Prime minister: Emissions trading system needs changing

Prime Minister Kaja Kallas (Reform) speaking to the Riigikogu on January 18.
Prime Minister Kaja Kallas (Reform) speaking to the Riigikogu on January 18. Source: Ken Mürk/ERR

The current EU Emissions Trading System or the CO2 quota mechanism is not as good as it can be and it must be improved to make price changes less chaotic, Prime Minister Kaja Kallas (Reform) said in a political statement made in front of the Riigikogu.

Kallas said there are many options to stabilize electricity prices and the electricity market, one of them being amendments to the EU Emissions Trading System.

"Life has shown us that the current solution is not optimal and it must be supplemented. It is understandable and tolerable for the emissions trading system to be more linear and not the rollercoaster it is today," Kallas said.

In addition, a greater number of fixed-price electricity contracts would also stabilize the situation, but better conditions for electricity providers must be ensured first.

"For the possibly very low prices of stock exchange packages, there is always a risk for very high prices. This risk can be mitigated by fixed-price contracts, which offer a more stable electricity price over a longer period. But for people to sign more fixed-price contracts, we must create better conditions for electricity providers so that they could provide consumers with lower fixed prices," the prime minister said.

Kallas said the Riigikogu is currently processing an electricity market law, which would specify the conditions for canceling contracts. "Electricity providers say providing security could lower fixed-price contract prices by a couple of dozen euros per megawatt-hour. /.../ At the moment, consumers can step out of fixed-price contracts at any time, which does not motivate providers to offer such contracts," she said.

Thirdly, Estonia must reach an agreement with Finland regarding the Financial transmission rights (FTR) market. "If this agreement is not moving fast enough on the technical level, I am prepared to address it at a higher political level. This would also allow us to offer lower fixed prices," Kallas said.

Eight bottlenecks

The government discussed the electricity market situation last Thursday, discovering several bottlenecks. Firstly, the government gave three ministries a task of creating proposals for mainland areas, where wind farms could be developed. Secondly, a local benefits element has been drawn up, which Kallas said should motivate locals to accept renewable energy production capacities in their homeplace.

The prime minister said Estonia needs to finally approve the maritime spatial plan, which would give the state clarity on where off-shore wind farms can be developed.

Fourth, an energy storage analysis will be conducted along with an analysis on creating a nuclear power plant in Estonia. Kallas added that the problem of connecting new renewable energy capacities to the grid must also be solved quickly, in addition to handling hydrogen as a future energy source.

For cheaper Nordic electricity to move through Finland to Estonia, a third undersea power link to Finland (Estlink 3) is planned to be completed by 2030.

No need to lose sleep

Kallas said the Reform-Center government coalition will discuss establishing a maximum stock exchange limit on electricity, in addition to removing electricity network charges for companies. "These are the additional steps on the table and where we are looking for a common solution as a coalition," the prime minister and Reform chair said.

She noted that finding common solutions has been complicated by statements publicly made by coalition politicians, which have caused the press to speculate on disagreements and conflicts in the government.

"We know how to find an agreement from earlier experiences and we need to do so now. What is certain is that the Estonian people do not need to worry nor lose sleep over high energy prices," Kallas said.

Prime Minister Kaja Kallas (Reform) speaking to the Riigikogu on January 18. Source: Ken Mürk/ERR


Follow ERR News on Facebook and Twitter and never miss an update!

Editor: Kristjan Kallaste

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: