Estonia collects over €32 million annually in oil shale and other hazardous waste plus water and air pollution fees. A recent bill would gradually hike the sum by €20 million by 2027.

"Pollution charges have not been raised since 2015, while inflation for the period comes to over 50 percent," said Keit Kasemets, secretary general of the Ministry of Climate, adding that it would only be fair for those doing the polluting to compensate society for the damage.

The charge for releasing phosphorus compounds into water will be hiked by 15 percent annually, while this will be 5 percent for sulfates and oil.

The biggest polluter to pay the most

The oil shale sector is the most affected. "Around 70 percent of air pollution comes from the oil shale industry. Oil shale waste makes up almost 80 percent of total waste in Estonia. The sector is also responsible for over 50 percent of industrial use of water," Kasemets said.

The secretary general suggested the hike could lead to more effective waste management and encourage the adoption of environmentally friendly technologies. The looming fee hike is greatest for depositing hazardous and oil shale waste – more than twofold for the former.

The bill's explanatory memo suggests changes should also promote recycling. For example, only 0.02 percent of shale fly ash is currently recycled and 3.5 percent of bottom ash. Semi coke is not recycled at all.

Head of VKG does not believe the hike could have a positive effect

Ahti Asmann, CEO of sector company Viru Keemia Grupp (VKG), said that higher charges are not likely to curb pollution.

"First of all, companies are already expected to use the best available technology to secure activity licenses," he said, adding that investing in brand new technologies is the only way to improve the situation. But adding to the tax burden would work against investments in cleaner production, Asmann suggested.

Higher pollution charges would constitute an extra €4-6 million in annual costs for VKG. "The oil shale sector struggles when world market oil prices come down," Asmann said, adding that higher fees would bring this closer for Estonian companies.

Keit Kasemets said that the oil shale sector has had a few good years, and that the ministry hopes a part of that success will reflect in more environmentally friendly technologies being adopted. "But it is also clear that we are waiting for a wider and more thorough change, a switch from oil shale to cleaner technologies. The charges hike is just one component in that wider transition."

Asmann said the changes concern thousands of Estonian companies, and not just in the oil shale industry. He suggested that the Estonian GDP shrinking is tied to a deep crisis in the processing industry, caused in turn by higher energy prices, more expensive logistics and labor costs. "Adding tax hikes to the mix would only work to make matters worse."

Sector participants give very little time for analysis

The head of VKG also pointed to the fact companies and business associations have been given just until September 7 to provide feedback.

"I believe the processing industry has been hit hard enough in this crisis to have earned some manner of effects analysis before fees are hiked."

Kasemets said that the pace of proceedings is dictated by the process of putting together next year's state budget. The new charges would enter into force next summer and count toward revenue in the budget.

"The proposal should not come as a surprise as the "polluter pays" principle has been outlined in the coalition agreement," Kasemets remarked.

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