Estonia 2023

Estonia 2023 Energy Policy Review INTERNATIONAL ENERGYAGENCY The IEA examines thefull spectrumof energy issuesincluding oil, gas andcoal supply anddemand, renewableenergy technologies,electricity markets,energy efficiency,access to energy,demand sidemanagement andmuch more. Through itswork, the IEA advocatespolicies that willenhance the reliability,affordability andsustainability of energyin its31member countries,13association countriesand beyond. IEA membercountries: IEA associationcountries: AustraliaAustriaBelgiumCanadaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNew ZealandNorwayPolandPortugalSlovak RepublicSpainSwedenSwitzerlandRepublic of TürkiyeUnited KingdomUnited States ArgentinaBrazilChinaEgyptIndiaIndonesiaKenyaMoroccoSenegalSingaporeSouth AfricaThailandUkraine This publication and any mapincluded herein are withoutprejudice to the status of orsovereignty over anyterritory, to the delimitationof international frontiers andboundaries and to the nameof any territory, city or area. The EuropeanCommission alsoparticipates in thework of the IEA Source: IEA.International Energy AgencyWebsite: www.iea.org Executive summary This IEA Energy Policy Review comes at a critical moment for Estonia, which isfacing notable challenges amid the climate and energy crises and the RussianFederation’s invasion of Ukraine. The IEA commends Estonia for the steps it hastaken to end all remaining energy trade with Russia while ensuring regional energysecurity, and for the work to accelerate the energy transition, including setting a2050 carbon-neutrality target and a target for 100% of annual electricity demand tobe covered by renewable energy by 2030. These targets require major investmentsacross all sectors and improved energy sector planning. Estonia has notably decreased its greenhouse gas emissions (GHG), mainly dueto an overall reduction in electricity and heat generation from oil shale and growthin generation from wind, solar photovoltaics (PV) and domestic forestry biomass.However, starting in 2020 net GHG emissions have been increasing due to arebound in electricity and heat generation from oil shale and to land use, land-usechange and forestry (LULUCF) becoming a net emissions source, mainly due toincreased emissions from forests. This report provides policy recommendations to help Estonia address its energysector challenges and drive a clean, secure and just energy transition. It highlightsinternational best practices relevant to Estonia and details areas where Estonia’sleadership can assist other countries with their energy sector challenges. Existing policies are insufficient to meet Esonia’s ambitious targets, but newpolicies are being developed to support more robust emissions reductions.Estonia’s ambitious targets require accelerated renewables deployment, increasedelectrification and phasing out oil shale generation while ensuring a just transitionthat maintains energy affordability and supports economic development in the oilshale region. The IEA commends Estonia for establishing a Ministry of Climate withbroad-ranging authority over the energy system and for starting work on a climatelaw. These steps will help provide the policy clarity and broad action needed tomeet Estonia’s climate and energy ambitions. The IEA recommends Estonia passa climate law that sets legally binding targets for carbon neutrality and intermediateemissions reductions, allocates responsibilities for implementation, and sets cleartargets for phasing out oil shale and other fossil fuels. Changes to fiscal and tax policy are needed to encourage consumers to moveaway from fossil fuels and support the uptake of low-emission, more efficient,renewable and innovative options.Estonia’s excise duty rates are not based onGHG emissions or other environmental factors. In addition, Estonia is the only IEAmember country without taxation on private vehicles and has one of the oldest andleast efficient vehicle fleets. IEA recommends a broad effort to align price signalswith climate and energy goals by updating energy excise duties; increasing carbonprices; quickly introducing vehicle taxation to drive uptake of efficient vehicles,including electric vehicles (EVs); and ending support for fossil fuels. This should bedone in a way that generates sufficient revenue to support a just clean energytransition. A major electricity system transformation is needed to achieve the 100%renewable electricity target and put Estonia on the path to climate neutrality.The IEA commends Estonia for taking steps towards these targets but notes a lackof clarity on how they will be achieved and whether existing energy sector planningprocesses will effectively guide the country to a carbon-neutral energy system. TheIEArecommends that the government ensure co-ordination between allcomponents of electricity sector planning, including electrification, to clarify toenergy sector stakeh