Estonia to get over €200 million from CO2 quota trading for 2021

Trains at the Baltjaam train station. Estonia plans to purchase additional electric trains for using its CO2 quota revenue.
Trains at the Baltjaam train station. Estonia plans to purchase additional electric trains for using its CO2 quota revenue. Source: Priit Mürk/ERR

Estonia is due to take in over €200 million in revenue from European Union CO2 quota trading, by far its highest figure to date and some of which is to be used in alleviating soaring electricity and natural gas prices. The eventual figure will not be known until year-end, but is likely to be over a third more than budgeted for earlier this year.

The relevant domestic legislation in fact contains provision for mitigating energy price inflation for the most economically vulnerable in any case, while other uses the revenue is likely to be put to include purchasing new electric trains.

Environment minister Tõnis Mölder (Center) said Wednesday that the government is analyzing all aspects of energy prices. 

"Among other things, we are considering supporting low-income families with income from the sale of CO2 emission allowances, in the form of temporary compensation for the renewable energy fee. However, there is no agreement on that yet," Mölder said, via a spokesperson.

Finance minister Keit Pentus-Rosimannus had said much the same thing earlier on Wednesday, having already proposed the idea a fortnight earlier.

She said: "We are currently working with the government on a quick relief package for the energy price shock, which will help alleviate the very sharp price jump from autumn-winter this year, for families in more difficult financial situations, and also for retirees living alone, for example."

Electricity and natural gas prices have risen sharply in the second half of this year.

The longer-range state budget strategy 2022-2025 (RES) drawn up in spring estimated that €144 million would be received from emissions trading, the sale of CO2 allowances, but the Ministry of the Environment said that as of October 8, CO2 trading intake stood at the very precise €183,058.225, meaning it will almost certainly exceed the €200-million mark by year-end.

Imre Banyasz, an adviser at the Ministry of the Environment's climate department, told ERR Wednesday that: "If the unit price of emissions permits remains at today's levels, the expected revenue is certainly over €200 million. If the average price for the whole year were €50, the expected revenue will be almost €230 million," qualifying that by noting that earlier on in the year, the CO2 quota prices was below €50.

"The exact amount of the proceeds depends on the market price that remained on the specific auction day and will be known at the end of the year," Banyasz said.

CO2 quota sales proceeds are strictly regulated by the EU and consequently by domestic law.

The Atmospheric Air Protection Act states that at least half of all revenues must be used for measures aimed at reducing greenhouse gas emissions, with 13 different related areas identified, including encouraging a shift to less environmentally damaging modes of transport and public transport, developing renewable energy, funding research and development in energy efficiency and clean technologies, increasing energy efficiency, better insulation and developing district heating systems, where hot water is often pumped-in from a nearby power station.

The RES for 2022-2025 included entires such as the purchase of additional electric trains (€55 million), with €8.43 million allocated for this year, €5.4 million in 2023 and € 34.59 million in 2024.

Boosting the energy efficiency of public buildings was budgeted at €15 million each year, while domestic funding on the high-speed Rail Baltic project was put at €13.8 million.

The Atmospheric Air Protection Act also references supporting low- and middle-income households in solving social problems arising from energy consumption as a possible uses of quota money.

Estonia's yearly CO2 quota trading revenues since 2013 (in reverse chronological order) are as follows:

-2020: €142.3 million.

-2019: €142.8 million.

-2018: €139.9 million.

-2017: €39.2 million.

-2016: €23.6 million.

-2015: €21.1 million.

-2014: €7.4 million.

-2013: €18.1 million.

CO2 Emission trading schemes (ETS) for carbon dioxide such as that operated by the EU aim to limit climate change by creating carbon allowances marketplace.

Carbon allowances are issued by a government and typically allow an owner to emit one tonne of CO2, or sometimes another pollutant. They are heavily regulated under a government's, in this case the European Commission's, emissions cap-and-trade regulatory program.


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Editor: Andrew Whyte

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