Large companies in Ida-Viru County that are affected by the European Union's carbon emissions trading are unsatisfied with CO2 pricing and blame speculators for the price hike.
Viru Keemia Grupp, Estonia's largest shale oil producer, has already negotiated an exemption for shale oil and currently receives a substantial amount of free emission allowances.
As a result, Viru Keemia Grupp is able to remain competitive despite unusually high emission quota costs. The missing quota must nevertheless be purchased on the market, Jaanis Sepp, CFO of the Viru Keemia Group, said.
"Since the price of quota purchased from the market has climbed dramatically, the amount of money that we have to pay out of our annual revenues in the form of this tax, so to speak, is growing and growing, and we do not know how long we will be able to sustain it," Sepp said.
This year, the shortage in emissions quotas might amount to approximately a third, which the Viru Keemia Group would need to purchase for approximately €30 million.
"So long as the price of oil exceeds the cost of CO2, we can pay for it." But if the market price of oil falls and we can't cover it and then the question is, "What happens next?" Sepp said.
Estonian cement producer Kunda Nordic Tsement does not trade quotas.
Cement with high emission levels was discontinued in Kunda a few years ago, and the raw materials are now imported from Sweden. Yet, the increasing emission quota has an effect on cement pricing:
"In addition to electricity, quota also plays a big impact in the rise of cement prices. As the price already contains a CO2 quota, we have to increase the product's price by that amount," Meelis Einstein, a member of Kunda Nordic Cement's board of directors, explained.
Einstein said that all European cement producers are in the same position and competition on the internal market is fair, but there is no room for a local cement producer exporting outside the European Union.
"This quota trade has put local producers under pressure. Cement manufactured in the European Union cannot be exported since this quota and quota trading must be now factored in, although it is not considered outside the EU. This has a negative effect on our global competitiveness," Einstein explained.
Both Viru Keemia Grupp and Kunda Nordic Tsement describe the market for emission quotas and its pricing as incomprehensible. While the price of emission quotas should reduce as the price of natural gas falls, yet the opposite is true.
"The biggest issue I see with quota trading is if all those who were actually issuing it - buying, selling and exchanging - were permitted to trade funds in that market. No on knows of the types of quotas these funds actually trade, and there is still a great deal of confusion and ignorance; the system is truly opaque," Einstein said.
Sepp said that speculative transactions may cause the price of CO2 quotas, which has grown to roughly €100 euros, to climb even higher.
Editor: Mait Ots, Kristina Kersa