Programme has been prepared by the Ministry of Agriculture in co-operation with other state agencies and co-ordinated with various nongovernment institutions. 3.5 Information and awareness programmes on energy efficiency The Energy Conservation Division within the MoEA was established in order to coordinate the conservation of energy and the environment in Estonia. At present, the Energy Act and the Construction Act are in the process of amendment to cover the targets set in the European Union Directive 93/76/EEC. An expert group at the MoEA has currently established the new Energy Conservation Program (draft from May 24, 1999), which was adopted by the Government in January The MoEA determines the role of different institutions and ministries in the implementation of the Energy Conservation Program. 4. OPPORTUNITIES FOR COST EFFECTIVE, LOW COST AND HIGH COST GHG EMISSION REDUCTION POTENTIALS The following types of projects gave been focused on AIJ pilot phase: Conversion of heat production plants from fossil fuels to the local bio-fuels; Reduction of heat losses in district heating systems; Energy efficiency in the end-use within buildings; These types have still substantial potential for further implementation, a new focus should be given to renewable energy. During the AIJ pilot phase, the average investment cost per ton of CO 2 were EUR 20 / ton. Average consultancy costs were EUR 5.3 / ton of CO CURRENT AND FUTURE AVAILABILITY OF DOMESTIC AND INTERNATIONAL CAPITAL FOR ENERGY SECTOR PROJECTS Estonia is one of the most advanced transition countries in central and eastern Europe. Ever since restoring independence, reform-minded governments have energetically implemented comprehensive reforms, creating one of the most consistently open-market-oriented economies and favourable investment climates in eastern Europe. With the abolition since January 2000 of taxation on corporate profits reinvested in Estonia, the country became even more attractive for foreign enterprises. Legislation is compatible with OECD countries and is being further streamlined in accordance with EU directives. As a result, Estonia has attracted among the highest rates of foreign direct investment per capita in the region. Estonia actively pursues regional cooperation with the other Baltic and Nordic countries and has enjoyed considerable investment from the latter. 6 -

8 6. ATTITUDE TO FUTURE COMMITMENT PERIODS There is no official position to future commitment period. 7. SPECIFIC COMMENTARY ON THE APPROACH IN EACH COUNTRY FOR USE OF FLEXIBLE MECHANISMS In the National Programme, which is currently under preparation, the chapter on flexible mechanisms is envisaged. Estonia is currently having negotiations with Finland, Netherlands and Germany to conclude Memorandums of Understanding or JI agreements. Estonia already has some experience in the AIJ phase with Sweden. Estonia is not yet involved in emissions trading. 8. CAPACITY BUILDING NEEDS WITH REGARD TO CLIMATE CHANGE STRATEGY In the area of capacity building needs the high priorities are theoretical issues related to JI and emissions trading, identification and preparation of JI projects, policy design and institutional issues related to emissions trading, data collection and development of national emissions factors. However, general awareness to climate change issues, national registry and preparation of a national emission reduction marketing strategy can also be seen as priorities. 9. LIST OF THE KEY EMISSIONS TRADING STAKEHOLDERS AND PLAYERS 9.1 Governmental sector Ministry of the Environment Toompuiestee 24, Tallinn, Estonia Mr. Andres Kratovits tel.: (0) ; fax (0) ; andres.kratovits@ekm.envir.ee Mr. Peeter Eek tel: ; fax: Ministry of Economic Affairs - Energy Department Harju tn 11, TALLINN, Estonia Mr. Einari Kisel, Deputy Head of Division tel.: ; fax: ; EKisel@mineco.ee 9.2 Private sector (energy and heat production, industry, associations) EPHA - Estonian Power and Heat Association Pärnu mnt 139C1, Tallinn, Estonia Mr. Anu Keskpaik tel. (0) ; fax: (0) ; anu.keskpaik@online.ee Eesti Energia AS 7 -

9 Laki st.24, Tallinn Estonia tel.: ; fax ; web: NGO s and others SEI Stockholm Environment Institute Office address: Lai St. 34, Tallinn Postal address: Stockholm Environment Institute Tallinn Center, Box 160, Tallinn, Estonia Mr. Tilt Kallaste, Programme Director - Atmosphere, Climate Change and Energy tel.: ; fax ; tiit@seit.ee Tallinn Technical University Ehitajate tee 5, Tallinn, Estonia tel.: ; fax: ; teab@edu.ttu.ee; web: REFERENCES 1. Acosta, R.: Guidelines for Reporting and Review GHG Inventories under the Convention and Guidelines under Article 5.1 of the Kyoto Protocol (Presentation at the workshop "National Systems for Flexible Mechanisms: Implementation Issues in EIT Countries" - Szentendre, Hungary, May 2002); UNFCCC secretatiat DOE Fossil Energy International Activities website ( 3. EIA/DOE Country analysis briefs website ( 4. Energy balances of non-oecd countries (2001 edition); OECD/IEA Paris, Energy statistics of non-oecd countries (2001 edition); OECD/IEA Paris, Estonia s Third National Communication under the UN Framework Convention on Climate Change, Ministry of the Environment of Estonia, November Key World Energy Statistics from the IEA Edition, OECD/IEA Paris, Speck, S., McNicholas, J. and Markovic M.: Environmental Taxes in an Enlarged Europe An Analysis and Database of Environmental Taxes and Charges in Central and Eastern Europe. Regional Environmental Centre, Szentendre, Hungary, October World resources Institute website Climate and Atmosphere country profile 8 -

10 11. SUMMARY TABLE Country Estonia Date of Ratification of Kyoto Protocol in progress Kyoto Preparation (Yes/No) National Communication in CRF yes National Registry no Monitoring and Verification Protocols no JI Projects Office yes Climate Change Policies (Yes/No) National GHG mitigation strategy included in yes national communications Carbon taxes ($/tonne) 0 Electricity taxes ($/kwh) 0 (VAT 18%) Renewables taxes ($/kwh) 0 Energy Sector subsidies for fossil fuels 0 Energy Sector subsidies for renewable 0 energy Programmes to raise awareness and promote yes energy-efficiency Performance Standards yes Energy and GHG Emissions Intensity of Economy (1999) CO 2 Emissions (Mt of CO2) 14,70 TPES/capita (toe/capita) 3,16 TPES/GDP (toe/thous USD) 0,80 Elec. Consumption / capita (kwh/capita) CO 2 / TPES (t CO 2 /toe) 3,22 CO 2 / capita (t CO 2 /capita) 10,19 CO 2 / GDP (kg CO 2 /1995 USD) 2,58 Opportunities for low and high cost GHG Conversion of heat production plants from fossil fuels to reduction JI projects (best sectors) biomass Reduction of heat losses in DH systems; Energy efficiency in buildings; Current and Future Level of domestic and international capital for investment in the energy sector Experience with JI (e.g World Bank PCF, Erupt etc ) Experience with international emissions trading (any deals brokered?) Experience with emissions trading (policy studies, discussion documents) Establishment of Registry (work underway or not yet started?) Policies on Allocation of Surplus (work underway or not yet started) Attitude to future commitment periods of KP (no discussion or some discussions) experience in the AIJ phase with Sweden The policy framework for JI starting to be developed No MOUs signed yet, negotiations with Finland, Netherlands and Germany ET Scheme yet to be developed/approved by Estonian Govt. not yet involved in emissions trading National Programme under preparation - chapter on flexible mechanisms envisaged no no no official position highlighted data to be checked/updated 9 -