Estonia might lose €340 million EU funding if oil plant project goes ahead

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Eesti Energia's headquarters in Tallinn. Source: ERR

The oil plant planned by Estonia's state-owned energy group Eesti Energia could call into question Estonia's eligibility for €340 million in European Union funding from the Just Transition Fund (JTF).

"Negotiations are ongoing between the European Commission and Estonia on the JTF's Territorial Fair Transition Plan for East-Viru County, in which context Estonia has not informed the Commission about a possible investment in the construction of a new shale oil production plant," Vivian Loonela, spokesperson for the European Commission on the European Green Deal, told ERR on Thursday. 

She said that the plan for such an investment would raise questions about the green transition, which could affect the approval of the Just Transition Plan by the Commission, which is a prerequisite for the disbursement of grants from the fund. The Commission will now discuss the investment with Estonia.

Loonela explained that the approval of the final Territorial Fair Transition Plan (TJTP) for Ida-Viru County requires that investments in the region are in line with the objectives of the JTF and demonstrate a national commitment to the transition to a climate-neutral economy.

The European Union's fund for a just transition, together with the two other pillars of the Just Transition Mechanism, is an essential part of the European Green Deal. The Green Deal is the basis for the EU's 2030 and 2050 climate targets, which call for reducing greenhouse gases and achieving carbon neutrality.

The JTF supports the transition to climate neutrality in the most affected regions -- in Estonia's case, Ida-Viru County.

According to the Commission's explanations, the purpose of JTF funding is to ensure that the transition to a green economy is fair, socially acceptable and inclusive. The main objective of JTF funding is to mitigate the impact of the transition.

"That is why the fund provides funding to diversify and modernize the local economy and to mitigate the negative consequences," said Loonela.

Estonia expects to receive €340 million from the JTF and plans to direct it entirely to Ida-Viru County.

The previous Estonian government decided last year to give Eesti Energia €125 million so that it could build a new shale oil plant. At the beginning of May this year, the Tartu Circuit Court upheld an appeal against a court order by the environmental NGO Loodusvõlu and suspended the building permit granted to the plant until the entry into force of a court's decision.

At the end of May, Finance Minister Keit Pentus-Rosimannus (Reform), in her capacity as the representative of the owner of Eesti Energia, called on the company to suspend the activities related to the construction of the oil plant during the litigation.

The same was said by at Thursday's government press conference by Prime Minister Kaja Kallas (Reform), who also stressed that the oil plant must not become an obstacle to obtaining the grant from the JTF.

Under current plans, the new oil plant is expected to be completed in 2024 and reach full capacity a year later. The investment in the plant is planned to amount to €286 million.

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Editor: Helen Wright

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