In September 2021, you made a proposal to parliamentary parties and the prime minister to put together a climate law that would serve as a social contract for Estonia meeting its climate targets. You said at the time that there is a social vacuum, which must be filled since meeting the EU's climate targets will require regulating how society and different walks of life function. To what extent does the draft law meet your expectations today?

It rather does not. Looking at the text of the law, we are dealing with a schedule for carbon emissions reduction to which quite a few slogans have been attached. To make matters look better than they are, the name of the law has been made more business friendly. But the explanatory memo's effects analyses paint a picture of negative effects, which the government simply states as facts or rather accepts. General criticism from me is that we're dealing with a development plan that has been styled a law.

There were several things we wanted to see. Firstly, we wanted a public process. Because Estonia was busy assuming obligations at the level of EU regulations, we wanted these changes to be a matter of public record. We wanted the changes to be reflected in legislation. And this we have been given in the new climate law.

The other [goal] was to try and make sense of the goal. The EU prioritized economic growth, while activities in Estonia were simply aimed at reducing carbon emissions it seemed. We also have clarity now in that the aim of the law is still just to reduce CO2 emissions.

Still, they renamed the law in the final stages. It is no longer the Climate Act, but the Climate Resilient Economy Act, which former climate minister, now Prime Minister Kristen Michal (Reform) emphasized during a press conference thing spring.

Everyone's a communication expert. But while we can talk of competitiveness, it isn't there in the draft law. Reading the effects analysis, it holds quite a lot that is negative, while it is offset by promises to concentrate on companies and ventures with solid value added per unit of CO2 emissions.

Or efforts to compare the service economy to industry, where we come to the example of a hair stylist whose carbon footprint is probably quite small, which gives them an advantage over a manufacturing business. So, there is a fair bit of demagogy involved. A piece of economic legislation should reflect relevant aspects. Competitiveness cannot mean the survival of businesses who can compete despite all this regulation.

The other reason why it is not an economic or competitive ability law is that Europe has standards, the best available technology, which determines what gets used. In Estonia, what the law basically states is that we'll need to hit CO2 reduction targets no matter what and irrespective where we are with our technology. Whether it makes economic sense or not is secondary.

We also wanted to see good legislative practice, for there to be effects analyses and the ability to gauge which changes are practicable for the Estonian people and economy, to avoid large-scale foolishness.

I don't think the law offers us that. While a host of analyses are referenced, their quality is questionable. What I find to be completely absent is effects [analysis] of fiscal impact and that on taxpayers. What will happen to the tax burden once the economic units the activities of which will be phased out stop contributing, or once revenue from emissions trading disappears? It needs to be offset using tax revenue from elsewhere. We can see the effects of past indecision on the state budget today. We have quite a sharp deficit.

Another thing I did not find was a civilized decision-making mechanism for when things don't go according to plan. Whether it's technological development failing to keep up or people being unable to cope with price advance – you need a capable, independent process for decision validation, striking a balance between environmental and social management, which is something the law virtually fails to provide.

We would also like to see a measure of responsibility. We need to keep an eye on who will vote for this law, should it be passed in its current form. I believe we can be quite certain they won't understand what they are voting into law.

Therefore, you are dissatisfied, despite the law stating that the oil shale industry, of which VKG is very much a part, can see emissions grow, compared to the 2022 level, by 40 percent by 2030, by 12 percent by 2035 and must only dial back emissions by 16 percent by 2040. Environmental organizations are fiercely critical of this section, saying you should not be granted the luxury. Why are you still not happy with what the law proposes?

For an average politician, the situation must seem good, as cases where no side is satisfied are often called excellent compromises. The alternative interpretation is that it's just a bad piece of legislation. The environmentalists' criticism is simple. It is focused on the Enefit oil plant and the fact the government greenlit its construction, which they just cannot accept. Those [Enefit] figures are reflected in the above percentages.

What we are not happy about is the law's idea that oil shale cannot be turned, for example, into fuel [in the future]. If the aim is to reduce CO2 emissions, it should stop there. For as long as there is a market for fossil fuels, including oil shale, as ship fuels, and if we find an effective way of capturing carbon, activities should not be limited. Especially as the explanatory memo sees carbon capture and use as a business opportunity. It is completely incomprehensible why I shouldn't be allowed to do it with oil shale, while other industries can keep going. It is ideological rather.

From a purely economic point of view, VKG contributes €50-60 million to the state treasury, while the entire sector yields €100-150 million, which makes wanting to shut the whole thing down incomprehensible.

The climate law also allows emissions in manufacturing to grow until 2035, which environmentalists are not happy about. Why is this being done?

The answer is very simple. Estonia lacks technologies which would allow the same things to be manufactured in a climate neutral way.

Talking about conservationists and environmental organizations, I looked into who was protesting the Enefit oil plant. The activities of Fridays for the Future Estonia are coordinated by NGO Loodusvõlu. I looked them up online and their only annual report is from 2021, according to which the organization had seven members at the time. The input of such organizations is equated to us. They are treated as equals of the Chamber of Commerce and Industry and the Employers Confederation. I would not overemphasize what a marginal environmental organization has to say.

As you mentioned, the draft law states that new resource mining permits will only be given for oil shale chemistry or other products which are not used as fuels or for generating energy. The explanatory memorandum also lists new mining applications by state-owned [Eesti Energia subsidiary] Enefit and VKG. You have set your sights on the Oandu and Sonda extracting permit areas. VKG has also moved for expanding its existing mines. Judging by the bill and the memo, how long do you believe you'll have oil shale?

We know the situation quite well here. We need to tell apart existing permits and those we're requesting. Basically, the law states that everyone can mine as much oil shale as they have. The difference is that Kiviõli Keemiatööstus has enough for roughly five years, VKG until the end of the next decade, while Eesti Energia has enough for another 40-50 years. What this means is that if VKG runs out of oil shale by the middle of the next decade, it will not be granted any more as its mining permit applications will not be processed. It constitutes a triumph of state capitalism where the dominant company on the market that holds all the reserves can continue, while the other, private companies will need to pack it up.

What would happen to the mining expansion requests based on your understanding of the bill and the explanatory memo?

/.../ We have permits based on which we mine today. It's important for us to know that the idea of the law is not to issue any new mining permits for when our volumes run out in the middle of the next decade. At the same time, the door is left open for Eesti Energia. Therefore, it is not something we can agree to, whereas I'm relatively sure it also clashes with European competition legislation.

Based on public information, VKG is aiming to expand its production and become more than just an oil shale company. You are considering opening a biproducts factory in Ida-Viru County. Reading the climate law, and amendments to the Conservation Act and Forest Act, which form a single package, does it lend VKG and your investors certainty for building a chemical wood products plant in the region?

When we initiated the special plan process three years ago, there was great confusion regarding forestry, and we hoped these matters would get sorted out. But the situation has not become any clearer. I believe that the problem, whereas I'm not as well-versed in forestry than the Estonian Forest and Timber Industry Association, is with terminology. From what I can understand, environmental activists do not accept the University of Life Sciences' terminology and positions and keep looking for alternative takes. People and market participants understand it in very different ways. Effects on us are dependent on logging volume. From what I gathered from the explanatory memo, logging volume should fall, which would cut into tax revenue from value added. /.../ The answer is I haven't really made sense of these things.

But we'll keep working, and I suppose this is the environment we have. We want to have the special plan approved by the end of this year or the start of 2025, and [state forest manager] RMK is currently looking for or qualifying partners for long-term contracts. It is quite natural for the national forest manager to want such a major investment, and the desire to add value to Estonian timber in Estonia stems not from the explanatory memo of the climate law, but from contracts with the state forest manager. That is where it will become clear whether that desire exists.

Would it be an accurate summary that while the climate law did not provide VKG with certainty for a bioproducts plant in Ida-Viru County, you also haven't shelved the project as things are still unclear?

That is precisely how it works in Estonia... Can you really make an investment decision based on reading a law's explanatory memorandum... Whatever the case, Estonia's reputation has taken a hit, as much that has been promised has not been delivered.

Yet, the law was supposed to provide certainty, and politicians had promised to make things clear.

We've been made many promises. The law does state that there is interest in a wood chemistry plant in Estonia. But words are not enough when it comes to such investments, and you need contracts, concrete steps. It's nice if the law provides a framework, but, and correct me if I'm wrong here, it also provides the framework of reduced logging volume as the law aims to curb CO2 emissions. There are few ideas for curbing emissions from agriculture as intestinal fermentation will be around for as long as animals will be around in Estonia. And that means the land use sector, in which forestry falls, must take it upon itself. But whether that means cutting less or more is something no one dares say today. We'll need to wait and see. It seems to me that what's been put down here will be reflected in RMK decisions, which do not exist yet.

Environmental organizations have been critical of the inclusion process, saying that while the working groups were grand and much was discussed, measures did not make it to the law or its explanatory memo. Does your experience differ?

Environmental organizations can take solace in the fact that entrepreneurs haven't been heeded either.

The question then is whose positions are reflected in the law if neither interest group was considered?

We were told at the very start of the inclusion process that while we'll listen to what you have to say, it will be a matter of political decision what to consider. The way I see it, we've basically promised the EU to cut a certain amount of carbon emissions, and now we just need to legitimize it. The whole point of involving partners is to avoid mistakes and illogical steps. But I think we haven't succeeded.

In terms of the ideologist behind it all... I'd leave that up to the investigating press. While I have a theory, Estonia is a small country and I've been loud enough as it is.

Not considering opinions is the status quo in Estonia. We are dealing with an ideological law that is impervious to rational arguments. We were told by one side during a rational debate in a working group that because it is a matter of life or death, there's nothing further to discuss. But I would like to ask the press to find out who is the ideological mastermind behind this thing.

Ahti Asmann, do you have a question to put to Minister of Climate Yoko Alender (Reform)?

I have no question. I understand the idea, but I find it is a bad idea, while its implementation is even worse.

But I have two messages. First, we should concentrate on creating and not tearing down. Oil shale is not the problem. The problem is CO2 the reduction of which is handled through the emissions trading system. That should be enough. All instruments for killing off the oil shale sector are in place, and the only thing the government should concern itself with is people's socioeconomic coping and state finances.

Secondly, there is no sense in styling a law that works to constrain the economy as one that boosts competitiveness, thinking that fixes things. The state budget is in crisis, and the law will definitely add to that crisis in the long run. My proposal is to take a deep breath and thoroughly rewrite the law together.

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