Minister: Planned oil shale plant shouldn't fall foul of EU state aid rules

Jaak Aab.
Jaak Aab. Source: Ken Mürk/ERR

State aid for a proposed oil shale plant in eastern Estonia should tick all the boxes despite concerns enumerated by a recent National Audit Office (Riigikontroll) report, Minister for Public Administration Jaak Aab (Center) says. Concerns have been raised that the plant's construction would run counter to European Union climate change goals, not to mention its state aid rules.

Speaking to ETV news show "Aktuaalne kaamera" (AK) Friday evening, Aab said that. "When this decision was made last year, there was no state aid problem. It is not very likely that it will be stated retrospectively that this state aid is no longer legally okay. It is probably okay."

Litigation involving environmentalists had also hindered progress of the proposed plant, but the audit office concerns have brought a new dimension to the affair.

Aab said the issue of state aid in relation to the plant can be checked, adding that the main criterion under consideration is that the oil shale plant be cost-effective.

Aab, who has deputized for Prime Minister Kaja Kallas (Reform) and whose remit as public administration minister focuses mainly on regional policy and development said that: "If the climate-energy package policy and proposals, and those of [EU] CO2 trade and free allowances which have now been made should affect these different options - of course, Eesti Energia should recalculate things," he said.

Former national air carrier Estonian Air folded in 2015 after state aid it had been granted was ruled by the European Commission to have been given illegally, meaning it had to be returned.

The state opted to boost energy giant Eesti Energia's share capital by €125 million, to help with getting things moving on the plant – which carries an estimated price tag of €300 million.

At the same time, the government supports the EU's green turn – which does not find favor with oil shale as an energy source – while the price of EU Allowances (EUA) on the EU Emission Trading System has risen significantly since last year, and the EU has fleshed out its climate change goals more fully with a recently-announced package.

Auditor General Janar Holm also expressed concern over the missing of a deadline put in place by the previous administration, by which time the finance ministry should have provided detailed financials for the proposed plant.

Holm has addressed acting finance minister Maris Lauri on the issue.

The oil shale industry – from its mining through to refining and production of by-products, not to mention energy generation including electricity and heating water, dominates Ida-Viru County in northeast Estonia and has its roots in the first period of Estonian independence – when a method of extraction known as the Kiviter process was developed.

During the Soviet time and in the years immediately following independence, the industry provided jobs, as well as relatively cheap electricity – not to mention the bulk of the country's power needs.

It has also left behind it a changed topography, mainly the result of the numerous slag heaps to be found – which sometimes find new uses as, for instance, motocross or skiing – as well as the large reserves of contaminated water, which can also find potential secondary industrial uses.

In addition to meeting short-term challenges as a result of the pandemic, the sector has since fallen out of favor as not being environmentally friendly, and things have moved on to the extent that even burning wood offcuts in plants – which in the 1990s would have constituted a renewable energy source – is also not in line with climate goals on the part of the EU.

The issue carries with it a political dimension; the Center Party had long been dominant in the region but support has been ebbing in recent years, manifesting itself more in low voter turnout than in switching to other political parties en masse.

Aab's role as public administration minister falls under the finance ministry's governance.


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Editor: Andrew Whyte

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