The Estonian Employers' Confederation has expressed dissatisfaction with the current draft of the Climate-Resilient Economy Act, stating that it fails to provide the legal and investment certainty businesses require. According to Kai Realo, chair of the Employers' Confederation's council, businesses support sustainable operations and have been awaiting a law that provides clarity and predictability. However, the draft legislation falls short of these expectations.

Realo emphasized that the government has not clarified how it plans to achieve climate goals without undermining businesses' export capacity, employment and income levels or triggering a socioeconomic crisis.

The Employers' Confederation pointed out that the implementing provisions, coordination with existing laws and societal agreements are either insufficient or unclear. Furthermore, the socioeconomic impact of the law on various sectors and society as a whole has not been properly assessed.

The organization criticized the government for seeking stakeholder input before finalizing key state energy strategies and regulations concerning forestry and land use. The draft leaves unanswered questions about the basis for regulating businesses.

This approach, they argued, contradicts the government's stated goal of enhancing the competitiveness of the economy, which depends on legal certainty and clarity. The confederation underscored that a realistic plan to meet European Union climate goals, rather than separate national targets, is necessary to provide such certainty.

Kati Rostfeldt, an adviser to the Employers' Confederation, noted that the draft law's goals were set before conducting impact assessments and its purported benefits are based solely on assumptions. "The draft does not provide the legal and investment certainty essential for businesses to make necessary investments, raising doubts about its necessity and potential positive impact on the business environment," she said.

The Employers' Confederation highlighted that businesses can only begin investing once implementation acts and measures to meet EU climate goals are fully developed and roadmaps or feasibility analyses are published. The organization has repeatedly emphasized this need in its feedback on the draft's development.

The confederation urged the government to take the time required to thoroughly assess the economic impact of meeting EU climate goals, design necessary measures and create balanced and sustainable regulations through amendments to existing laws.

The Climate-Resilient Economy Act will be discussed for the first time in the government's economic cabinet on Thursday. According to the Ministry of Climate, the draft has been updated based on more than 900 proposed amendments.

Realo: Law the add to uncertainty

In comments to ERR, Kai Realo criticized the current draft of the climate law, describing it as unclear, underdeveloped and confusing.

"For businesses, this law does not resolve the key reason why they were initially interested in adopting a climate law. The aim was to understand how the Estonian state plans to move toward its climate goals, what targets will be set in various business and economic sectors and what these plans entail. In other words, to also gain insight into the framework of regulations and additional legislation that would be used to achieve these goals. Currently, this information has not been discussed in relation to the law, nor is it included in the draft. This means that investment uncertainty, unfortunately, remains," Realo explained.

Realo further noted that businesses lack clarity about potential restrictions, mandates and limitations they might face to meet the proposed goals.

"The law lacks clarity. It mainly focuses on the goals themselves, accompanied by loosely defined text about what should be considered when working toward these goals. At the same time, we have seen sectors where roadmaps are clearer, where there is an understanding of whether the goals are achievable and with what measures. But there are also sectors where no such roadmap exists, only the goals themselves," Realo added.

She warned that without clear guidance on how the government plans to achieve its climate goals, businesses face the risk of sudden, restrictive measures on economic activity.

"If businesses are merely informed that the state has set such goals, but there is no clarity on how these goals will be achieved, there's a danger that economic activity could once again come under severe restrictions," Realo said.

She provided an example from the forestry sector: "Questions like how much logging will be allowed, what can be done with the harvested timber and similar concerns arise. Even if such measures are reasonable from an environmental perspective, it would also be reasonable from a business perspective to know in advance that certain restrictions are likely to be introduced. When we talk about industry, any investment takes at least 20 years to pay off. Making investments today without knowing the rules of the game even five years from now is a significant risk," Realo explained.

The confederation's council chair said employers were caught off guard when they learned that the government plans to discuss the climate law on Thursday.

"This is another bad sign for us, as it seems this law is being rushed through without a genuine willingness to consider fundamental changes," Realo said.

She also criticized the law's title, the Climate-Resilient Economy Act, calling it troubling for employers.

"It is completely unclear who, where and why believes that introducing such a law would improve Estonia's competitiveness. This perspective is missing from the law. If it is a climate law, then it should focus solely on climate issues. But if we're talking about a Climate-Resilient Economy Act, it should heavily address the economic aspect – how to ensure that we achieve climate goals without destroying our economic competitiveness in the process," Realo argued.

Realo concluded that the current version of the law is so fundamentally flawed that it would be difficult to improve. "It would be wiser to abandon this law altogether," she said.

The article was updated to add comments from Kai Realo.

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