"The European Union must reduce net emissions of greenhouse gases by at least 55 percent compared to the level in 1990 by the year 2030. This also requires transport to be taxed in a way to promote more sustainable options," the center's expert Magnus Piirits said.

The overview shows that while transport taxes made up 1.1 percent of tax revenue on average in the EU in 2019, it was just 0.1 percent in Estonia.

The green turn also requires renovation of buildings to bring down energy costs," Piirits emphasized.

He said that Estonia collects more motor fuels excise duty and resource and pollution fees than other EU member states. "For example, in 2019, fuel excise duty made up 6.1 percent of total tax receipt, while the EU average came to around 3 percent. Gasoline and diesel account for 92 percent of motor fuel excise duty receipt, while their use is forecast to fall," Piirits said.

"A Foresight Center forecast suggests that gasoline and diesel excise duty receipt will fall by around €100 million in current prices by 2030 due to the advent of electric vehicles," he added.

Tax revenue from power generation falls short of the EU average by three times in Estonia and made up just 0.4 percent of total tax receipt in 2019. "However, a power excise duty hike cannot be facilitated in Estonia as spiking CO2 quota prices have already caused considerable price advance that will likely force people to reconsider their power use," the expert said.

Piirits emphasized that environmental taxes cannot compensate for falling revenue. "Environmental fees cannot be a long-term source of tax revenue – reduction of environmentally harmful activities will quickly translate into falling revenue," he said. "Nevertheless, Estonia will have to go over recent environmental taxes to meet the requirements of the green turn."

The Riigikogu Foresight Center is concentrating, among other things, on "Future-proof tax structure" in 2021, trying to answer the question of how to cover costs in an aging society and the possibilities of changing the tax system over the next 15 years.

The Foresight Center is a think tank at the Estonian parliament; its tasks include analyzing long-term developments in society, identifying new trends and development avenues and drafting development scenarios. The Foresight Center bases its studies on a variety of possible developments and outlines alternative scenarios.

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