Ministry: Shale oil plant not grounds for withholding JTF support

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Eesti Energia/Enefit model Source: Siim Lõvi /ERR

The Ministry of Finance finds that the rules of the EU Just Transition Fund (JTF) aimed at moving away from carbon-intensive industry do not provide direct grounds for leaving Estonia without support should Eesti Energia go ahead with its planned shale oil plant project.

"The ministry finds that JTF rules do not include direct legal grounds for depriving Estonia of the instrument," Kadri Tali, head of the ministry's foreign resources service, told ERR.

She added that Estonia has joined the EU climate neutrality target and set the same goal on the state level. "The coalition has decided that Estonia will stop generating power from oil shale by 2035 at the latest and drop oil shale energy altogether by 2040. The Just Transition Fund forms an important part of funding possibilities to facilitate the shift. We are aware of the Commission's plan to raise this issue, and I'm sure Estonia will have to give thorough answers in terms of how we plan to hit our climate targets, our transition and exit from oil shale energy," Tali explained.

A European Commission representative said this week that national energy company Eesti Energia's new shale oil plant could jeopardize JTF support for Estonia in the total volume of €340 million.

"Negotiations between the Commission and Estonia regarding the just transition plan for Ida-Viru County are underway in which context Estonia has not informed the Commission of its potential investment into a new shale oil plant. Such an investment plan would raise questions in terms of green transition that could affect the Commission approving the just transition plan, which is what we are about to discuss," Vivian Loonela, spokesperson for the EU Green Deal, told ERR. The plan needs to be approved by the Commission for Estonia to be eligible for support.

Tali said that Estonia presented its energy and climate plan to the Commission in December of 2019 and that it included the shale oil plant as a possibility. "The European Commission has seen the plan and provided its assessment in October of last year. It is important to note that using JTF sums to finance the construction of the plant is out of the question," the ministry representative said.

Asked whether the ministry believes the shale oil plant is compatible with JTF goals, Tali said: "The plant would definitely not qualify for Just Transition Fund support, and applying for funding from there has never been the plan. When the construction of the plant was decided in the spring of 2020, it was seen as an intermediate stage in the transition of the oil shale sector and the oil shale exit."

She also emphasized that JTF rules provide that all member states that have prioritized climate neutrality by 2050 on the EU level can use all of their allocated resources. Considering the fact that Estonia has adopted this goal, the ministry concludes there are no grounds for cutting Estonia's €340 million support sum.

Prime Minister Kaja Kallas (Reform) said on Thursday that the planned shale oil plant must not become a touchstone for Estonia on the road to JTF support.

"Basically, no plant can be allowed to be a condition or problem in terms of utilizing JTF sums. Because the point of the Just Transition Fund is to facilitate a developmental leap in the area, to attract new investments, make the region greener alongside our energy portfolio," Kallas said at the government press conference on Thursday. "That is my personal opinion. I think that the Just Transition Fund must not be jeopardized in any way," the PM said, adding that she has been very skeptical of the shale oil plant from the first.

Head of the Center Party government delegation, Minister of Public Administration Jaak Aab said on Friday that he does not see shale oil plant as an obstacle when it comes to JTF support.

The plant is set to be completed in 2024 and reach peak power a year later. The investment totals €286 million.

The Enefit plant would yield 268,000 tons of liquid fuels a year. Eesti Energia CEO Hando Sutter has said that the new plant would increase the company's annual oil production to over 700,000 tons a year – the average price of liquid fuels in 2019 would yield the national energy giant sales revenue of €250 million a year.

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Editor: Marcus Turovski

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