Knowledge Transfer and Research Needs for Preparing Mitigation/Adaptation Policy Portfolios

PROMITHEAS – 4

Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios (Contract No. 265182)

Mitigation / Adaptation scenarios and Climate Change policy portfolios for Estonia

Author: Dr. Nadežda DEMENTJEVA Tallinn University of Technology

Co-authors: Dr. Popi KONIDARI, Anna FLESSA M.Sc. National and Kapodistrian University of Athens - Energy Policy and Development Centre

Tallin, 2013 2 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” This document is part of the relevant report prepared for the FP7 funded project “PROMITHEAS-4: Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios”, coordinated by Prof. Dimitrios MAVRAKIS, Energy Policy and Development Centre (Greece). The whole report contains twelve (12) documents for each one of the emerging economies that participate in the project: Albania, Armenia, Azerbaijan, Bulgaria, Estonia, Kazakhstan, Moldova, Romania, Russia, Serbia, Turkey and Ukraine.

3 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” 4 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” CONTENTS

Contents______5 List of Tables______6 List of Figures______6 Abbreviations______9 Introduction______11 Objectives of the Estonian climate change policy______11 Spectrum of climate change mitigation options for Estonia______12 Spectrum of adaptation needs in Estonia______19 References______22 Business – As – Usual Scenario (2000 – 2050)______24 BAU scenario description______24 Key assumptions______32 Energy Demand______47 Transformation______53 Global warming potential (GHG emissions)______57 References______58 Optimistic Scenario (2000 – 2050)______62 Optimistic scenario description______62 Key assumptions______69 Energy Demand______73 Transformation______75 Global warming potential (GHG emissions)______77 References______78 Pessimistic Scenario (2000 – 2050)______80 Pessimistic scenario description______80 Key assumptions______83 Energy Demand______87 Transformation______88 Global warming potential (GHG emissions)______90 References______91 Results of Long – Range Energy Alternatives Planning System (LEAP)______92 Demand______92 Transformation______93 Global warming______94 5 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” LIST OF TABLES

Table 1: National 2020 target and estimated trajectory of energy from renewable energy sources in heating and cooling, electricity and transport.______12 Table 2: Charge concerning CO2 emissions.______29 Table 3: Water abstraction charge.______29 Table 4: United Nations projections for the Estonian population (UN, 2010).______32 Table 5: Projections for the Estonian GDP (IMF, 2011).______33 Table 6: Projections for the GDP in Estonia from different sources.______34 Table 7: Projections for the GDP in Estonia for three scenarios of PROMITHEAS-4 under different forecasts for the national GDP.______34 Table 8: Current feed–in–tariffs.______44

LIST OF FIGURES

Figure 1: Demographics: Population.______32 Figure 2: Economy: GDP real.______35 Figure 3: Economy: Average Annual Household income.______38 Figure 4: Climate Statistics: Precipitation.______39 Figure 5: Climate Statistics: Temperature.______40 Figure 6: Climate Statistics: Surface waters.______42 Figure 7: Climate Statistics: Groundwaters.______43 Figure 8: Final Energy Demand per sector.______47 Figure 9: Final Energy Demand per fuel.______47 Figure 10: Final Energy Demand in Household Sector.______48 Figure 11: Final Energy Demand in Agriculture Sector.______49 Figure 12: Final energy demand in industrial sector by type of industry.______50 Figure 13: Final Energy Demand in Industrial Sector by type of fuel.______51 Figure 14: Final Energy Demand in Transport Sector per fuel.______52 Figure 15: Transmission and Distribution losses of electricity and heat.______53 Figure 16: Transformation: Power plants capacity.______54 Figure 17: Transformation: Electricity Generation.______55 Figure 18: Share of Heat Production by fuel type.______55 Figure 19: GHG emissions per sector.______57 Figure 20: Climate Statistics: Precipitation.______69 Figure 21: Climate Statistics: Temperature.______70 Figure 22: Climate Statistics: Surface waters.______70 Figure 23: Climate Statistics: Groundwater.______71 Figure 24: Final Energy Demand in Household Sector.______73 Figure 25: Final Energy Demand in Transport Sector.______74 Figure 26: Transformation: Transmission and Distribution losses of electricity and heat.______75 Figure 27: Transformation: Electricity Generation.______76 Figure 28: GHG emissions per sector.______77 Figure 29: Climate Statistics: Precipitation.______83 Figure 30: Climate Statistics: Temperature.______84 Figure 31: Climate Statistics: Surface waters.______84 Figure 32: Climate Statistics: Groundwater.______85 Figure 33: Demand: Final Energy Demand in Household Sector.______87 Figure 34. Transformation: Transmission and Distribution losses of electricity and heat.______88 Figure 35: Transformation: Electricity Generation.______88 Figure 36: GHG emissions per sector.______90 Figure 37: Comparison of energy demand for the 3 scenarios.______92 Figure 38: Comparison of transformation capacities for the 3 scenarios.______93 Figure 39: Comparison of the electricity generation capacity for the 3 scenarios.______93 Figure 40: GHG emissions per sector.______94 6 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” 7 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” ABBREVIATIONS Abbreviation Full name AAPA Ambient Air Protection Act AC Auxiliary current BAU Business As Usual CFBC Circulating fluidized bed combustion CFL Compact Fluorescent CHP Combined Heat and Power EE Eesti Energia AS EEA European Environmental Agency EBRD European Bank of Reconstruction and Development EEIC The Estonian Environment Information Centre EEK Estonian crown abbreviation EMP Electric Mobility Programme ENHDP Estonian National Housing Development Plan EPBD Energy Performance of Buildings EREF European Renewable Energies Federation ESDP Electricity Sector Development Plan EU European Union EU-ETS European Union Emission Trading Scheme EV Electric Vehicle EWEA European Wind Energy Association GHG Greenhouse Gas GIS Green Investment Scheme GNI Gross National Income HELCOM Helsinki Commission ICZM Integrated Coastal Zone Management IEA International Energy Agency IMF International Monetary Fund IPCC Intergovernmental Panel on Climate Change JI Joint Implementation JRC Joint Research Centre KP Kyoto Protocol LTO Landing/Take-off MOE Ministry od Environment MoEAC Ministry of Economic Affairs and Communications MOIEEP Ministry of Economic Affairs and Communications MOU Memorandum of Understanding NAP National Allocation Plan NDPUOS National Development Plan for the Utilization of Oil Shale NEEP National Energy Efficiency Plan NIR National Inventory Report NREAP National Renewable Energy Action Plan NRP National Reform Programme OECD Organization of Economic Cooperation and Development OPT Optimistic OWER Official Webpage of the Estonian Republic PES Pessimistic R&D Research and Development RES Renewable Energy Sources RES-E Electricity produced from RES RMK Estonian State Forest Management Centre SP Stability Programme SUV Sport utility vehicle TSO Transmission Operator System

8 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” TU Tallinn University UNFCCC United Nations Framework Convention oc Climate Change VOC Volatile Organic Compounds WHO World Health Organization WW Water Wikipedia

9 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” INTRODUCTION Objectives of the Estonian climate change policy Estonia signed the United Nations Framework Convention on Climate Change (UNFCCC) during the United Nations Conference on Environment and Development held in Rio de Janeiro in June 1992. In 1994 Estonia ratified the UNFCCC and in 2002, the Kyoto Protocol (KP)1. Under the KP Estonia is obliged to reduce during the period 2008-1012 the emissions of air polluting greenhouse gases from its territory by 8% as compared with the 1990 level (NIR, 2011). As a first step the National Programme for the Reduction of Greenhouse Gas (GHG) Emissions for the time period 2003-2012 was compiled taking into consideration the KP and the European Council Decision 93/389/EC from 24 June 1993 on the monitoring of GHG emissions in the EU (EÜT L 167, 09/07/1993 p 0031 0033) (CD, 1993). The Programme that was approved on 30 April 2004 by the Estonian Government set in the long-term a GHG emissions reduction of 21% by 2010, compared to the 1999 emission level (NIR, 2011). This target implied a reduction of carbon dioxide emissions by 20% and methane emissions by 28%, allowing for an increase of nitrogen dioxide emissions by 9%. For the achievement of these objectives the Plan was oriented towards the Joint Implementation (JI) mechanism and the increase of energy efficiency (LG Action, 2011). Regarding the second component about the increase of the Estonian energy efficiency the National Energy Efficiency Plan was approved in 2007. It sets respective strategic aims and objectives, and takes into account the task of achieving the indicative energy conservation objective set by Directive 2006/32/EC, i.e. saving of 9% of final energy consumption by 2016 in comparison to the average final energy consumption of the period 2001–2005 (ODYSSEE- MURE, 2009). For fulfilling also its obligations as an EU Member State, Estonia has set additional objectives for its climate change policy, which are included in the:  “ Estonian Electricity Sector Development Plan until 2018” (Government of the Republic Order No. 5 of 3 January 2006) (ESDP, 2009). These objectives are: - the achievement of electricity production from Renewable Energy Sources (RES) by 15 % in gross consumption by 2015 and 25% by year 2020; - 20% at least share of cogeneration electricity of the gross consumption of electricity in 2020;

- restriction of the amount of atmospheric CO2 emissions at less than 5 million tons in 2020; - maintenance of the level of power transmission losses below 3% and the share of distribution losses below 6% from 2015. - decrease of the share of oil shale electricity in the gross production of electricity to less than 70% by 2018.  “Estonian Environmental Strategy 2030” (The Riigikogu approved it on 14 February 2007 (RT I, 01.03.2007, 19, 96)) (MoE, 2007). These are: - 30% reduction of waste disposed to by 2030; - restrict at less than 90% by 2015 the relative share of oil shale in the electricity production; - at least 8% increase by 2015 of the relative share of electricity produced from RES and consumed in Estonia ;

1 Estonian Act on Ratification of the Kyoto Protocol RT II 2002, 26, 111 and Ambient Air Protection Act RT I 2004, 43, 298 10 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” - at least 20% increase by 2020 of the relative share of electricity produced in combined heat and power plants and consumed in Estonia; - 8% decrease by 2009 of network losses in the distribution network; - maintain at 8% at least until 2015 the network losses in the distribution network; - maintain at 3% at least the network losses in the transmission network until 2015; - at least 9% reduction by 2015 of the Estonian power stations’ own consumption.  “ Estonia’s National Renewable Energy Action Plan 2020” (NREAP, 2010): - 25% increase of RES share in the total gross consumption. The national 2020 target and estimated trajectory of energy from renewable sources in heating and cooling, electricity and transport are showed in Table 1. - nominal of 253MW electricity generating capacity based on RES by the end of 2011. According to Estonia’s National Renewable Energy Action Plan 2020 (NREAP), the RES-E capacity is expected to grow to 727MW, which means that a growth of 474MW from current level is foreseen. - 2,7% minimum increase of the market share of biofuels compared to the total consumption of fuel in transport of year 2010 (0%). - 11,4% increase of the final energy consumption in 2020 compared to the average final energy consumption in 2005. Table 1: National 2020 target and estimated trajectory of energy from renewable energy sources in heating and cooling, electricity and transport. 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (in %) RES- 16,3 19,2 19,3 19,3 19,1 19,0 18,8 18,6 18,4 18,1 17,9 17,6 H&C RES-E 0,3 1,7 1,8 2,1 2,9 3,2 3,5 3,5 4,0 4,3 4,2 4,8 RES-T 0,0 0,0 0,0 0,6 1,2 1,3 1,3 1,6 1,8 2,1 2,4 2,7 RES share 16,6 20,9 21,2 22,0 23,3 23,4 23,6 23,7 24,2 24,5 24,5 25,0 Source: Estonia’s National Renewable Energy Action Plan 2020 (NREAP, 2010)

Spectrum of climate change mitigation options for Estonia Total GHG emissions, excluding emissions and removals from land use, land-use change and forestry (LULUCF), decreased by 59% between 1990 and 2009, while total GHG emissions, including net emissions or removals from LULUCF, decreased by 68%

(UNFCCC, 2011). The most important GHG in Estonia is carbon dioxide (CO2), with approximately 85% share in the total GHG emissions. For the period 1990-2009 the CO2 emissions decreased by 72% (UNFCCC, 2011). The largest share of CO 2 emissions is from the energy sector, which in 2009 contributed 85,53% of total GHG emissions followed by agriculture (7,74%), waste (3,94%), industrial processes (2,69%) and solvent and other product use (0,10%) (NIR, 2011). 97,7% of the energy sector emissions originate from fuel combustion and only 2,3% are from fugitive emissions (NIR, 2011). This high percentage is due to the use of domestic fuels (oil shale, wood and peat). Their share in the primary energy balance has remained at the level of 65–75% during the last decade (Roos I., Soosaar S., 2012). Estonia is the only country in the world that uses oil shale2 as its major primary source of energy. Wood is the second important primary energy resource since more than half of the Estonian territory is covered by forest (Roos I., Soosaar S., 2012). The third important indigenous fuel is peat.

2 Estonian oil shale as a fuel is characterized by high ash (45–47%) and sulphur (1,5–1,7%) content, low net calorific value (8,3–8,7 MJ/kg) and high content of volatile matter in the combustible part (up to 90%) (Roos I., Soosaar S., 2012). 11 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Estonia’s dependency on imported energy sources was 21,2% in 2009 (Roos I., Soosaar S., 2012). All petroleum products are imported to Estonia, mainly from Lithuania, Finland and Russia since the country has no oil-refining capacity. Estonia has no indigenous natural gas, and imports it from Russia. In total primary energy consumption, the share of fossil fuels is very high, approximately 90% (Roos I., Soosaar S., 2012). The majority of mitigation efforts are focused on this sector and particularly on electricity production because: i) approximately 85% of electric power is generated from domestic oil- shale based power plants in Narva town (EE AR, 2010); ii) in 2009 approximately 51% of the converted primary energy is used for electricity generation (Roos I., Soosaar S., 2012) and iii) Estonia is a net exporter of electricity to Latvia, Finland, Russia and Lithuania (Roos I., Soosaar S., 2012). Using oil shale as its main source of fuel Estonia has ensured its security of supply and the independence of its electricity price from trends in world prices for energy sources. On the other hand, electricity generation from oil shale releases considerable amounts of CO2 emissions, imposing the need to change Estonian generation portfolio by increasing its energy diversity (EE AR, 2010). Therefore, although the main source for energy generation in Estonia today and in the near future will remain oil shale, which has an environmental impact similar to that of coal, the state subsidies for RES are expected to bring a sharp increase in the amount of RES-E (electricity generated from RES) and meet the respective targets set by the European Union. It is indicative that the share of RES-E generation over consumption was 0,6% in 2003, 2% in 2008 and 9,7% in 2010 (Brückmann R., Piria R., 2011). In 2011 the production of RES accounted approximately for 13% of electricity consumption (together with self-consumption of power plants), which is 3,2% more than the year before (Elering, 2011). The Estonian power sector consists mainly of thermal power plants fueled by domestic oil shale (approximately 85%). Most of the plants have been operational for more than 30 years, with low thermal efficiencies. CFBC (Circulating fluidized bed combustion) oil shale units are renovated. The rest of existing thermal power plants have deSO x technology and by the year 2016 will be equipped by deNOx technology. Heat production in district heating systems is fueled by imported fuel natural gas (EE AR, 2010). Great changes have taken place in the Estonian electricity sector after the adoption of the aforementioned “Estonian Electricity Sector Development Plan until 2018”. The submarine cable Estlink was completed in 20063, the new fluidised bed boilers were successfully put to use in Narva Power Plants, the production of renewable electricity has started to develop quickly, the security of supply of natural gas and the resulting energy security of states have risen to the agenda. Power losses have decreased significantly and the export of electricity has increased considerably in the Estonian power system as a whole. Great challenges in the next few years are connected with the development of the electricity markets of Estonia and the Baltic States. The prohibition to use the old units of Narva Power Plants shall be applied as of 2016 and the reactors of Ignalina nuclear power plant that were closed in 2009 will require significant investments in the electricity sector (ESDP, 2009). The full opening of the electricity market in 20134 at the latest and the application of the new rules of emission trading in 2013 will also have a considerable impact on the development of the Estonian electricity market. The development of electricity markets requires adequate market regulation in all three5 Baltic States (ESDP, 2009). Problems concerning the coverage of peak demand may arise in Estonia during 2012. These problems will become more severe in 2016 when the old units of Narva Power Plants will not be used as in the present form. From the current electricity production capacity probably only the two new fluidised bed combustion units of Narva Power Plants, the second 3 This 350MW underwater cable increased Estonian reliability and enables the export of produced electricity to the Nordic countries (Roos I., Soosaar S., 2012). A 650MW interconnector between Estonia and Finland is expected to be operational in 2014 (Roos I., Soosaar S., 2012). 4 In 2010 the Estonian electricity market was partially opened (by 35%) (ECA, 2011). 5 Estonia, Latvia and Lithuania 12 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” power unit of Iru Power Plant and small stations will remain operational from 2016. The capacity of wind turbines cannot be taken into account in the capacity balance (ESDP, 2009). Exploitation of RES According to Directive 2009/28/EC the Estonian share of renewable energy needs to be 25% of the final consumption of energy including 10% of fuels used in transport in year 2020 (Elering, 2011). The share of electricity produced in combined heat and power plants should be at least 20% in 2020 according to the target (Elering, 2011). According to the survey of the Tallinn University of Technology, the most promising potential of Estonian renewable energy is combined heat and power production based on biofuel and wind power; and small-scale hydropower (ESDP, 2009). Research and development efforts for RES are supported by the ten (10) national universities and all the involved higher education colleges (Patlitzianas K., Karagounis K. 2011). Biomass Biomass is the RES with the greatest potential in Estonia since about 50,6% of whole territory (about 2,3 million ha6) is coved by forests and about a quarter is used in agricultural production (Kingsbury A., Zochowska M., 2011; EBRD, 2009). Estonia has a high potential for energy production from wood-based fuels - firewood, wood by-products (e.g., wood chips, pellets, granules, briquettes), forest residues, waste wood (AgriPolicy, 2009). The total primary energy content of biomass that can be used annually for energy production exceeds the amount of 20 TWh (EBRD, 2009). Biomass has been used up to now in district heating and other-heat boiler plants ( I., Soosaar S., 2012). The biggest share of RES electricity production is from biomass used in CHP plants (Estonian Competition Authority, 2012). Forest trees biomass is an important bioenergy source in Estonia. The annual amount of fellings formed about 6,5-7,5 million joule/m3 per year and demand of timber for renewable energy in Estonia is 3,6 milj./m3 per year. The annual felling amount has decreased significantly during the last five years (Korjus H., Lang M. 2009). The consumption of wood for energy in Estonia increased due to the establishment of new boiler-houses and combined power plants-boiler houses. Also oil-shale power plants started to use woody biomass as additional fuel for producing of energy (Korjus H., Lang M. 2009). Logging residues are used mainly for heating of boiler houses. Their use increased and according to estimations of the Estonian State Forest Management Centre (RMK) the potential amount of logging residues is approximately 220000 m3 per year (Korjus H., Lang M. 2009). The survey of the Tallinn University of Technology proposes the replacement of firewood boilers of boiler plants with combined heat and power appliances that have 31 MW of electrical capacity. This will allow the production of additional 830 GWh of heat (maximum) and 164 GWh of power (maximum) from firewood on the basis of cogeneration. Electricity produced from biogas – approximately 3 MW – and electricity produced on the basis of black liquor (the production depends on the profitability of the production in Estonia) will be added thereto (ESDP, 2009). The new cogeneration stations would operate mainly on biofuels. Peat, firewood, logging and wood waste are local fuels that have significant energetic potential which could be used sustainably in small cogeneration stations (ESDP, 2009). The biogas sector is in an early stage of development for acquiring know-how practices and implementation of practical solutions (TU, 2010). The resources of biogas would theoretically enable to produce approximately 10% of primary energy based on biogas (TU, 2010). The main obstacle in promoting this sector is the fact under the frame of the current economic and market situation the production of biogas is not profitable (TU, 2010). Additionally, know how practices and experience in biogas are insufficient and fragmented in

6 Estonian Ministry of Environment homepage: http://www.envir.ee/67248 13 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Estonia (TU, 2010). About 2,15% of the theoretical potential of biogas or 3,3% of the realistic potential of biogas is being used (TU, 2010). The economically usable biogas potential of the country is estimated to be (TU, 2010):  20% of the hay made at nature conservation areas;  20 % of silage from unused agricultural land, in two harvests (yield 7,3 t/ha);  5% of energy crops growing on usable agricultural land (830000 ha), in two harvests (yield 20 t/ha);  80% of landfill gas is used for combined heat and power production;  50% of sewage sludge is used for biogas production;  30% of total manure and slurry can be used for biogas production;  10% of bio waste (food industry, kitchen waste). The actual usable quantity is estimated to 286 million Nm³/a allowing its use to produce

688 GWhel annually, with electrical nominal power of 78 MW (TU, 2010). Wind power Wind power is the second largest potential RES due to the geographical location of the country to the Baltic Sea (Kingsbury A., Zochowska M., 2011). The increase of wind energy in 2011 compared to 2010 was 29% (Estonian Competition Authority, 2012). Wind resources suitable for power utilization are available on approximately 20% of Estonia’s territory with the most promising areas concentrated in the archipelago of Estonia, along the coastal areas of the Baltic Sea and the eastern shore of the Gulf of Riga (AgriPolicy, 2009; EBRD, 2009). In 2003 the potential for wind energy production was estimated at 924 GWh/y (AgriPolicy, 2009). More recently, the theoretical wind potential in Estonia was estimated at about 9 TWh (EBRD, 2009). Considering electrical network restrictions, the optimistic wind target is considered at 3 TWh and realistically the potential is about 1,3 TWh. The strongest obstacles to the construction of wind power are the low grid capacity and the lack of regulating reserves to compensate the fluctuations during its production (EBRD, 2009; Kuhi- Thalfeldt R., Kuhi-Thalfeldt A., 2010). The optimistic figure is close to a potential wind power of more than 4 GW for 2050 provided by Inforse-Europe in 2011. The survey of the Tallinn University proposes increased capacity of wind farms up to 50 MW with the annual production of 123 GWh (ESDP, 2009). Hydropower Estonia has 7308 rivers and streams, but they are shorter than 10 km, with less than 50 rivers exceeding flows of 2 m3/s and only 14 rivers having flows over 10 m3/s, as the country’s terrain is relatively flat (EBRD, 2009). Therefore there is limited possibility for large hydro generators, but several hundred sites are suitable for small hydro (EBRD, 2009). The technical hydropower resource is estimated to be about 25-35 MW (excluding the border river Narva) with total annual output potential of 0,2-0,4 TWh (AgriPolicy, 2009; EBRD, 2009). The survey of the Tallinn University proposes increasing of the capacities of hydroelectric power plants up to 10 MW. This would enable to produce 45-55 GWh of electricity with an average annual quantity of water (ESDP, 2009). Solar – Geothermal - Tidal The solar energy resource potential is small in Estonia because of climatic conditions unfavorable for using solar energy and of northern latitudinal placement (EBRD, 2009). The

14 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” geothermal conditions in Estonia are unfavorable and the geothermal gradient is lower than the average level (EBRD, 2009). The Baltic Sea has a low tidal range because it regularly freezes during the winter. Therefore it is not suitable for marine power generation (Davies S. and Holmes I., 2011). Energy efficiency One of the main mitigation actions for Estonia is the increase of energy efficiency. Since oil shale will remain the primary energy source for Estonia one of the most effective ways of sustainable consumption of this energy source is energy saving (NDPUOS, 2008). The improvement of energy efficiency contributes to environment-friendly power engineering (more efficient energy consumption – smaller environmental impact) and to the increase of security of supply (smaller energy consumption – smaller need for imported energy). All these coincide with the objectives of the Development Plan of the Electricity Sector upon the increase of energy efficiency (ESDP, 2009). Estonia aims to maintain, as aforementioned, the final consumption of energy at the level of year 2010 (approx. 2866 ktoe) i.e. reducing final consumption of energy by approximately 11% compared to the level forecast for 2020 (NRP, 2012). Accordingly, final consumption of energy in 2015 needs not to exceed the current consumption and should remain between 2938-2986 ktoe (approximately 4% lower than the projected level for 2015) (NRP, 2012). The main energy consumer is the household sector with 45% in 2009, followed by industry (19%), transport (18%), services (15%) and agriculture (3%) (Roos I., Soosaar S., 2012). Heating has the highest potential for energy conservation (Roos I., Soosaar S., 2012). There is no proper quantitative analysis of energy efficiency in sectors due to the lack of several reliable data, as well as to some significant gaps and uncertainties in the available data (TTU, EEPM, 2009).

Energy sector The measures that affect electricity and heat producers’ operation and foster improved energy efficiency in generating electricity are the following (MOIEEP, 2011): - opening of the electricity market. At present, the electricity market is open for those customers whose annual consumption exceeds 2 GWh; on 1 January 2013, the market will be opened for all customers. - modernization of oil shale electricity generation facilities; - support offered for constructing new CHP plants; - requirements for efficiency of CHP plants. CHP plants are divided into high- efficiency and low efficiency plants on the basis of cogeneration Directive 2004/8/EC. Only those CHP plants that meet the high-efficiency cogeneration requirements are granted support. High-efficiency cogeneration requirements are established in a regulation7; - options for local authorities to use district heating regions in compliance with the District Heating Act. - heat price regulation8. - support granted under the Operational Programme for the Development of the Living Environment and from other state budget funds. The measures are used to finance transfer from the use of fossil fuels to the use renewable sources of energy in generating heat and construction of small CHP plants using renewable sources of

7 Requirements for efficient coproduction, regulation No 30 of the Minister of Economic Affairs and Communications, 3 May 2007 (https://www.riigiteataja.ee/akt/12825847 ; in Estonian). 8 The ceiling for heat prices is set by the regulator of energy prices (the Estonian Competition Authority) for all companies offering district heating services, including boiler-houses and CHP plants 15 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” energy. Implementation of the measures is managed by the Environmental Investment Centre.

Residential Building Sector The National Development Plan for Housing Sector 2008–2013 (approved by the Government in January 2008) has energy efficiency measures for the residential sector, but the energy saving effect of this plan has not been ex-ante estimated (TTU, EEPM, 2009). There are target values (to be reached by 2013) foreseen in the plan for some of the measures: - 20% increase by 2013 of the share of residential buildings that have undergone energy audits, implemented the recommended measures and reduced their energy consumption (ENHDP, 2008); - increasing the share of A-rated electrical appliances sold to 50% (ENHDP, 2008; TTU, EEPM, 2009); - 8000 apartment blocks receiving retrofit support (ENHDP, 2008; TTU, EEPM, 2009); - 95% of apartment houses with energy performance mapped (TTU, EEPM, 2009); - 30% of apartment blocks (of the total number of buildings in the target group) to receive energy audits (ENHDP, 2008; TTU, EEPM, 2009), and - 10% of apartment buildings to be improved to be in the top energy performance category (ENHDP, 2008; TTU, EEPM, 2009).

Industrial sector - adoption of new technology and increase in awareness is estimated to provide 30% conservation in heat and 10% conservation in electricity (NRP, 2012); - encouragement to perform energy audits in industries and small enterprises (NEEP II); - contribution to improvement of energy auditors’ qualifications with respect to industrial energy conservation issues, fostering energy consultants’ participation in EU projects related to energy conservation in industries (NEEP II); - better financing opportunities for energy conservation measures in industries and small enterprises (NEEP II); - development of databases and methods for benchmarking of companies (NEEP II).

Transport sector - reduction of the need for transport (NRP, 2012); - increase use of public transport (NRP, 2012); - increase the economy of vehicles (NRP, 2012);

- increase the share of cars with emission lower than 120 g CO 2/km to 30% by 2013 (TTU, EEPM, 2009).

Fuel switch No information available.

Mitigation through JI and GIS In the 5th National Communication of Estonia to UNFCCC, there is no explicit information on how the country will use the Kyoto Protocol mechanisms supplementary to domestic action. The country reported its intention not to use these mechanisms to meet its KP target for the first commitment period (UNFCCC, 2011). Estonia will meet its Kyoto Protocol target 16 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” by domestic efforts only, and its total GHG emissions are expected to be around 50% below the base year emissions during the first commitment period (2008–2012) (UNFCCC, 2011). JI Estonia has signed Memorandum of Understanding (MoU-s) with five (5) countries – Finland, Austria, Sweden, Netherlands and Denmark (EJIG, 2012). Priority areas for JI projects are as follows (EJIG, 2012): - utilisation of RES (incl. among others grid-connected wind and hydro power); - fuel-switch from fossil fuels to biomass at boilerhouses; - combined heat and power production; - improvement of energy production technology leading to higher efficiency or emission reduction; - demand side management of energy consumption; - energy savings in heating of buildings (insulation, regulation); - energy savings in energy production and distribution; - utilization of waste industrial heat in existing installations; - construction of collection systems for landfill gases in old landfills and use of energy thereof, ( animal waste management, resource management, waste recycling); - implementation of industrial processes with higher energy efficiency. Projects that cover other facilities and measures leading to the reduction of GHG emissions may also be submitted.

GIS GIS projects concern (Report, 2011): - Energy efficiency and use of renewable energy at small boiler houses and improvement of district heating networks; - Promoting the use of public transport; - Increase in the share of renewable electricity; - Renovation of public buildings with an aim to reduce energy consumption; - Renovation of multi-apartment building with an aim to reduce energy consumption.

EU-ETS According to the Estonian National Allocation Plan (NAP) for the first phase of the EU ETS (2005–2007), 43 installations were included, with the amount of approximately 14,2 Mt

CO2 eq per year allocated emission allowances (UNFCCC, 2011). Estonia has submitted its NAP for the second phase of the EU ETS (2008-2012) to the EC for approval and the EC reduced the country’s total amount of allowances to 12,7 Mt CO 2 eq per year for the period 2008–2012. Estonia contested the decision in the Court of First Instance of the EC and the court annulled the EC’s decision. At the time of the review, Estonia has revised its NAP and submitted it to the EC for approval on 8 February 2011 (UNFCCC, 2011). Estonia included in the National Programme of Greenhouse Gas Emission Reduction for 2003–2012, the measures related to energy efficiency improvements in cement and lime production. Estonia has reported that the EU ETS created the incentives for emission reduction for the enterprises involved during the first phase of EU ETS (2005–2007).

Emission reduction was estimated at 13,9 Gg CO2 eq (UNFCCC, 2011). Other mitigation options 17 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” None.

Spectrum of adaptation needs in Estonia There is no comprehensive strategy for adaptation in place in Estonia. However, a process for drawing up a National Adaptation Strategy (NAS) has started and is coordinated by the Climate and Radiation Department in the Ministry of the Environment (MoE) (ECAP). A. Energy sector The energy sector is particular sensitive to climate change due to impacts on: i) the availability of cooling water for power generation; ii) the potential for hydropower, wind and solar power; iii) the productivity of crops for bio-energy; iv) the energy use for heating and cooling in households (Pilli-Sihvola P., et al., 2010; Isaac M., van Vuuren D.P., 2009). Regarding the first impact, the oil shale sector is the largest water consumer in Estonia. In 2005, 1,5846 bn m3 of water in total was taken from all water sources of the country, which was 188 mn m3 less than in the previous year (NDPUOS, 2008). The energy sector enterprises in total used 1,258 bn m3 of water from surface water bodies, mostly used as cooling water for power plants (NDPUOS, 2008). In total, 273,7 mn m3 of ground water was used. 223,36mn m3 was pumped out of opencasts, 6–73% of it was ground water (NDPUOS, 2008). Adaptation needs for this sector will require: - Technical options; - Management of energy demand. B. Agricultural sector One third of the Estonian land area is used for agriculture (ERDP, 2011). This sector is expected to be subjected to violent storms and flash floods, with higher and more intense precipitation, particularly in winter (EC, 2009). On the other hand it may be possible to cultivate new areas and crops, due to longer growing seasons, and yields could substantially increase under limited warming of 1°C to 3°C, but production could suffer from new pests and diseases. Permafrost melting due to warming will also be of particular concern for soil structure. According to the 5th National Communication to UNFCCC agriculture in Estonia will be more efficient and competitive in the future (UNFCCC, 2009). C. Forestry sector Almost half of the Estonian land area is covered with boreal forests with a remarkable role in national economy and ecology. There has been a continuous increase in forest area (about 2,5 times), volume (about 3 times), and the average age of stands (about 1,3 times) in Estonia during the past half-century (UNFCCC, 2009). The main cause of this increase is the conversion of abandoned agricultural lands into forest (particularly after World War II and after the Soviet Union collapse) (Korjus H., Lang M. 2009). 70% of the forests are commercial forests covering 1,5 million ha. One third of the forests are placed under different protection regimes. In terms of the proportion of protected forests, Estonia holds the 10th place in Europe9. Further climate warming in Estonia increases the risk of: i) diseases due to dendrofagous insects and ii) fires. The forest fires will increase with increasing droughts. There has been a remarkable increase of them during the recent years. Since 60% of forest fires happen in May and June, the increasing spring-summer droughts will increase this risk (UNFCCC, 2009). The increase in temperature prolongs the growing season and enhances the decomposition of soil organic matter, increasing the supply of nitrogen, all of which enhance forest growth, timber yields and carbon sequestration (UNFCCC, 2009). Higher winter temperatures will 9 Estonian Ministry of Environment homepage: http://www.envir.ee/67248 18 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” shorten the period with frozen soils and snow cover, impacting negatively forest management operations. Reduced availability of timber due to the inaccessibility of forest resources on wet soils outside the frost period will pose a threat to the forest industry (UNFCCC, 2009). An adaptation need is to improve forest productivity that in turn will create opportunities for increased utilisation of forest resources (UNFCCC, 2009). The Estonian Forest Development Plan until 2020 (Estonian version) handles indirectly these needs. More specifically, support for investment in adding value to forestry products – this support is meant for micro-undertakings (with fewer than 10 employees) engaged in forestry. The support is granted to purchase machinery or equipment, for automatic or IT-equipment, as well as for expenditure related to inventions, utility models and patents (ECAP). The Plan raises the share of forest land under strict protection to 10% of the total forest land and provides additional protection for natural treasures during regeneration cutting. For securing good use and creating jobs, the optimal prescribed cut is estimated at 22 million m 3 a year, while the best scenario for balanced development involves a prescribed cut of 12–15 million m3 a year, which nearly doubles the prescribed cut for 200910. Other adaptation needs include (Korjus H., Lang M. 2009): - improved continuous monitoring and systematic recording the data about the actual forest health and growth, forming archives of the records for later analysis; - sustainable forest management. D. Water resources The main expected climate change impacts for this sector in Estonia are: increased water run-off in winter; decreased maximum water discharge and run-off in spring; increased frequency of winter flooding; worsening water quality; negative impact on aquatic habitats (UNFCCC, 2011; UNFCCC, 2009). Rise in precipitation would increase groundwater recharge (by 50–75%) and the physical extent of wetlands; areas suffering from excess moisture would become even wetter (UNFCCC, 2011; UNFCCC, 2009). The aforementioned climate changes are not expected to have negative effects regarding the provision of freshwater because the available groundwater resources can guarantee a sufficient supply of good quality domestic water in all regions. Furthermore, the global warming is expected to have a positive influence on the ecological state of water-bodies in Estonia (EC, 2007). Estonia is vulnerable to coastal erosion and flooding which are expected to increase because of climate change (Peleikis J., 2011). More specifically, changes in atmospheric circulation and warmer winters have resulted to strong westerly storms associated with high sea levels in ice-free sea conditions and of increased frequency on the Estonian coast (Kont A., Jaagus J., 2010). The energy of strong storms and their impact on shore dynamics is exponentially larger than that of moderate storms (Kont A., Jaagus J., 2010). The frequency and intensity of such storms in the Eastern Baltic Sea region – along with mean global sea- level rise - are predicted to affect significantly the Estonian coast over the next decades (Peleikis J., 2011; Kont A., Jaagus J., 2010). Estonia lacks of an Integrated Coastal Zone Management (ICZM) as a land use approach designed to access, analyze, and balance the concerns of various coastal zone interest groups. The set of laws and regulations regulating its coastal zone – while still evolving - remains incomplete and subject to numerous loopholes (Kont A., Jaagus J., 2010).

10 The Parlament of Estonia homepage: http://www.riigikogu.ee/index.php?id=67559 19 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” References AgriPolicy, Enlargement Network for Agripolicy Analysis, 2009. Analysis of renewable energy and its impact on rural development in Estonia. http://www.euroqualityfiles.net/AgriPolicy/Report %202.2/AgriPolicy%20WP2D2%20Estonia%20Final.pdf19 Brückmann Robert, Piria Raffaele, Herling Jana, Bauknecht Dierk, 2011. Integration of electricity from renewables to the electricity grid and to the electricity market INTEGRATION National report: Estonia. Berlin, 20 December 2011. Available at: http://www.eclareon.eu/sites/default/files/estonia_- _res_integration_national_study_nreap.pdf

CD, 1993. Council Decision of 24 June 1993 for monitoring mechanism of Community CO2 and ohter greenhouse gas emissions (93/389/EEC). EÜT L 167, 09/07/1993 p 0031 0033. http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:1993:167:0031:0033:EN:PDF EBRD, 2009. Estonia, Country Profile. http://ws223.myloadspring.com/sites/renew/Shared %20Documents/2009%20Country%20Profiles/estonia.pdf EC, 2007. Country Overview and Assessment- Estonia, http://ec.europa.eu/maritimeaffairs/documentation/studies/documents/estonia_climate_change_en.pdf EC, 2009. Agriculture and Rural Development, 2009. Fact Sheet, Climate Chnage: The challenges for Agriculture. Available at: http://www.seerural.org/wp-content/uploads/2009/05/01_CLIMATE- CHANGE-THE-CHALLENGES-FOR-AGRICULTURE1.pdf ECA, 2011. Estonian Competition Authority, 2011. Estonian Electricity and gas market – Annual Report 2010. Available at: http://www.konkurentsiamet.ee/?id=14463 ECAP. European Climate Adaptation Platform website. http://climate- adapt.eea.europa.eu/countries/estonia EE AR, 2010. Eesti Energia AS. Annual Report 2010/2011. Tallinn. EJIG, 2012. Ministry of the Environment of the Republic of Estonia, 2012. Estonia’s Joint Implementation Guidelines. http://ji.unfccc.int/UserManagement/FileStorage/QJMAH2PV90E4TGI17O8CLFKWXUDRYZ Elering, 2011. Annual Report 2011. Available at: http://elering.ee/public/Infokeskus/Aruanded/Aruanded_eng/Elering_Aruanne_2011_eng.pdf ENHDP, 2008. Ministry of Economic Affairs and Communications, 2008. Estonian National Housing Development Plan 2008-2013. Available at: http://been-online.org/filea ERDP, 2011. Ministry of Agriculture, 2011. Overview of the implementation of rural enterprise measures of Estonian Rural Development Plan 2007–2013. Available at: http://www.agri.ee/public/juurkataloog/TRUKISED/MAK_investeeringutoetused_ENG.PDF ESDP, 2009. Estonian Electricity Sector Development Plan until 2018. Report to Ministry of Economic Affairs and Communications of Estonia. Tallinn, 2009. (In Estonian). www.mkm.ee Estonian Competition Authority, 2012. Estonian Electricity and Gas Markets – Report 2011. Available at: http://www.konkurentsiamet.ee/file.php?22537 Kingsbury Agata, Zochowska Monika, 2011. Renewable energy and bio-fuel situation in Estonia. Gain Report No. ES1104. http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Renewable%20energy %20and%20bio-fuel%20situation%20in%20Estonia_Warsaw_Estonia_12-6-2011.pdf Kont A., Jaagus J., Orviku K., Palginõmm V., Ratas U., Rivis R., Suursaar Ü. and Tõnisson H., 2010. Natural Development and Human Activities on Saaremaa Island (Estonia) in the Context of Climate Change and Integrated Coastal Zone Management Korjus Henn, Lang Mait, Uri Veiko, Laarmann, 2009. COST action FP0703 – ECHOES, Country report: Estonia. Available at : http://www2.gip- ecofor.org/docs/37/countryreports/CountryReports_July-August- Sept2009/Echoes_Estonia_Report_Oct09.pdf

20 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Kuhi-Thalfeldt R., Kuhi-Thalfeldt A., Valtin J., 2010. Estonian electricity production scenarios and their CO2 and SO2 emissions until 2030. WSEAS TRANSACTIONS on POWER SYSTEMS. ISSN: 1790-5060 LG Action, 2011. LG Action - Country Profile Collection. Available at: http://www.lgaction.eu/fileadmin/template/projects/lgaction/files/it/Country_Profiles/Country_Profile_ESTONIA.pd f Ministry of the Environment, 2007. Estonian Environmental Strategy 2030. Available at: http://www.envir.ee/orb.aw/class=file/action=preview/id=1101230/inglisekeelne.pdf MOIEEP, 2011. Ministry of Economic Affairs and Communications, 2011. Mid-term overview of implementation of Energy Efficiency Plan 2007–2013 and further implementation. The second energy efficiency action plan of Estonia. Available at: http://ec.europa.eu/energy/demand/legislation/doc/neeap/estonia_en.pdf NDPUOS, 2008. Ministry of the Environment of the Republic of Estonia, 2008. National Development Plan for the utilization of oil shale, 2008-2015. Available at: http://www.envir.ee/orb.aw/class=file/action=preview/id=1155858/P%F5levkivi_arengukava_+EN.pdf NEEP II. National Energy Efficiency Plan II. Available at: http://www.buildup.eu/publications/20806 NIR, 2011. Greenhouse Gas Emissions in Estonia 1990–2009. National Inventory Report to the UNFCCC secretariat. Tallinn 2011. http://www.keskkonnainfo.ee/failid/ohk/Estonia_IIR_2011.pdf NREAP, 2010. Estonia’s National Renewable Energy Action Plan 2020. Report to Ministry of Economic Affairs and Communications of Estonia. Tallinn. (In Estonian). www.mkm.ee. NRP, 2012. Government of Estonia, 2012. National Reform Programme “ESTONIA 2020”. Available at: http://valitsus.ee/UserFiles/valitsus/en/government-office/growth-and-jobs/Estonia%202020%20in %202012/ENG%20national%20reform%20programme%20Estonia%202020.pdf ODYSSEE-MURE, 2009. Energy Efficiency Policies and Measures in Estonia. Monitoring of Energy Efficiency in EU 27, Norway and Croatia (ODYSSEE-MURE). Tallinn University of Technology, Tallinn, September 2009. http://www.odyssee-indicators.org/publications/PDF/estonia_nr.pdf Patlitzianas Konstantinos, Karagounis Konstantinos, 2011. The progress of RES environment in the most recent member states of the EU. Renewable Energy 36, pp. 429-436. Peleikis Julia, 2011. Climate Change Adaptation in the Blatic States – Current Developments on National Adaptation Strategies. Local experts: Daina Indriksone, Laura Remmelgas, Vaida Pilibaityte. Report, 2011. PROMITHEAS-4. Overview of the Mitigation/Adaptation Policy instruments in Estonia. The report is written by Prof. Alvina Reihan. Available at: www.promitheasnet.kepa.uoa.gr/ Roos Inge, Soosaar Sulev, Volkova Anna, Streimikene Dalia, 2012. Greenhouse gas emission reduction perspectives in the Baltic States in frames of EU energy and climate policy. Renewable and Sustainable Energy Reviews 16 (2012) 2133– 2146. TTU, EEPM, 2009. Tallinn University of Technology, 2009. Energy Efficiency Policies and Measures in Estonia, Monitoring of Energy Efficiency in EU 27, Norway and Croatia (ODYSSEE-MURE). Available at: http://www.odyssee-indicators.org/publications/PDF/estonia_nr.pdf TU, 2010. Tarty University, 2010. Background Paper on Biogas Sector in Estonia: Current Status and Development Needs. Available at: http://www.lote.ut.ee/orb.aw/class=file/action=preview/id=882699/Background+paper+on+Biogas+Se ctor+in+Estonia_Current+Status+and+Development+Needs.pdf UNFCCC, 2011. Report of the in-depth review of the fifth national communication of Estonia. Note by the secretariat. CC/ERT/2011/13, 24 August 2011. Available at: http://unfccc.int/national_reports/annex_i_natcom/idr_reports/items/4056.php and http://unfccc.int/files/kyoto_protocol/compliance/plenary/application/pdf/cc-ert-2011- 13_idr_of_nc5_of_estonia.pdf UNFCCC, 2009. Ministry of Enevironment, 2009. Estonia’s 5th National Communication under the UNFCCC. Available at: http://unfccc.int/resource/docs/natc/est_nc5.pdf

21 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” BUSINESS – AS – USUAL SCENARIO (2000 – 2050) BAU scenario description General comments The current Mitigation/Adaptation policy portfolio for Estonia is adjusted to the EU standards. Estonia, as an EU member State since 2004, incorporated into its national legislation EU regulations and directives. By 2010, the Estonian climate change legislation was harmonized with the relevant EU legislation, except for the legislation on emissions from large combustion plants and from large oil shale fired power plants (Directive 2001/80/EC11); it is planned that Estonia will become fully compliant with the EU requirements by 1 January 2016 (UNFCCC, 2011). Estonia will close all electricity generation facilities that do not comply with this Directive or will restrict their work by 2016. Simultaneously, new oil shale- based electricity generation facilities will be built to ensure security of electricity supply. The construction of a 300 MWel electricity generation plant based on fluidized bed technology was planned to start in 2011 while in 2012, a decision on a further 300 MW el plant is expected to be made (MOIEEP, 2011). The country has met the EU requirements (Directive 2003/96/EC12) for taxation of fuels and energy. Since 1 January 2008 the rates of excise taxes have been at the EU minimal level, since 1 July 2009 some rates exceed that level (TTU, EEPM, 2009). Since January 1, 2011 the fuel excise tax reached 422,77 EUR per 1000 liters of lead free gasoline and 392,92 EUR per 1000 liters diesel fuel. The tax on natural gas was 23,45 EUR per 100 m 3 and the excise tax on electricity is 4,47 EUR per megawatt hour13. However the component of the national climate policy that concerns energy efficiency is not fully developed since there are no measures directly targeted for increasing energy efficiency in industrial sector (TTU, EEPM, 2009). There are plans for the adoption of stricter energy performance requirements after 2013, but the existing legal acts do not foresee the application of more stringent requirements yet (Laaniste M., 2010). The National Renewable Energy Action Plan (NREAP) sets the first steps for the development of the biogas sector (TU, 2010). The Estonian BAU scenario is mainly a mitigation policy portfolio.

Policy portfolio for this scenario

The policy instruments that were implemented before 31 December 2010, concern mitigation/adaptation activities and form the policy portfolio of the BAU scenario. Mitigation

Laws for RES Electricity Market Act14 (RT I 2003, 25, 153, date: 1 July 2003; amended by RT I 2009, 39, 262, date: 24.07.2009) This Act regulates the use of RES in the production of electricity in Estonia. It incorporated into national legislation the Directive 2001/77/EC15. The network operators purchase in a trading period (at a price of 0,052€/kWh) all the electricity generated by a producer of renewable energy to the extent of the operator’s network losses (AgriPolicy,

11 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:309:0001:0001:EN:PDF 12 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:283:0051:0070:EN:PDF 13 http://balticexport.com/?article=igaunijas-nodoklu-sistema&lang=en 14 http://www.konkurentsiamet.ee/?id=19475 15 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:283:0033:0033:EN:PDF 22 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” 2009). The 2007 amendment introduced a new aid scheme for producers of renewable energy allowing them to use the purchase obligation as before, but by selling the electricity produced itself and is given aid for the electricity sent to the grid and sold. The mandatory purchase price for electricity produced from RES rose by 42% (to 1,15 EEK /kWh), and the possibility of using the purchase obligation is no longer restricted to the network losses (EC, 2006). The aid lasts 12 years from the start of production (EBRD, 2009). The Act also foresees operating support for constructing fossil-fuel-fired CHP plants. The support on the terms and conditions stipulated in the act is ensured to plants that generate electricity in efficient cogeneration regime from waste as defined in the Waste Act, from peat or from the retort gas from oil shale processing. Plants that use other sources of energy receive support if their electrical capacity does not exceed 10 MW. This Act incorporates also the following Directives: i) Directive 2004/8/EC16 - Support to efficient cogeneration of heat and electricity (feed-in tariffs for cogeneration and investment support) ii) Directive 2009/28/EC17 (2001/77/EC) - Transform energy structure towards renewable energy and increased energy production from RES. The objective is to produce up to 1500 GWh/y wind power by 2020 (this instrument is also a part of Joint Implementation). Liquid Fuel Act18 (RT1 I 2003, 21, 127, date: 1 July 2003, amended by RT I 2003, 88, 591, date: 01.01.2004) This Act incorporates Directive 2003/30/EC19 regarding the introduction of obligation of 5-7% biofuel share in liquid motor fuels and of 50% biofuel share in liquid fuels for public transport. Laws for energy efficiency District Heating Act20 (RT I 2003, 25, 154, date: 11 February 2003; amended RT I 2007, 17, 80, date: 09.03.2007) This act regulates activities related to the production, distribution and sale of heat through district heating networks and connection to networks. It authorizes local governments to introduce the zoning of heat supply based on analyses, carried out for alternative heat supply options during the planning phase. The zoning of heat supply as an instrument of regulation of the energy sector gives municipalities the authority to avoid chaotic disconnection from district heating systems. The latter process had taken place in some towns and cities for many years. Planned zoning makes it possible to keep efficient DH systems in operation. Later these systems can form a basis for the introduction of CHP, which is not, up to now, a widely spread heat supply option in Estonia. In Estonia, tens of municipalities have introduced the zones of district heating (Report, 2011). A district heating region is an area determined by a comprehensive plan of a local authority within which consumer installations are provided with heat from the district heating network and the use of other sources of energy is restricted. District heating regions allow for CHP plants to be constructed. On the basis of the District Heating Act, 106 local authorities have established 164 district heating regions21.

16 http://www.energy.eu/directives/l_05220040221en00500060.pdf 17 http://www.energy.eu/directives/pro-re.pdf 18 http://www.konkurentsiamet.ee/?id=14705 19 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:123:0042:0042:EN:PDF 20 http://www.konkurentsiamet.ee/?id=11927 21 State’s efforts in ensuring the sustainability of heat supply, audit report by the National Audit Office of Estonia (2011): http://www.riigikontroll.ee/tabid/206/Audit/2169/Area/4/language/en-US/Default.aspx 23 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Energy Efficiency of Equipment Act22 (RT1 I 2003, 78, 525, date: 1 January 2004) This Act transposes the provisions of Directive 2002/91/EC23 into Estonia’s legislation. The main provisions were introduced to make relevant amendments in the act. It aims to (Report, 2011): i) introduce energy efficiency and energy labelling for certain types of household appliances (refrigerators, washing machines, electric ovens, etc.); ii) introduce requirements for heating equipment and for installation; iii) provide the bases of and the procedure for their conformity assessment and attestation in order to increase energy efficiency. The measures for improvement of the efficiency of the energy utilization in equipment are: - Energy labelling; - Verification of the efficiency of heat and air conditioning systems in buildings; - EE management and services.

Building Act24 (RT I 2002, 47, 297, date: 1 January 2003; amended by RT I 2002, 99, 579, date: 01.01.2003) EU Directive 2002/91/EC25 on the Energy Performance of Buildings (EPBD) was transposed into the Building Act and the Energy Efficiency of Equipment Act. The amendment of the Building Act that transposed the main elements of the EPBD came into force in October 2006, while all regulations transposing entirely the EPBD were finalized in January 2009 (Laaniste M., 2010). The Regulation on the energy certification of buildings (“The template on energy certificate and issuing procedure” (signed by the Minister of Economic Affairs and Communications on December 17, 2008 and published in the State Gazette) sets the procedure for the determination of energy rating of buildings and the template for the energy certificates (Laaniste M., 2010). The first energy certificates were issued and registered in the National Building Register in January 2009 (Laaniste M., 2010). The Regulation for Minimum Requirements for Energy Performance of Buildings (No. 258 of 20 December 2007) describes the methodology for providing compliance with the energy performance requirements and for calculating the energy performance number (Laaniste M., 2010). More specifically it provides detailed requirements for energy performance of buildings, the needed initial data and procedures for calculations of performance indicators which are defined as well (TTU, EEPM, 2009). This Regulation incorporates into the national legislation Directive 2010/31/EU26 of the European Parliament and of the Council of 19 May 2010 regarding the energy performance of buildings.

Laws for emission trading Ambient Air Protection Act27 (RT I 2004, 43, 298; 2010, 44, 261, date: 30.09.2004, amended by RT I, 04.07.2012, 4, date: 15.07.2012, partly 01.01.2013 and 01.03.2013) The Act regulates activities, which discharge emission of pollutants into the ambient air, damage to the ozone layer, and appearance of factors causing climate change. The Act provides main principles for the control of ambient air quality, sets basis for emission standards, foresees measures for reduction of air pollution, etc. The Act also provides that the possessors of pollution sources must take additional measures to reduce the emission levels of carbon dioxide and other GHG. To reduce the emission of pollutants into ambient air from stationary sources of pollution and to improve the quality of ambient air, the system of

22 http://www.legaltext.ee/text/en/X80004.htm 23 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:001:0065:0065:EN:PDF 24 http://www.legaltext.ee/text/en/X50072K2.htm 25 http://www.energy.eu/directives/l_00120030104en00650071.pdf 26 http://www.energy.eu/directives/2010-31-EU.pdf 27 https://www.riigiteataja.ee/akt/104072012009?leiaKehtiv 24 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” pollution permits and pollution charges has been implemented. A number of secondary level legal acts have been issued on the basis of this Act (Report (2011)). The Act stipulates that activities for the reduction of climate change have to be organized by the MoE. AS Eesti Energia, Ministry of Economic Affairs and Communications and other institutions, for example SEI Tallinn Centre, are usually involved in the implementation. Estonia is using two out of the three Kyoto Protocol flexible mechanisms – Joint Implementation and International Emissions Trading. The Ambient Air Protection Act (AAPA, 2004) incorporates into the national legislation Directive 2003/87/ЕС28 regarding the establishment of a scheme for greenhouse gas emission allowance trading within the Community and the amendment of Council Directive 96/61/EC29. The following regulations are linked with the Act and indirectly with climate change issues: Regulation No. 120 of Ministry of the Environment, 22 September 2004 - “Procedure for determination of ambient air pollution levels”, Appendix to the State Gazette; 2006, 33, 591. Regulation No. 115 of Ministry of the Environment, 7 September 2004 “-“Ambient air pollution level, limit value, target value, limit of resistance to pollution, alert threshold of a pollutant, further objectives and information threshold” (Appendix to the State Gazette 2004, 122, 1894; 2006, 33, 592). Green Investment Scheme In August 2009 the Government decided to sell excess Assigned Amount Units (AAU) through the Green Investment Scheme (GIS)30. A special working group led by State Chancellery was created for determining environmentally friendly projects for potential buyers. The Government approves each agreement and provides the Minister of the Environment with the mandate to sign the agreement (Report, 2011). The legal framework for the Green Investment Scheme is stipulated in the Ambient Air Protection Act. Also the Kyoto Protocol Ratification Act adopted by Riigikogu in 2002 established conditions for International Emission Trading (Report, 2011). In July 2010 the Ministry of Environment and the Environmental Investment Centre (EIC) signed an administration agreement which gives EIC rights to trade with the CO2 quotas and implement the Green Investment Scheme in Estonia. Joint Implementation Since 2002, Estonia has been active in carrying out joint implementation (JI) projects under the Kyoto flexible mechanisms (UNFCCC, 2009). JI is regulated by the Ambient Air Protection Act. Since May 2006 the Minister of the Environment has been designated by the Government to sign international agreements for JI projects. The Designated National Focal Point for Joint Implementation is the Ministry of the Environment. By February 2011, twelve projects have been approved, resulting in a total emission reduction around 1,9 Mt CO2-eq. by 2012 (Report, 2011).

Policy instruments related to climate change issues Integrated Pollution Prevention and Control Act31 (RT I 2001, 85, 512, date: 1 May 2002; amended by RT I 2002, 61, 375, date: 01.08.2002)

28 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:275:0032:0032:EN:PDF 29 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996L0061:en:HTML 30 http://www.kik.ee/en/energy/renewable-energy.html 31http://www.asser.nl/upload/eel-webroot/www/documents/Integrated%20Pollution%20Prevention%20and %20Control%20Act.pdf 25 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” The Act transposes the provisions of the amended Directive 96/61/EC32 and Directive 2008/1/EC33. The objectives are: i) determination the environmentally hazardous activities and to lay down the bases for the integrated prevention and control of pollution arising from such activities; ii) prevention or reduction of the harmful effect of human activity on the environment. A natural or legal person who operates the installation or to whom the decisive power over the functioning of the installation has been delegated. The Act regulates the application for an Integrated environmental permit (hereinafter integrated permit), that is a document that gives the right to use an installation or part of it in a way that ensures that the activities or subactivities listed in this act have the least possible harmful effect to the environment. The conditions provided by the integrated permit shall ensure protection of water, air and soil and treatment of waste generated in the installation, in the way to prevent pollution transfer from one environmental element (water, air, soil) to another. This Act incorporates into national legislation: i) Directives 88/609/EEC34 and 2001/80/EC35 Improvement of the efficiency of the use of oil shale (reconstruction of two units in Narva Power plants, capacity 2x215 MW)36. ii) Directives 88/609/EEC and 2001/80/EC Improvement of the efficiency of the use of oil shale (reconstruction of one unit in Narva Power plants, capacity 300 MW). iii) Directive 2009/31/EC37 establishes a legal framework for the environmentally safe geological storage (GS) of carbon dioxide (CO 2) to contribute to the fight against climate change. iv) Directive 1999/94/EC38 Promotion of sustainable transport. Fuel economy related labelling of new cars, information and training on economic driving. Charges Environmental Charges Act39 (RT I 2005, 67, 512, date: 1 January 2006, amended by RT I 2006, 29, 220, date: 8.07.2006) (MoE, 2005). The Act determines natural resources, air and water pollutants along with types of waste as conditions and rules of charging (MoE, 2005). According to this Act, pollution charges and resource use charges will gradually increase in the following years. Directive 2004/74/EC allowed Estonia to apply a transitional period until 1 January 2010 to introduce the output taxation on electricity. Despite this exemption, Estonia introduced excise duty on electricity on 1 January 2008; not only that – the imposed rate of electricity excise is 3,20 EUR/MWh, while the EU minimum rate is 1,00 EUR/MWh (non-business use) or even 0,50 EUR/MWh (business use). The latest increase of excise rates was enforced on 1 July 2009. As a result of these increases some rates now exceed the EU minimum level by several times: 3,2-fold for light fuel oil, 2,3-fold for natural gas, etc (UNFCCC, 2011). After putting into effect the electricity excise (5 cents per kWh) from 1st of January 2008 the electricity producers do not have to pay the pollution charge for CO2 emissions. In June 2009 it was decided by the Government and Parliament that new environmental charge rates for the period 2010-2015 should however be set and amendments were done in the Environmental Charges Act, increasing these charge rates from year 2010 (MoE, 2005). The resources from the electricity excise are allocated to the environmental protection measures (Report (2011)). The Environmental Charges Act is based on the ‘polluter pays’ principle. The environmental charges make producers reduce emissions from electricity generation (MOIEEP, 2011). The Environmental Charges Act obliges the owners of combustion equipment to pay pollution charges for several pollutants emitted into air (e.g. sulphur dioxide, nitrogen oxides, etc.). At

32 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996L0061:en:HTML 33 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:024:0008:0029:en:PDF 34 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:1988:336:0001:0013:EN:PDF 35 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:309:0001:0001:EN:PDF 36 http://valitsus.ee/et/riigikantselei/euroopa-liit/kuidas-otsuseid-tehakse/direktiivide-ulevotmise-seis 37 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0114:0135:EN:PDF 38 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0094:EN:HTML 39 http://www.legaltext.ee/text/en/x110001.htm 26 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” present, the CO2 charge has to be paid by all enterprises producing heat, excluding the ones firing biomass, peat or waste (UNFCCC, 2011). At the moment the environmental charge rates are in place until 2015. The coming steps with respect to environmental charges include analysis of charges until 2020, taking into account the developments and policy recommendations from the EU and OECD, for example the results of the attempts to coordinate CO2 taxation in EU etc (MoE, 2005).

Table 2: Charge concerning CO2 emissions. Component 2011 2012 2013 2014 2015 Pollution charge rates upon emission of pollutants into ambient air (EUR/t) carbon dioxide (CO2) for heat production 2,0 2,0 2,0 2,0 2,0 sulphur dioxide (SO ) or other inorganic sulphur 2 51,0 66,21 86,08 111,90 145,46 compounds carbon monoxide (CO) 5,25 5,78 6,35 6,99 7,70 nitrogen oxides, calculated as nitrogen dioxide, and 83,53 91,90 101,10 111,20 122,32 other inorganic nitrogen compounds (NOx) Volatile Organic Compounds, except mercaptans 83,53 91,90 101,10 111,20 122,32 (VOC) Source: Environmental Charges Act Table 3: Water abstraction charge. Minimum rates of water Maximum rates of water Water abstraction charge abstraction charge for 1000 abstraction charge for 1000 (EUR/1000m3) cubic meters cubic meters surface water 14,65 38,30 surface water as cooling water 1,55 7,65 Source: Environmental Charges Act Resource taxes Environmental taxes in Estonia are grouped into four categories: pollution taxes, resource taxes, energy taxes and transport taxes. Resource taxes include the mineral resources extraction charge, the water abstraction charge, the fishing charge, the forest stand cutting charge and the hunting charge. Those that concern climate change policy are the following two: A Water abstraction charge is paid for the right to abstract water from a water body or groundwater, if the water abstraction is at least 30 cubic meters in a day from water bodies or 5 cubic meters in a day from groundwater (excl. abstraction of mineral water). In addition to drinking water and water for technological use, the water abstraction charge is requested on water abstraction from quarries and mines and cooling water abstraction as well. A Forest stand cutting charge is paid for rights to do regeneration cutting in a forest which belong to the state. Owners of private forests should not pay the charge, but they should pay 26% of the income from the sale of regeneration cutting rights and the income from the sale of Tiber received from regeneration cutting.

Adaptation Directive 2007/ 60/EC on the assessment and management of flood risks40 The European Union's central inland waters and coastal waters of the legislation governing the Water Framework Directive (2000/60/EC), which aims to create a unified, systematic basis for water protection rules. An important framework directive issued under EU legislation in the groundwater protection regulatory Directive 2006/118/EC. Following the adoption of the Water Framework Directive is an additional flood risk assessment and management regulations Directive 2007/60/EC (ELC).

40 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:288:0027:0034:en:pdf 27 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Emergency Act41 (RT I 1996, 8, 165, date: 16 February 1996; amended by RT I 2002, 57, 354, date: 15.08.2002) The management of extreme weather conditions is regulated by the Emergency Act (Estonian version) that came into force in July 2009. According to the Emergency Act there is a need to draw up emergency risk assessments and crisis management plans in case of storms and floods. The 2011 Review of Emergency Risk Assessment (Estonian version) describes, among other high risk emergencies, windstorms, flooding in high density areas, and health issues or deaths caused by accidents due to the formation or deformation of ice-cover. At least once in every two years, the value of emergency risk assessment is revisited. There are websites www.kriis.ee and http://www.rescue.ee/loodusjoud (Estonian-versions), providing information about major emergencies and practical emergency instructions (ECAP). Water Act42 (RT I 1996, 40, 655; consolidated text RT I 1998, 13, 241, date: 16 June 1994, amended by RT I 2004, 28, 190, date: 01.05.2004) The purpose of the Water Act is to guarantee the purity of inland and transboundary water bodies and groundwater, and ecological balance in water bodies. The Water Act regulates the use and protection of water, and relations between landowners and water users. In the Water Act is also possible to find points that provide sustainable use and management of natural resources, prevention of water pollution the legal bases for water planning.

Main characteristics of this policy portfolio Although a spectrum of policy instruments have been introduced the reduction of the Estonian GHG emissions cannot be attributed to this policy mix. Between 1990 and 2009,

GHG emissions from the energy sector decreased by 60,2 % (21,76 Tg CO2 eq), mainly driven by a decrease in energy use in industry that was caused by the closure of energy- intensive production facilities and structural changes in the Estonian economy after independence in 1991 (UNFCCC, 2011). The emission trend during the period 1990–2009 demonstrated decreases in emissions by 62,4% in energy industries; by 73,1% in manufacturing industries and construction; and by 13,4% in transport. Fugitive emissions from fuels decreased by 57,6% (UNFCCC, 2011). The support scheme for producing RES in Estonia was established with the 2007 amendment to the Electricity Markets Act. This scheme has strongly increased the share of RES during the recent years (NRP, 2012). In 2010, the share of RES in the end consumption was 24%, which achieves the goal set for 2015 (23,6%) and is close to the goal set for 2020 (25%) (NRP, 2012; Tallinn University of Technology, 2012). It is likely that the data of 2011 will indicate growth of the share, too, and the indicator probably exceeds the 25%, i.e. Estonia’s goal for 2020. A rough estimation is that in 2011 the volume of RES production increased by 10% compared to 2010 (Estonian Competition Authority, 2011; 2012). If the support measure remains as it is then the target set for Estonia is attainable and it is likely that there is enough potential to achieve the higher objective as well (NRP, 2012). The actual AAU trading started in April 2010 resulting - until September 2012 - to 21 selling agreements under which AAUs worth of almost 400 million euros have been sold (Tallinn University of Technology, 2012). These revenues allowed the implementation of energy efficiency and RES investments (Tallinn University of Technology, 2012). By the end of 2010, the Ministry of Economic Affairs and Communications had allocated approximately 22,4 million € under GIS for the construction of new wind farms (Teckenburg E., Rathmann M., Winkel T., 2011). GIS is estimate to allow the installation of about 27 MW of wind turbines (Teckenburg E., Rathmann M., Winkel T., 2011). Wind energy producers

41 http://www.legaltext.ee/text/en/XX10024.htm 42 http://www.legaltext.ee/text/en/X50046K4.htm 28 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” that have receive this investment support are not eligible for the feed-in premium payable under the Electrical Markets Act (Teckenburg E., Rathmann M., Winkel T., 2011). The financial support of the Government for the refurbishment of residential buildings concerns the 10% of the cost, and resulted to approximately 465 GWh of saved energy in 2007 and reduced demand for heating in residential buildings by 30–60 kWh/m 2 per year

(UNFCCC, 2011). An estimated emission reduction of 10,3 Gg CO2 eq during 2003–2012 is expected also (UNFCCC, 2011). More specifically, these financial incentives for the promotion of energy efficiency in buildings include (Laaniste M., 2010): - 50% of the cost for the energy audit of an apartment building is covered with an upper limit of 700€. More than 1500 buildings have benefited from this financial incentive; - Grant of 96€ is given by the city of Tallinn for the energy certificate; - Loans with low interest are provided for residential buildings. The interest rate is subsidized by structural funds. The total budget is 50M€; - Tax relief for interest paid for home renovation loans; - Tax relief for reinvested profit in business (the businesses may reinvest their profit in more energy efficient buildings. For energy efficiency the Estonian government considers that the relevant targets cannot be achieved quickly without the support of EU funds (EUP, 2011). The funds need to be allocated during the next budget period once the investment needs have been calculated (EUP, 2011). Additionally, the first analysis regarding the effectiveness of the national energy efficiency policy, showed - using the methodology recommended by the European Commission and the data of the years 2008 and 2009 – that the energy savings amounted to 2,88 PJ (MOIEEP, 2011). This leads to the conclusion that the interim target of achieving 3,3 PJ of energy savings for 2010 was probably reached (MOIEEP, 2011). The analysis also showed that there is not enough data for a thorough analysis on the effectiveness of the national energy efficiency policy. Economic difficulties during the period from 2008 to 2010 are the main reason for not developing systems for gathering such data (MOIEEP, 2011).

29 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Key assumptions The key assumptions used for the development of scenarios are similar to those used in previously published studies and papers for Estonia. The categories of the key parameters are common for all scenarios and are divided as follows:

Demographics The Estonians are a Finnish people, and the sole official language, Estonian, is closely related to Finnish (OWER, 2011). The largest ethnic group consists of Estonian – 67,9%, Russian 25,6%, Ukrainian 2,1%, Belarusian 1,3%, Finn 0,9% and other 2,2% (2000 population census). According to data from Statistics Estonia, the population of Estonia is shrinking. While there are other European countries like Estonia with a birthrate that is below replacement levels, Estonia lacks immigration to compensate for the negative natural growth. In fact, the number of emigrants is larger than the number of immigrants. As such, the population is on a slow downward trend. The population of Estonia was 1340341 in 2009 (OWER, 2011). The three largest towns by population are: Tallinn – 403500, Tartu – 101169, Narva – 68680. The version “medium variant” of the population projections of the UN will be used for the BAU scenario. Table 4: United Nations projections for the Estonian population (UN, 2010). Average annual rate of change (%) Variant 2005- 2010- 2015- 2020- 2030- 2040- 2045- 2050- 2010 2015 2020 2025 2035 2045 2050 2055 Medium -0,07 -0,07 -0,11 -0,20 -0,33 -0,21 -0,21 -0,24

Figure 1: Demographics: Population.

30 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Economy Gross Domestic Product GDP is characterized as a key driver of energy demand in all regions (World Energy Outlook 2010, IEA). It is assumed to grow worldwide by 3,2% per year on average over the period 2008-2035. In general, the non-OECD countries continue to grow fastest (World Energy Outlook 2010, IEA). According to Estonia’s Fifth National Communication report, for the time interval 2000- 2007, national economy experienced one of the highest growth rates among emerging market economies and until 2005 a low inflation. Eight years ago, Estonia’s GDP per capita in Purchasing Power Standards was only 45% of EU27 average, but by December 2008 it grew to 68,2%. For Estonia the high growth rate of the GDP is characterized as the main factor of affecting the total energy intensity of the economy (Tallinn University of Technology, 2012) In 2008, GDP at current prices was 16,1 billion euros. According to the preliminary calculations, the Gross National Income (GNI) was 15,1 billion euros. Thus, the primary income payable by resident units to non-resident units was bigger by 0,9 billion euros than the income receivable by resident units in the rest of the world. Simultaneously, the gap decreased substantially compared to 2007. GDP growth in nominal terms decelerated steeply to 3,9%, which is the smallest figure since 1995. In 2008, GDP in real terms decreased by 3,6%. The decrease in GDP accelerated gradually in the course of the year, influenced by the fast decrease in domestic demand (7,4%). In addition, exports of goods and services decreased due to the decline of external demand. The International Monetary Fund (IMF) provides projections for the Estonian GDP until 2017 (Table 5). These are slightly different from those published by the same institution in 2011. Table 5: Projections for the Estonian GDP (IMF, 2011). Year 2010 2011 2012 2015 2016 2011 2012 2013 2017 (B) (B) (B) (B) Annual percent 3,1 3,3 3,7 3,1 3,6 - 2,0 3,6 4,0 change of GDP (%) Forecasts of the Stability Programme 2012 show that the Estonian GDP is expected to increase by 1,7% in 2012 and 3,0% in 2013 according to the main scenario of the forecast (Republic of Estonia, 2012). The Ministry of Finance lowered these economic growth forecasts mainly due to deterioration of the growth outlooks of Estonia’s trade partners. The growth of exports is expected to slow down considerably in 2012, mainly to the weak exports of industrial production (Republic of Estonia, 2012). Domestic demand is also expected to slow down considerably in comparison to the previous year. Economic growth in 2013 is expected to be again supported by exports via the strengthening of the external environment (Republic of Estonia, 2012). Economic growth will stabilize at around 3,5% from 2014 to 2016 (Republic of Estonia, 2012). However, there are risks for the 2013 outlook. Due to the expected liberalization of the electricity market, power prices will rise significantly for both enterprises and households, which may restrict the growth outlook (Danske, 2012). On the other hand, Estonia was the only EU country to have a budget surplus (1% of GDP) in 2011, which should allow smoothing a negative shock to the economy (EC, 2012; Danske, 2012). The European Commission in its “Assessment of the 2012 national reform programme and stability programme” for the country quotes a similar future situation. Real GDP is expected to continue growing above the EU average over the long term thanks to continuing capital accumulation and productivity gains. Economic growth is projected at 1,6 % in 2012, reflecting lower confidence and weaker external demand around the turn of the year. In 2013 growth should be back to around 3,8 %, because of exports and increasingly domestic

31 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” demand mostly through stronger private investment. In comparison for 2013 the Estonian authorities are more pessimistic and forecast real GDP growth of 3% (EC, 2012). Table 6: Projections for the GDP in Estonia from different sources.

Institutions Real GDP growth, Annual percent change % 2011 2012 2013 2014 2015 2016 2017 2020 2030 2040 2050 Ministry of 7,6 2,2 3,0 3,4 3,5 3,6 Finance43, 2012 Stability 7,6 1,7 3,0 3,4 3,5 3,5 44 Programm 2012 7,6 1,0 2,0 3,5 3,5 - - 1,9 2,0 1,6 1,6 European 7,6 1,6 3,8 (3,4) (3,5) (3,6) Commission, 2012 Stability 4,0 4,0 3,6 3,6 3,4 Programme 2011 3,0 3,0 3,3 5,0 5,0 4,0 IMF, 201145 3,3 3,7 - - 3,1 3,6 IMF, 2012 46 - 2,0 3,6 4,0 OECD, 2011 8,0 3,2 4,4 OECD, 2012 7,6 2,2 3,6 Bank of Estonia 7,9 1,9 3,6 SEB, March 2012 7,6 1,5 2,5 SEB, October 8,4 2,5 3,3 4,0 2012 Swedbank, 2012b 7,6 2,7 4,2 Danske, 2012 7,5 2,2 3,7 Nordea, 2012 7,6 2,0 4,2 Eesti Pank, 2012 7,6 2,6 3,6 4,1 Note: For the Stability Programme 2012, three scenarios were developed: the baseline (first row), the Negative risk (second row) and the long-term one (third low); For the Stability Programme 2011, three scenarios were developed: the baseline (first row) and the Negative risk (second row) and the Positive Risk scenario (third row). Table 7: Projections for the GDP in Estonia for three scenarios of PROMITHEAS-4 under different forecasts for the national GDP. Real GDP growth, % Scenarios 2011 2012 2013 2014 2015 2016 2017 2020 2030 2040 2050 BAU 7,6 2,0 3,6 4,0 Opt 7,6 2,7 4,2 4,2 4,2 4,2 4,2 4,2 4,2 4,2 4,2 Pes 7,6 1,0 2,0 3,5 3,5 3,5 3,5 3,5 3,5 3,5 3,5

43 http://estonia.eu/about-estonia/economy-a-it/economy-in-numbers.html 44 Republic of Estonia, April 2012 45 http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf 46 http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/tables.pdf 32 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” For the BAU scenario the GDP growth rate is assumed to be based on IMF projections in 2012 given in Table 7. For the Opt scenario Swedbank and Eesti provide the most optimistic ones, so the GDP growth rate is assumed to be 2,7% by 2012, while for the Pes it is assumed to be 1,0% by year 2012. These growth rates were selected based on the most recent forecasts for the Estonian GDP (see Tables 5 and 6). For the purposes of this report the growth rates of GDP under the BAU scenario will be used initially for all three scenarios. In the final report and for nine scenarios the aforementioned assumptions will be used.

Figure 2: Economy: GDP real. Estonian economic sectors Estonian economy has a unique position in Europe, since it attracts the interest of Scandinavian investors and is influenced by the Russian economy as well. In 2008, foreign investments came from the nearby countries by integrating Estonia’s economy closely with the Nordic economy. Sweden (39% of all foreign direct investments made to Estonia) and Finland (23,9%) maintain a solid leading position, the percentage of which has remained relatively stable in the recent years. 26% of the Finnish investments were made to the processing industry. According to the 2011 forecast of the Estonian Ministry of Finance47, export markets are assumed to increase by 6,3% in 2011 and by 6,6% in 2012, as main engine for growth, supporting the increase of economic sentiment and gradual recovery of domestic demand. The Ministry of Finance expected also in 2011 a 16% increase in the export of goods and services48. For the period 2012-2015 exports will moderate to 5,5-7% being in line with the developments of the main trading partners49. In 2012 the contribution to growth should lean more to domestic demand as private consumption and investments are recovering. According to the same forecast inflation in 47 http://www.fin.ee/economic-forecasts 48 According to 2011 exports the destination share was: Sweden – 17%, Finland – 14% and Russia 10% (Ernst & Young Eurozone Forecast, 2012). 49 http://www.fin.ee/economic-forecasts 33 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Estonia would increase up to 4% in 2011 from 2,7% in 2010. Estonian GDP being 3,1% in 2010 is also expected to grow up to 4% in 2011 and 2012. In 2013-2015 Estonian economic growth is expected to stabilize round 4%. Growth is supported in addition to export also by stable increase of domestic demand. Investments (gross fixed capital formation) are expected to grow 8,1% in 2012, which should initially predominantly come from corporate investments to machinery and equipment. Housing investments recovery will be slower. Investments in the coming years will also grow faster than GDP and the structure of investments should become more broad-based. Investment to GDP ratio will start to grow, but will remain lower than in the pre-boom level until the end of the forecast period50. Estonian industries include: oil shale mining, shipbuilding, engineering, electronics, wood and wood products, textiles; information technology, telecommunications. Industry constitutes 28,7% of the total GDP in 201051. Out of these sectors, manufacturing and energy had the largest investments in 2011, almost 20% and 19% of all enterprise investments (Swedbank, 2012a). Services constituted 68,8% of the total GDP in 201052. Manufacturing sector Manufacturing industry managed to recover from the economic recession in 2010 due to better position in exports (export increased more than 40% within a year). The volume of output reached almost pre-crisis level at the end of 2010 (growth of production was 23% in 2010 compared to 2009). There was no sales growth in the domestic market (UNECE, 2011). The highest growth took place in electronics and electrical equipment manufacturing industry where the volume of production tripled within a year (compared to 2009). Volume of production in Estonia’s manufacturing industry is expected to grow fast due to improving export markets (UNECE, 2011). In the manufacturing sector roughly three-fourths of investments in 2011 were made in equipment and machinery (Swedbank, 2012a). Perspectives for this sector are considered very good since: i) Estonia offers an opportunity for cost-efficiency, including competitive labour and low transportation costs; ii) Manufacturing of machinery and equipment is largely dependent on exports - the World Bank has ranked Estonia among the TOP 5 in the world in ease of trade53. Energy sector Investments in this sector grew by nearly 55% in 2011 and by 120% in the first quarter of 2012 in annual comparison (Swedbank, 2012). This is attributed to the large development projects, many of which are new ones which are to start or already started in 2012 (Swedbank, 2012b). These are: the building of the Enefit 280 oil plant; the co-generation plant at the rapeseed processor Werol (both by Eesti Energia), and the renewal of the distribution network (Elektrilevi OÜ). Investments will continue in the energy sector as there are many new and ongoing capital-intensive projects planned for the near future (construction of Estlink 2, Harku-Lihula-Sindi high voltage line (both by Elering) and the Auvere power plant (by Eesti Energia)) (Swedbank, 2012a). Wood industry It is one of the largest industry sectors in the country. Its volume of production and number of workforce stabilized after deep fall during economic crisis. Its output at constant prices increased more than a quarter and the sales almost one-third in 2010 compared to 2009 (UNECE, 2011). The sector recovered in 2010 due to rapid growth in export volumes. Sales in the domestic market grew one-fifth of its volume (UNECE, 2011). The prices of the production input (raw material, energy, employees) increased significantly in 2010. The

50 http://www.fin.ee/economic-forecasts 51 www.stat.ee 52 www.stat.ee 53 http://estonia.eu/link.php?url=http://www.investinestonia.com 34 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” prices of wood increased 25% on an average (UNECE, 2011). The export value of wooden buildings was estimated at 89,8 million € for the first six months of 2011, an increase of nearly 42% in comparison to the same period in 2010 (Kingsbury A., 2011).

Agricultural sector Agriculture is an important sector of activity and a source of income for Estonians all throughout its history. The country produces more agricultural products than it can consume, and it has well-developed export activities, in the Russian market (The European Times, 2007). The main agricultural products are: grain, potatoes, vegetables, livestock and dairy products and fish. Agriculture constitutes 2,5% of the total GDP in 201054. Rural working population is decreasing and only 2,8% are occupied in agriculture. Agricultural holdings specialize in three types of production: 45% of the farms engage in crop production, 21% in dairy farming, and 31% in mixed production (crop and livestock production). Grain production is the main activity in large farms and agricultural enterprises. Potatoes are grown in Estonia mainly on small farms and private residences. Estonia fully covers its potato demand. Estonia has attracted three types of foreign investors in agriculture: i) small farmers who wish to live and work in Estonia’s well-preserved natural environment; ii) investors who create larger agricultural enterprises, and iii) investors who acquire existing Estonian agricultural companies, particularly meat and milk production and processing facilities (The European Times, 2007).

Public sector Public sector investments were planned to be 28% higher in 2012 – funds for increase will mostly come from EU funds and the revenues from sales of CO2 quotas (Swedbank, 2012a).

GDP per capita Projections of this key driver are based on those of GDP and population. LEAP calculates them automatically based on the projections of the other two key drivers as they are defined for each scenario. GDP distribution per sector There is no the historical data about GDP distribution per sector in Estonia, therefore there is no any projections for the scenarios. Average annual household income The stable growth is noticed through the years 2000-2010. The growth rate of this variable is assumed to be equal to the growth rate of GDP per capita.

54 www.stat.ee 35 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 3: Economy: Average Annual Household income. Gini coefficient Measures of income inequality are based on data on people's household disposable income. The data on the Gini coefficient will be used for assessment of policy portfolios in AMS method.

Climate Statistics Estonia belongs to the Atlantic continental region of the temperate zone, which is characterized by rather warm summers and comparably mild winters. Since the annual amount of precipitation exceeds evaporation approximately twice, the climate is excessively damp. The amount of solar radiation varies widely during the year. The length of light summer day exceeds three times that of a winter day in northern Estonia. The height of the sun attains 55E at summers solstice and only 8E at winter solstice. Average temperatures range from +16,3°C on the Baltic islands to +18,1° C in mainland in July, the warmest month, and from −3,5°C on the Baltic islands to −7,6°C in mainland in February, the coldest month. The average annual temperature in Estonia is 5,2oC. The average precipitation is 700 mm, ranging from 520 mm on some islands to almost 780mm in the uplands. The prevailing winds are south-westerly, southerly and westerly (OWER, 2011). Precipitation Annual precipitation trends in the 20th century showed an increase in Northern Europe (10–40%). Mean winter (December–February) precipitation is increasing 20–40% in most of Western and Northern Europe, because western circulation was stronger in winter. Trends in spring and autumn were not significant. Precipitation is the most variable climatic characteristic in Estonia. Its extreme values cause severe droughts and floods which have a significant influence on human activity. Since 1966 precipitation series in Estonia have been homogeneous (UNFCCC, 2011). The average precipitation is 700 mm, ranging from 520 mm on some islands to almost 780 mm in the uplands. 36 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” For the BAU scenario it is expected that precipitation will increase between 1 and 2% per decade in Northern Europe (Beniston et al., 2007).

Figure 4: Climate Statistics: Precipitation. Temperature The annual average temperature for the European land area up to 2007 was 1,2°C above pre-industrial levels, and for the combined land and ocean area 1°C above. Eight of the 12 years between 1996 and 2007 were among the 12 warmest years since 1850. The warming trend throughout Europe is well established (+0,90°C for 1901 to 2005). However, the recent period shows a trend considerably higher than the mean trend (+0,41°C/decade for the period 1979 to 2005). The temperatures during the winter season have in general increased more than during the summer (CC, 2012). Average temperatures range from +16,3°C on the Baltic islands to +18,1°C in mainland in July, the warmest month, and from −3,5°C on the Baltic islands to −7,6°C in mainland in February, the coldest month. The average annual temperature in Estonia is 5,2°C (CC, 2012). There are two different projections for the BAU scenario: - temperature will increase at 7,7°C by 2050 (O´Brien (ed.), 2000); - temperature will increase at 9,0 °C by 2050 (CiscarJ., Iglesias A., 2010). The average air temperature that will be taken into account in BAU scenario is 8,35 °C by 2050.

37 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 5: Climate Statistics: Temperature. Frequency of extreme events Flash floods The annual number of reported flood disasters in Europe increased considerably in 1973- 2002. Despite the considerable rise in the number of reported major flood events and economic losses caused by floods in Europe over recent decades, no significant general climate related trend in extreme high river flows that induce floods has yet been detected. Hydrological data series do not indicate clear upward trends in the frequency and magnitude of floods in Europe. The direct anthropogenic causes include land use change, river channel modifications and increased activities in areas vulnerable to floods. In the Nordic countries, snowmelt floods have occurred earlier because of warmer winters. Changes in the terrestrial system, such as urbanization, deforestation, loss of natural floodplain storage, as well as river and flood management have also strongly affected flood occurrence (CC, 2012). Although there is as yet no proof that the extreme flood events of recent years are a direct consequence of climate change, they may give an indication of what can be expected: the frequency and intensity of floods in large parts of Europe is projected to increase (EEA, JRC and WHO, 2008). In particular, flash and urban floods, triggered by local intense precipitation events, are likely to be more frequent throughout Europe (EEA, JRC and WHO, 2008). A study has been carried out on climate change in the Baltic Sea area. Nordic part of the Baltic drainage basin has shown an increasing trend in runoff during winter (December– February) and spring (March–May). A significant increase (by 30–50% on average) in winter runoff has also been observed in the southeastern and southern Baltic drainage basin during the past 50–60 years, in the rivers of Poland, Russia, Estonia, Latvia, and Belarus. Warmer temperatures in the Baltic Sea area would greatly influence snowpack volumes and duration, resulting in considerable impact on the timing of runoff into the Baltic Sea. Simultaneous increases and/or decreases in precipitation would strongly affect corresponding runoff volumes. Evapotranspiration is a key process, and its response to climate change is an important determinant in how runoff volumes would change and how groundwater levels would, in turn, is affected (HELCOM, 2007).

38 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Heat waves Much of Europe was affected by a heat wave during the summer of 2003 (June, July and August). It is estimated that this was the hottest summer since at least year 1500. Seasonal temperatures were the highest on record in Germany, Switzerland, France and Spain. Average summer (June–August) temperatures were far above the long-term mean, by up to five standard deviations, implying that this was an extremely unlikely event under current climatic conditions. Over the period 1880 to 2005 the length of summer heat waves over Western Europe has doubled and the frequency of hot days has almost tripled. The study adds evidence that heat waves, such as the devastating 2003 event in Western Europe are a likely sign of global warming. According to some researchers it is very likely that human influence has more than doubled the risk of a regional scale heat wave of at least the 2003 severity (CC, 2012). High-temperature extremes like hot days, tropical nights, and heat waves have become more frequent (CC, 2012). Since no other information is available the assumption for the BAU scenario is that the frequency of heat waves follows the historical trend (CC, 2012). Frost days Low-temperature extremes like cold spells, frost days have become less frequent in Europe. In northern and central Europe, less frequent frost occurrences associated with higher temperatures are projected to reduce the number of days with snow cover (CC, 2012). On balance there are 0 days annually with measurable frost and in January there are on average 0 days with frost (CC, 2012). Water resources Estonia can be divided into three main watersheds (Lake Peipsi, the Gulf of Finland, and the Gulf of Riga) and 27 main river basins. There are 7000 rivers, brooks, and canals in Estonia. As many as 90% of the rivers are up to 10 km long and only 1% are over 50 km in length. The longest river is the Pärnu River in West Estonia. There are over 1400 natural and man-made lakes, covering 6,1% of the territory (CC, 2012). Surface waters Annual runoff increases in northern Europe and decreases in central, Mediterranean and Eastern Europe (IPCC, 2007). Annual average runoff is projected to increase in northern Europe (north of 47oN) by approximately 5 to 15% (7% for BAU) up to 2020s and 9 to 22% (15,5% for BAU) up to 2070s for the SRES A2 and B2 scenarios. In southern Europe (south of 47oN) runoff decreases by 0 to 23% up to 2020s and by 6 to 36% up to 2070s (IPCC, 2007). River runoff is one of the main characteristics describing available water resources in Estonia. Possible changes in precipitation and air temperature should be reflected in runoff data. In general, an increase of annual runoff by 20-30% (HADmid55) or by 40-50% (HAMmid56) is modeled for the year 2100 (O’Brien (ed.), 2000). For the BAU scenario the assumption is that the amount of water resources for Estonia is according to the average of two models (O’Brien (ed.), 2000) and it increases by 36% annually. The increasing of surface water is too huge in the mentioned above studies, so we will use the average numbers of the region: for the BAU scenario the assumption is that the average number is 7% by 2020 and 15,5% by 2050.

55 HADmid - IPCC medium emission scenario (IS92a) with HadCM2 model 56 HAMmid - IPCC medium emission scenario (IS92a) with ECHAM3TR model. 39 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 6: Climate Statistics: Surface waters. Groundwater Groundwater recharge is likely to be reduced in central and eastern Europe with a larger reduction in valleys and lowlands. Groundwater levels of many aquifers around the world show a decreasing trend over the past few decades, but it is mainly attributed to groundwater pumping/use that surpasses groundwater recharge rates (IPCC, 2008). Further decreases in groundwater levels are projected because the lower recharge is (partly) caused by a shorter length of the recharge season and the drop in water retention as snow (DG Environment, 2007). While an increase in winter rainfall could in principle increase groundwater recharge, saturated soil conditions could mean more immediate surface sun-off of water instead of infiltration into the ground (DG Environment, 2007). According to Estonia’s Fifth National Communication as a result of climate change, groundwater recharge will increase by 5–75%, depending on the hydrogeological conditions of catchments. Groundwater recharge will be the most intensive in the heights of Upper Estonia, whereas toward the lowlands the incremental infiltration rate will be less intensive. For BAU scenario the increase is 10% average for the region by 2050.

40 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 7: Climate Statistics: Groundwaters.

Policies and Measures Carbon tax This policy instrument is described in the Opt scenario, due to the introduction of the

Energy taxation Directive. Estonia implemented a CO2 tax in 2005, which applies to installations under the EU emission trading scheme—combusting industries in the energy, iron and steel, mining and mineral processing, and paper and pulp sectors, as well as generating facilities exceeding 20 MW. Feed – in – tariff system The EU directive on the promotion of electricity produced from RES in the internal electricity market is also being implemented in the Baltic States. Based on the requirements of this EU directive (Streimikiene, Punys, Burneikis, 2005), the Baltic States have set ambitious targets for an increased share of renewables in electricity production. This is expected to have a significant impact on the reduction of GHG emissions. Electricity generation from RES has increased significantly in recent years in Estonia. This has been helped by new wind park developments and the use of biomass as a source of energy. In 2010, 862 GWh of electricity were generated from RES or 8,1% from the annual electrical energy production, and this was 69,6% more than in the previous year. A major part of this rise was accounted to the use of wood chips for electricity generation in the Eesti and Balti power plants near Narva, from windparks such as Aulepa, Virtsu, from small hydroelectric plants Linnamäe and Keila-Joa. The subsidies are set in § 59 of the Electricity Market Act, which has entered into force since 2007 and was established for renewable energy and cogeneration production support. The Electricity Market Act states that the subsidy paid for electricity generated from RES is 53,7€/MWh. From 1 July 2010 electricity generated from biomass only qualifies for the subsidy if it is generated in a plant running in CHP mode. Electricity generated in CHP mode from waste, peat and oil shale retort gas or in generating installations with a capacity of less 41 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” than 10 MW receives a subsidy of 32,0 €/MWh. The subsidy for renewable energy is paid in accordance with the level of network services used. For the BAU scenario feed-in-tariffs follow their historical trends (Table 8). Table 8: Current feed–in–tariffs. Level of subsidy Conditions for receiving the subsidy Target group 0,0537 €/kWh Subsidies are paid for electricity that is produced Producers of electricity from renewable energy sources, except biomass. from renewable energy Under § 59(1) of the Electricity Market Act, a (water, wind, solar, wave, producer generating electricity from wind can get tidal, geothermal, landfill a subsidy for up to 600 GWh of wind energy in gas, sewage treatment plant each calendar year. gas, biogas, except biomass) 0,0537 €/kWh Subsidies are paid for electricity that is produced Producers of electricity from biomass in CHP mode. From 31.12.2010, from efficient biomass CHP producers who have started generating electricity from biomass can only get the subsidy for electricity generated in efficient CHP mode. 0,032 €/kWh Subsidies are paid for electricity that is produced Producers of electricity in efficient CHP mode from waste as defined in from efficient waste CHP the Waste Act, peat or oil shale retort gas. 0,032 €/kWh Subsidies are paid for electricity that is produced Producers of electricity in efficient CHP mode using generating equipment from efficient CHP with with a capacity of not more than 10 MW. installed capacity <10MW

Quota Not implemented in Estonia. Soft loans No policy instrument concerning soft loans is applied. Subsidies No policy instrument concerning subsidies is applied. Land management No policy instrument concerning land management is applied. Environmental charges The environmental charges concerning BAU scenario are given in Tables 2 and 3.

Global trends Crude oil price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Natural gas price For the natural gas prices the following forecasts are encountered in the relevant literature: Coal prices increase from 65$ per tonne in 2006 to 120$ in 2015, then fall to 85$ in 2030, compared with 110$ in 2030 in the Reference Scenario — a reduction of 23%. EUA price Projections about the EUA price will be used based on the relevant literature. 42 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” ERU price

The average CER price was 18€/tCO2 based on the first 11 months of 2008 (Rotfub W. et al., 2009). The same growth rates that are adopted for the EUA price will be used for the CER price also.

Adaptation Water Use Water consumption has decreased significantly since Estonia regained its independence in 1992. For a quick comparison, combined water use in 2006 was half than that of 1992. Between 1992 and 2007, agricultural water consumption decreased by almost a factor of seven and the average price of water increased nearly 25 times. Daily per capita water consumption fell from 188 litres in 1992 to 90 litres in 2007. The main reasons for the abrupt decrease in overall water use were the introduction of a water use charge, an increased unit price, the closure of a pulp factory in the capital, Tallinn, adoption of water saving technology in industry, and reductions in numbers of livestock and in agricultural production after the system of collective farms collapsed (WW, 2012). Household water use Water use is mainly affected by three sectors: agriculture, industry and households. On average, in the EU 14% of total water abstraction is used for public water supply, 30 % in agriculture, 10% in industry (excluding cooling water) and 46% as cooling water, mainly for power generation (EEA, 2004). Water use for agriculture Reductions in agricultural area, animal husbandry and certain industrial activities have resulted in a decreased contaminant load and a general improvement in surface and groundwater quality. At the same time, Estonia’s economic indices have improved. Better water management through increased efficiency in water use in all sectors has enabled Estonia to achieve a strong decoupling of water use and economic output, which in turn has helped boost the economy (WW, 2012). Water use for industry Water consumption has significantly decreased compared to the 90’s, but it has been quite stable for the last few years. The fall of water consumption is due to producing less, better water measuring and industries’ more economic water usage. More economic water usage is mostly caused by rising prices and the recession in the start of the 90’s. Due to recession many high water consumption industries were closed such as the Tallinn pulp and paper mill, which itself used one fourth of all the water in Tallinn. Later water prices increased due to water treatment and political decisions57. Water use for energy production Cooling water A very big amount of water in Estonia is used to produce energy, most of it takes place in Ida-Virumaa, so ⅔ of the water consumption happens in Harjumaa and Ida-Viruma. Thermal power plants burning oil shale account for 92% of the country’s electricity production. Until recently, about 90% of overall surface water extraction was used for cooling these plants at the main power generation complex in Narva. However, thanks to reduced electricity demand, the use of water saving technology and a substantial increase in the water extraction charge, the rate of abstraction has decreased by half (WW, 2012).

57 http://mail.spsstav.edu.sk/e-twin/dokumenty/comenius/1/estonian_water_consuption%202.pdf 43 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Hydropower needs in water The hydropower potential of Europe is expected to decline on average by 6% but by 20 to 50% around the Mediterranean by the 2070s (IPCC, 2007). Several member States have reported reduction in hydroelectricity production due to drought events (Finland, France, Portugal, Spain) (DG Environment, 2007). As hydroelectricity production is related to the amount of water stored in the upper reservoirs, the production level can be lower during a drought. Peak demands then need to be satisfied by other means available in a short term (gas turbine, etc) (DG Environment, 2007). The use of hydro-energy in Estonia is limited; it is estimated that 30 MW could be produced, but only a third of this theoretical amount is actually usable. There are quite a lot of hydroelectric plants in Estonia, but on a global scale these are still micro hydroelectric plants. Although the Estonian hydroelectric plants cannot contribute to large-volume power production, it still makes sense to use the resources that are available (EE, 2012).

44 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Energy Demand Estonia’s energy demand framework is comprised of the sectors: households, industry, agriculture, services. Assumptions about these sectors are described in the next sessions. The total energy demand by type of sector and by type of fuel is shown in the following figures.

Figure 8: Final Energy Demand per sector.

Figure 9: Final Energy Demand per fuel.

45 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Households The overall economic growth and real estate development has resulted in an increase in electricity consumption in households58. For the time period 1995-2010 there is a steady growth in the electricity consumption by this sector (Tallinn University of Technology, 2012). The largest share of energy consumption in households is space heating (Tallinn University of Technology, 2012). The growing electricity use is attributed mainly to the increasing number of appliances owned by households (Tallinn University of Technology, 2012). Lighting Technology Penetration: The eco-design requirements of the efficient lighting systems could reduce electricity consumed in urban households, using Compact FLuorescent (CFL) and other technologies. Energy savings and transitional stages are regulated by EU Directive 2005/32 and Commission Regulation 244/2009 non-directional household lamps on eco- design requirements. The first phase of transition effect began in September 2009, prohibiting most importantly: i) the power of 100 watts or more in lamps, ii) energy-saving class which is weaker than the C (conventional filament lamps such as this is the class E, A, CFL and halogen lamps in some B or C). The last stage will start in September 201659. The program is implemented for period 2009-2016 and is capable of reaching 50% by 2012 and 100% of all households by 201660. Technology Performance: Efficient lighting can be assumed to consume only 20% of the electricity used by conventional lighting in urban households (EE, 2012).

Figure 10: Final Energy Demand in Household Sector.

58 The two variables are linked through the average household income. During the economic downfall of 2009, when GDP fell by 14,1% the consumption of electricity decreased by 4,7%. Gas consumption decreased by 35% that year also (Estonian Competition Authority, 2010). 59 Euroopa Parlamendi Ja Nõukogu Direktiiv 2005/32/EÜ. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do? uri=CONSLEG:2005L0032:20080321:ET:PDF 60 Komisjoni Määrus (EÜ) nr 244/2009 (Commission Regulation 244/2009). http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:076:0003:0016:ET:PDF 46 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Renovation There are 15 thousands apartment houses that need reconstruction. Apartment buildings can apply for a KredEx (The Credit and Export Guarantee Fund) subsidy up to 35% of the apartment building's renovation costs. The expected energy savings in households receiving these subsidies is approximately 40% (Tallinn University of Technology, 2012). By year 2011 the number of households that applied for the subsidy was 1,5% of the total needed renovation households61. The assumption is that subsidies in BAU scenario will continue with for whole household sector.

Agriculture The area of utilized agricultural land increased by 4% between 2004 and 2008, reaching the figure of 802300 ha with the sown area of field crops increasing by 17% - ie to 577400 ha in 2008. All areas that are used for the production of agricultural products are included in agricultural land (EEA, 2012). The number of cattle, including dairy cows, was stable or decreased slightly between 2004 and 2008. At the end of 2008, there were 237900 cattle in Estonia of which 100400 were dairy cows. The number of pigs decreased by 4% compared to 2007, ie around 365000 at the end of 2008. The number of sheep and goats almost doubled between 2004 and 2008. The number of poultry reached the level of 2005-2006 (Statistical Yearbook of Estonia, Statistics Estonia 2009). Agricultural production per inhabitant has increased steadily in recent years. The assumption for the growth rate of energy demand in the BAU scenario is that it follows the growth rate of GDP. Fuel shares are considered to be the same across the years since no policy instrument is applied.

Figure 11: Final Energy Demand in Agriculture Sector.

Industry Consumption of fuels by industry has been increasing for several years due to economic growth. Electricity consumption by industrial activities is also increasing. The steady growth

61 KredEx home page: http://www.kredex.ee/apartment-association/toetused/rekonstrueerimise-toetus/ 47 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” in industrial output, around 10% for some years, has slowed slightly: in 2007 it increased by about 7% due to a slowdown in the growth of manufacturing. The production of manufactured goods was increased by 12% in 2004, but only 6% in 2007. There were more than 6200 operating industrial enterprises in 2007, about 5900 of them in manufacturing. The manufacture of wood and wood products was the largest branch of manufacturing with more than 1100 enterprises, followed by the manufacture of metals with about 960 enterprises (EE, 2012). Of all the branches of manufacturing industry, the ones with the fastest output growth have been electrical machinery and optical instruments; pulp, paper and paper products; metals and fabricated metal products; motor vehicles, trailers and semi-trailers; and other transport equipment. Manufacture of wood and wood products, which had been growing steadily for years, was already slowing in 2006 and went into decline in 2007 due mainly to a shortage of raw materials. Growth in the most important branch of manufacturing in Estonia – manufacture of food products and beverages – remained at around 5-6% (Statistical Yearbook of Estonia, Statistics Estonia 2009). Fuel shares are considered steady since no policy instrument is applied.

Figure 12: Final energy demand in industrial sector by type of industry. Due to lack of data for the activity level of non-ferrous metals and non-specified, we separated the industrial energy demand in two sectors, so as to facilitate the calculations in the LEAP model.

48 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 13: Final Energy Demand in Industrial Sector by type of fuel.

Services No data on services.

Transport Fuel consumption has grown in all types of transport, but the relatively largest increases are recorded in domestic water transport and in domestic air transport (Tallinn University of Technology, 2012). For the period 1995 - 2010 the largest increase of used fuel quantities was in road transport (Tallinn University of Technology, 2012). This increase justifies why the road transportation is the most important emission source in this sector covering over 93,8% of the sector´s emissions. Road transport contributed to the emissions of nitrogen oxides, non-methane volatile compounds and carbon monoxide by 63,9%, 72,8% and 83,2% respectively in 2009. National navigation in Estonia is a small emission source of the transport sector. The share of navigation transport into total transport emissions in 2009 was: NOx – 2,0%, NMVOC – 1,3%, CO – 0,5%. The rail transport is used mostly for transportation of goods. The total contribution to the emissions of nitrogen oxides, non-methane volatile compounds and carbon monoxide were 12,3%, 3,6% and 1,3% respectively in the transport sector for year 2009. The total contribution of aircraft LTO emissions to the emissions of nitrogen oxides, non-methane volatile compounds and carbon monoxide were 0,5%, 0,2% and 0,5%, respectively, in transport sector for year 2009. Other pollutants have smaller share (Reihan A., Roosimägi J, 2011). The use of light fuel oil and diesel increased rapidly at the beginning of the century. The number of vehicles is increasing steadily but the efficiency of engines is also increasing. Consumption of motor gasoline and aviation gasoline is rather stable. Heavy fuel oil is now almost out of use.

Technological improvements and fuel efficiency 49 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” The general objective of the National Energy Efficiency Action Plan (MOIEEP, 2011) is to provide the effective transport system that is an important prerequisite for economic growth and social development. Specific objectives of the Plan are: - making transport more environmentally friendly; - to increase the proportion of public transport users;

- 30% share of new cars with CO2 emissions less than 120 g/km; - 10% share of RES in the road transport fuels by 2020; - according to the respective EU Directive biofuels are to increase at 5,75% in the energy consumption of the transport sector by 2020; - the proposed new standard will require new cars and SUVs to increase their fuel economy by 5% in 2012, by 18% in 2020 and by 30% in 2025 (all values relative to the base year fuel economy). In road transport the number of road vehicles – passenger cars, trucks, buses and motorcycles – has increased considerably since 1990. The use of public transport, in contrast, has decreased. In 2008 buses carried about 122 million passengers – 12 % fewer than in 2007. Fewer passengers used city buses, trams and trolley buses compared to 2007. Bus within counties and rural municipalities and long-distance ones between counties transported fewer passengers than in 2007. Increases in public road transport fares at the beginning of 2008 as well as a decrease in the number of county and national long-distance buses contributed to the decreasing number of passengers. The increase in the number of vehicles was mainly due to the increase of the number of passenger cars (Statistical Yearbook of Estonia, Statistics Estonia 2009). The increasing of connection schedule and reducing the duration of the journey with new trains, creating pan-Baltic joint-venture would cause the increase the market share of rail passenger traffic to 10% and rail goods traffic to 15% in BAU scenario. Since no policy measure is expected to be taken concerning energy savings or fuel switch, the energy demand is expected to increase following the trend of GDP.

Figure 14: Final Energy Demand in Transport Sector per fuel.

50 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Transformation Transmission and Distribution losses There are 40 distribution network enterprises in Estonia by 1 January 2008. The technical level of distribution networks has improved from year to year; however, the quality of the network services does not comply with the contemporary requirements in smaller places yet. The quality requirements for network services introduced in 2005 together with contractual penalties have given a good signal for network undertakings for the improvement of the quality of their services and for setting investment priorities. In the places where it is expensive to connect residential buildings to the distribution network a programme for supporting their connection is under implementation in cooperation with the local governments. The distribution network tariff rate is sufficient at present to invest in the development of the networks; the flexible longer-period price regulation, that is applied, had also positive results. Distribution losses have decreased constantly (7,8% in 2007) (DPEES, 2010). Transformation module contains the assumption of 8,27% in base year. This value is assumed to decrease by 0,5% annually and across all scenarios.

Figure 15: Transmission and Distribution losses of electricity and heat.

Electricity generation The BAU scenario is characterized by the facts that the CFBC oil shale units will be renovated and the production of electricity is dominated by oil shale. The penetration of various renewable energy technologies such as wind and biomass power generation is considered as per the existing situation today. The rest of oil shale old units will be closed after 2020 and only energy units nr. 8 and 11 of Narva Power Plant will be in operation ( EE, 2012). There are no new power plants in this scenario.

51 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” The oil-shale-based generation decreases from 8,7 TWh in 2008 to 4,5 TWh in the 2035. Gas-based generation has the same level as in base year because no new power plants will be built in this scenario (EE, 2012). Estonia has a 2020 RES target of 25%. The NREAP indicates that in the electricity sector RES should reach 17,6%. Onshore and offshore wind power plants are the main renewable energy technologies to contribute to the target, and are forecasted to cover 14% of total electricity consumption by 2020 (9% and 5% respectively). With 400 MW of onshore wind power and 250 MW offshore planned for 2020, the Estonian NREAP is above EWEA’s forecast of 500 MW62. However, EWEA’s scenario did not take into account the offshore capacity in Estonia. Whereas it should not be problematic for Estonia to reach its onshore target, the offshore target seems more challenging, but feasible. The results are presented in the below figures.

Figure 16: Transformation: Power plants capacity.

62 The assumptions of the scenarios presented in the “Development Plan of the Estonian Electricity Sector until 2018” were also taken into consideration (ESDP, 2009). 52 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 17: Transformation: Electricity Generation.

Heat production The heat production remained on the same level during the time interval 1999–2003. Mainly oil shale and natural gas were used in the production of heat. During the last years the share of oil shale in heat production has decreased, but simultaneously the share of natural gas has increased. Compared to May 2011, the production of electricity decreased by 7% and the production of heat by 8% (EE, 2012).

Figure 18: Share of Heat Production by fuel type.

53 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Coal transformation There is no coal transformation in Estonia.

Oil Refining There is no historical data presented in Estonia.

54 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Global warming potential (GHG emissions)

The below graph shows the GHG emissions which are attributed to each “energy consuming” sector.

Figure 19: GHG emissions per sector. The non – energy sector, presented above, concerns the emission sources and sinks attributed to land use change, agriculture and forestry. No data on the emissions of methane due to waste are presented.

55 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” References AAPA, 2004. Ambient Air Protection Act (RT I 2004, 43, 298) (RT L 2004, 59, 990). Riigi Teataja. 2004 AgriPolicy , 2009. AgriPolicy, Enlargement Network for Agripolicy Analysis, 2009. Analysis of renewable energy and its impact on rural development in Estonia. http://www.euroqualityfiles.net/AgriPolicy/Report%202.2/AgriPolicy%20WP2D2%20Estonia %20Final.pdf Ciscar J., Iglesias A., Feyen L.. Physical and economic consequences of climate change in Europe. December, 2010. http://www.pnas.org/content/early/2011/01/27/1011612108.full.pdf CC, 2012 Climate change: the European scale. Estonia. http://www.climateadaptation.eu/estonia/en#climate-change-european-scale CSDTR, 2010. The Commission for Sustainable Development. Transport Report. 2010 Rapporteur: Estonian Council of Environmental NGOs. http://valitsus.ee/UserFiles/valitsus/en/government- office/growth-and-jobs/sustainable-development/Summary%20of%20the%20report%20(pdf, %2042%20KiB).pdf Dalkmann H. and Brannigan C., 2007. Transport and Climate Change, Deutsche Gesellschaft fuer Technische Zusammenarbeit (GTZ), Germany. http://www.transport2012.org/bridging/ressources/files/1/609,-dl_name-en-transport-and-climate- ch.pdf Danske, 2012. MacroMonitor Estonia. Produced by the Investment Research, Emerging Markets, 12 April 2012. Available at: http://danskeresearch.danskebank.com/link/MacroMonitorEstonia120412/$file/MacroMonitor_Estonia _120412.pdf DPEES, 2010. Ministry of Economic Affairs and Communications. Development Plan of the Estonian Electricity Sector until 2018 http://www.mkm.ee/public/ELMAK_EN.pdf EBRD, 2009. Estonia, Country Profile. http://ws223.myloadspring.com/sites/renew/Shared %20Documents/2009%20Country%20Profiles/estonia.pdf EC, 2006. Available at: http://ec.europa.eu/energy/res/legislation/doc/electricity/member_states/2006/estonia_en.pdf ECAP. European Climate Adaptation Platform website. http://climate- adapt.eea.europa.eu/countries/estonia EE, 2012. Eesti Energia homepage. www.energia.ee EE AR, 2010. Eesti Energia. Annual Report 2010-2011. EEA 2012. European Environmental Agency, available at: http://www.eea.europa.eu/soer/countries/ee/soertopic_view?topic=climate%20change EEA, JRC and WHO, 2008. Impacts of Europe’s changing climate (EEA/JRC/WHO, 2008) EEIC. The Estonian Environment Information Centre webpage. www.keskkonnainfo.ee Eesti Energia AS. Annual Report 2010/2011. Tallinn Eesti Pank, 2012. Estonian Economy and Monetary Policy, 1/2012. Available at: http://www.eestipank.ee/sites/default/files/publication/rpy_112_0.pdf and http://www.eestipank.info/pub/en/dokumendid/publikatsioonid/seeriad/ylevaade/_2012_01/_3_112.pdf ?ok=1 ELC. Environmental Law Centre webpage. Available at: http://www.k6k.ee/keskkonnaigus/materjalid/teemavaldkonnad/vesi Elering webpage. www.elering.ee Ernst & Young Eurozone Forecast, 2012. Outlook of Estonia - Ernst & Young Eurozone Forecast — Summer edition — June 2012. Available at:

56 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” http://www.ey.com/Publication/vwLUAssets/Eurozone_forecast_Summer_2012_Estonia/ $FILE/Eurozone_forecast_Summer_2012_Estonia.pdf Estonian Competition Authority, 2012. Estonian Electricity and Gas Markets – Report 2011. Available at: http://www.konkurentsiamet.ee/file.php?22537 Estonian Competition Authority, 2010. Estonian Electricity and Gas Market – Report 2009. Available at: http://www.konkurentsiamet.ee/file.php?15982 European Commission, 2012. Commission Staff Working Document - Assessment of the 2012 national reform programme and stability programme for Estonia, Accompanying the document Recommendation for a Council Recommendation on Estonia’s 2012 national reform programme and delivering a Council Opinion on Estonia’s updated stability programme for 2012-2015. Brussels, 30.5.2012, SWD(2012) 311 final, {COM(2012) 311 final}. Available at: http://ec.europa.eu/europe2020/pdf/nd/swd2012_estonia_en.pdf EU EP, 2011. Energy Policy to 2050 Achieving 80-95% emissions reductions. March 2011. A report by the European Wind Energy Association. http://www.ewea.org/fileadmin/ewea_documents/documents/publications/reports/EWEA_EU_Energy_ Policy_to_2050.pdf ESDP, 2009. Estonian Electricity Sector Development Plan until 2018. Report to Ministry of Economic Affairs and Communications of Estonia. Tallinn, 2009. (In Estonian). www.mkm.ee Estonia’s Fifth National Communication under the UN Framework Convention on Climate Change. Estonia, December 2009. http://unfccc.int/resource/docs/natc/est_nc5.pdf EUP, 2011. Government of Est. onia, 2011. Estonia’s European Union Policy 2011-2015. Available at: http://valitsus.ee/UserFiles/valitsus/en/government-office/european-union/eu-policy-of-the- government/Eesti%20EL%20poliitika_ENG.pdf HELCOM, 2007 www.helcom.fi IMF, 2011. World Economic Outlook, Tensions from the Two-Speed Recovery Unemployment, Commodities, and Capital Flows, April 2011 - World Economic and Financial Surveys. Available at: http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf; http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/tables.pdf IMF, 2011. World Economic Outlook, Tensions from the Two-Speed Recovery Unemployment, Commodities, and Capital Flows, April 2011 - World Economic and Financial Surveys. Available at: http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf IMF, 2012a. World Economic Outlook: Growth Resuming, Dangers Remain. Available at: http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/tables.pdf Intelligent Energy - Europe, ALTENER, Grant Agreement no. EIE/08/517/SI2.529243. Available at: http://www.reshaping-res-policy.eu/downloads/D8%20Review%20Report_final%20(RE-Shaping).pdf Kingsbury Agata, 2011. Estonian Forestry Situation – GAIn Report Number: ES1105. Available at: http://static.globaltrade.net/files/pdf/20120112153214123.pdf Laaniste M., 2010. Implementation of the EPBD in Estonia, Status in November 2010. http://www.epbd-ca.org/Medias/Pdf/country_reports_14-04-2011/Estonia.pdf Mavrakis D. and Konidari P., 2004. Elements of climate change policy (Hardcopy, available only in Greek language). Ministry of Finance of Estonia, Statistics Estonia. http://estonia.eu/about-estonia/economy-a- it/economy-in-numbers.html MoE, 2005. Ministry of the Environment, 2005. Environmental charges in Estonia. Available at: http://www.envir.ee/1106192 MOIEEP, 2011. Ministry of Economic Affairs and Communications, 2011. Mid-term overview of implementation of Energy Efficiency Plan 2007–2013 and further implementation. The second energy efficiency action plan of Estonia. Available at: http://ec.europa.eu/energy/demand/legislation/doc/neeap/estonia_en.pdf

57 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Nordea, 2012. Economic Outlook, March 2012. Available at: http://newsroom.nordea.com/en/files/2012/03/EO-EN-2012-03-Edited.pdf NREAP, 2010. Estonia’s National Renewable Energy Action Plan 2020. Report to Ministry of Economic Affairs and Communications of Estonia. Tallinn. (In Estonian). www.mkm.ee NRP, 2012. Government of Estonia, 2012. National Reform Programme “ESTONIA 2020”. Available at: http://valitsus.ee/UserFiles/valitsus/en/government-office/growth-and-jobs/Estonia%202020%20in %202012/ENG%20national%20reform%20programme%20Estonia%202020.pdf O´Brien K. (ed.). Developing Strategies for Climate Change: The UNEP Country Studies on Climate Change Impacts and Adaptations Assessment. Report 2000:2. Center for International Climate and Environmental Research, Oslo, 2000. http://eslamian.iut.ac.ir/Teaching/Meteorology/climat %20change-2000.pdf OECD, 2012. Economic Outlook, No.91. Press Conference, Paris, 22 May 2012, 10h (Paris time). Available at: http://www.oecd.org/finance/monetaryandfinancialissues/49995435.pdf OECD, 2011. Economic Outlook, No.90. Press Conference, Paris, 28 November 2011, 11h (Paris time). Available at: http://www.oecd.org/economy/economicoutlookanalysisandforecasts/49112261.pdf OWER, 2011. Official Webpage of the Estonian Republic. http://www.eesti.ee/eng/riik/eesti_vabariik/ Ragwitz Mario, Held Anne, Breitschopf Barbara, Rathmann Max, Klessmann Corinna, Resch Gustav, Panzer Christian, Busch Sebastian, Neuhoff Karsten, Junginger Martin, Hoefnagels Ric, Cusumano Niccolò, Lorenzoni Arturo, Burgers Jitske, Boots Maroeska, Konstantinaviciute Inga, Weöres Botond, 2011. D8 Report: Review report on support schemes for renewable electricity and heating in Europe. A report compiled within the European research project RE-Shaping (work package www.reshaping-res- policy.eu) Reihan A., Roosimägi J.. PROMITHEAS-4. Mapping national procedures in Estonia. Tallinn, 2011. REN21, 2011. Renewables 2011 – Global Status Report. Available at: www.ren21.net Report, 2011. PROMITHEAS-4. Overview of the Mitigation/Adaptation Policy instruments in Estonia. The report is written by Prof. Alvina Reihan. Available at: www.promitheasnet.kepa.uoa.gr/ Report, 2011. Report pursuant to Article 3(2) of Decision 280/2004/EC. 2011. Estonia. Estonian Ministry of the Environment Republic of Estonia, 2012. Stability Programme 2012, Tallinn, April 2012. http://ec.europa.eu/europe2020/pdf/nd/sp2012_estonia_en.pdf Republic of Estonia, 2011. Stability Programme 2011, Tallinn, April 2011. http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/20_scps/2011/01_programme/ee_ 2011-04-28_sp_en.pdf SEB, 2012b. Eastern European Outlook. Economic Research, October 2012. Available at: http://www.seb.fi/pow/wcp/filedownload.asp? file=DUID_FB4BDED9BE363439C1257A93002BB3BB_EEO_1210_eng.pdf SEB, 2012b. Eastern European Outlook. Economic Research, March 2012. Available at: http://taz.vv.sebank.se/cgi-bin/pts3/mc1/MB/mblib.nsf/a- w/42D5136BBB65B5B4C12579CF002CA9EE/$FILE/eeo12_03.pdf SP, 2012. Stability Programme 2012, Tallinn, April 2012. http://ec.europa.eu/europe2020/pdf/nd/sp2012_estonia_en.pdf Statistical Office of Estonia http://www.stat.ee/population Streimikiene Dalia. Climate change mitigation policies in energy sector of Baltic States. Streimikiene, Punys, Burneikis, 2005.Review of renewable energy in Lithuania. Renewable and Sustainable Energy Review. Vol. 9. Issue 1. P. 29–49. Swedbank, 2012b. Economic Outlook, 2012. Available at: http://www.slideshare.net/SwedbankAB/swedbank-economic-outlook-april-2012 and http://newsroom.swedbank.com/en/Publications/2012/Swedbank-Economic-Outlook----April-24-2012/

58 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Swedbank, 2012a. the Estonian Economy - Monthly newsletter from Swedbank’s Economic Research Department by Teele Reivik. Available at: http://www.swedbank- research.com/english/estonian_economy/2012/augusti/swb_eemonthly_aug2012.pdf Tallinn University of Technology, 2012. Energy Efficiency Policies and Measures in Estonia ODYSSEE - MURE 2010, Monitoring of EU and national energy efficiency targets. Available at: http://www.odyssee-indicators.org/publications/PDF/estonia_nr.pdf The European Times, 2007. Estonia. Available at:http://www.european-times.com/wp- content/uploads/estonia-ept_ap-low.pdf TTU, EEPM, 2009. Tallinn University of Technology, 2009. Energy Efficiency Policies and Measures in Estonia, Monitoring of Energy Efficiency in EU 27, Norway and Croatia (ODYSSEE-MURE). Available at: http://www.odysseeindicators.org/publications/PDF/estonia_nr.pdf TU, 2010. Tarty University, 2010. Background Paper on Biogas Sector in Estonia: Current Status and Development Needs. Available at: http://www.lote.ut.ee/orb.aw/class=file/action=preview/id=882699/Background+paper+on+Biogas+Se ctor+in+Estonia_Current+Status+and+Development+Needs.pdf UNECE, 2011. Estonia, Country Market Statement - 69th session of UNECE Timber Committee and 36th session of European Forestry Commission, 10–14 October 2011. Available at: http://www.unece.org/fileadmin/DAM/timber/country-info/Estonia.pdf UNFCCC, 2011. ESTONIA`S FOURTH NATIONAL COMMUNICATION. Available at: http://unfccc.int/resource/docs/natc/estnc4pI.pdf UNFCCC, 2011. Report of the in-depth review of the fifth national communication of Estonia. Available at: http://unfccc.int/files/kyoto_protocol/compliance/plenary/application/pdf/cc-ert-2011- 13_idr_of_nc5_of_estonia.pdf UNFCCC, 2009. Ministry of Environment, 2009. Estonia’s 5th National Communication under the UNFCCC. Available at: http://unfccc.int/resource/docs/natc/est_nc5.pdf United Nations, Department of Economic and Social Affairs, 2011. World Population Prospects – The 2010 Revision, Volume I: Comprehensive Tables. Available at: http://esa.un.org/unpd/wpp/Documentation/pdf/WPP2010_Volume-I_Comprehensive-Tables.pdf UN, Department of Economic and Social Affairs, 2011. World Population Prospects – The 2010 Revision, Volume I: Comprehensive Tables. Available at: http://esa.un.org/unpd/wpp/Documentation/pdf/WPP2010_Volume-I_Comprehensive-Tables.pdf World Energy Outlook 2010, IEA. http://www.worldenergyoutlook.org/ WW. 2012. Waterwiki homepage. Estonia. http://waterwiki.net/index.php/Estonia

59 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” OPTIMISTIC SCENARIO (2000 – 2050) Optimistic scenario description General comments The Opt scenario is structured by: i) the mitigation/adaptation policy instruments that the country has set into force after January 1st, 2011; ii) additional policy instruments in line with the EU climate change policy that can be adjusted to the needs and priorities of the examined country63 and iii) the maximum exploitation of the potential of the country in energy efficiency and renewable energy sources. Its development is consistent with the National Reform Programme “Estonia 2020” approved by the Government on 26 April 2012. According to this programme the following policies and measures are within the priorities of the country (NRP, 2012): - The next amendment of the EU ETS needs to focus on the development of energy and resource efficiency of companies outside ETS.

- Energy and resource efficiency measures, measure for reducing CO2 emissions must be developed through innovative investment schemes. Therefore, for the achievement of economic development and industrial competitiveness it is important to support R&D in resource efficiency and eco-innovation investments. - Development of green technologies in water and waste management need special attention since natural circumstances offer a competitive advantage in these areas compared to other countries. - Reducing waste generation and increasing recycling are priorities, particularly due to the high percentage of oil shale waste. Additionally, it is important to find recycling possibilities by removing existing bottle necks that prevent greater use of oil shale waste for different products (for example grit stone). - Estonian natural conditions favour an increased and efficient use of agricultural and forestry land allowing the use of renewable resources for energy production, food and wood industry. Emphasis will be given to R&D solutions for enhancing the value of biomass in Estonia – i.e. to use it for products with high possible value. - For optimal resource use and decreased environmental impact it is important to implement measures for developing public transport and traffic flows and green corridors in cities. - Industrial competitiveness assumes safe access to raw materials and their safety of supply. For effective and efficient use of mineral resources there is a need for updating relevant legislation and target R&D activities towards new and unused mineral resources and mining technologies. - Correct economical values must be placed on ecosystem services in order to create long term secure supply of ecosystem services and new business opportunities. Therefore it is important to develop evaluation methodology for ecosystem services.

63 Albania, Moldova, Serbia and Ukraine are Contracting Parties of the Energy Community and have committed to comply with the EU energy policy (http://www.energy-community.org/portal/page/portal/ENC_HOME). This commitment concerns also climate change policy due to policy instruments that support the usage of technologies for energy efficiency and renewable energy sources. Armenia and Turkey are observers to this Treaty. 60 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Policy portfolio for this scenario Existing policy instruments The existing policy instruments are the ones described in the BAU scenario (those accepted by 31 December 2010), but with the following modifications, due to recent legislation changes. Policy instruments for the promotion of RES There are no amendments to the relevant Acts presented in the BAU scenario nor was a new Law set into force after 31 December 2010. Policy instruments for energy efficiency There are no amendments to the Acts of the BAU scenario concerning energy efficiency nor was a new Law set into force after 31 December 2010. Policy instruments for the transport sector There are no amendments to the Acts of the BAU scenario concerning RES transport sector nor was a new Law set into force after 31 December 2010. Policy instruments for promoting biofuels – transport and agricultural sectors There are no amendments to the Acts of the BAU scenario concerning the promoting biofuels nor was a new Law set into force after 31 December 2010. Policy instruments for emission trading There was an amendment at the following Acts after 31 December 2010. Ambient Air Protection Act64 (RT I 2004, 43, 298; 2010, 44, 261, date: 30.09.2004, amended by RT I, 04.07.2012, 4, date: 15.07.2012, partly 01.01.2013 and 01.03.2013) The Act regulates activities, which discharge emission of pollutants into the ambient air, damage to the ozone layer, and appearance of factors causing climate change. The Act provides main principles for the control of ambient air quality, sets basis for emission standards, foresees measures for reduction of air pollution, etc. The Act also provides that the possessors of pollution sources must take additional measures to reduce the emission levels of carbon dioxide and other GHG. To reduce the emission of pollutants into ambient air from stationary sources of pollution and to improve the quality of ambient air, the system of pollution permits and pollution charges has been implemented. A number of secondary level legal acts have been issued on the basis of this Act (Report, 2011). The Act stipulates that activities for the reduction of climate change have to be organized by the Ministry of Environment. AS Eesti Energia, Ministry of Economic Affairs and Communications and other institutions, for example SEI Tallinn Centre, are usually involved in the implementation. Estonia is using two out of the three Kyoto Protocol´s flexible mechanisms – Joint Implementation and International Emissions Trading. The Ambient Air Protection Act (AAPA, 2004) incorporates into the national legislation Directive 2003/87/ЕС65 regarding the establishment of a scheme for greenhouse gas emission allowance trading within the Community and the amendment of Council Directive 96/61/EC66. Policy instruments for promoting carbon capture and storage (CCS) Technologies There is no Act yet in Estonia for this technology, so there is no amendment to it.

64 https://www.riigiteataja.ee/akt/104072012009?leiaKehtiv 65 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:275:0032:0032:EN:PDF 66 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996L0061:en:HTML 61 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Additional policy instruments Mitigation Policy instruments for the promotion of RES There are proposals for changes of the Acts that are implemented. Since these are proposals and not official changes they were included in this session that concerns the additional policy instruments. Renewable energy support schemes have been launched for supporting the construction of power plants using RES in order to increase their share to 25% of the final consumption by 2020. These changes concern the following policy instruments: Financial policy instruments The feed-in-tariffs for RES-E are expected to change. The amendment of the Electricity Market Act in 27 February 2010 abolished the purchase obligation and only a premium of 53,7€/MWh is available for electricity generated from RES. Estonia’s government wants to continue this process and to revise the current subsidies for renewable energy producers, in order to cut costs for consumers. The Ministry of Economic Affairs and Communications is preparing a bill on amendments; the subsidies may differ across energy sources. Proposals will be based on a study by the country’s Competition Board. According to the Ministry of Economic Affairs and Communications the main goal of the foreseen reduction is to limit investments in renewable energy, which may be the result of too high profitability and too high support granted by current law (Teckenburg E., Rathmann M., Winkel T., 2011). On January 31st 2012, the Estonian Ministry of Economic Affairs and Communication published the Draft Amendments which aim at reducing the Feed-in-tariff support for renewables. According to the proposal, the new support scheme will apply from January 1st, 2013, to all renewable energy producers, including existing installations. As the proposed new feed-in-tariffs will be reduced by about 16 €/MWh (or 30%) compared to the feed-in premiums paid before, they will thus retroactively lower the support level for already operating renewable plants in Estonia (EREF, 2012).

Policy instruments for energy efficiency The National Energy Efficiency Programme for the period 2007-2013 has already been prepared, concerning all sectors. The expected energy savings are to be achieved in this scenario. The policy instruments that will be used additionally are presented per sector. These additional policy instruments are proposed for ensuring the achievement of the energy saving target. Energy Sector - Energy efficiency standards: Introduction of stricter standards; - Tax exemptions: For installations that proceed with energy efficient investments. Tax exemptions for three years depending on the amount of investment cost. Industrial sector For the most energy consuming branches of this sector regulatory (energy audits) and financial (subsidies) policy instruments are foreseen (Tallinn University of Technology, 2012). Households The estimated share of space heating in the total energy consumption of households is approximately 60%. The annual amount of energy used for space heating depends on the outdoor temperature during the heating season (TUT EEPM, 2009). The proposed policy instruments include:

62 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” - Stricter energy efficiency requirements for new and reconstructed buildings starting from 2013. The state will lead by example, constructing new public sector buildings energy-efficiently; - Support and financial policy instruments for the energy efficiency of industrial enterprises, which would include energy audit grants and the provision of financing possibilities for activities resulting from such audits. - Apartment buildings can apply for a KredEx (The Credit and Export Guarantee Fund67) subsidy of 50% of the energy audit costs and to be subsidized up to 35% of the apartment building's renovation costs. There is an assumption that it will be proceeding with subsidies in Opt scenario. - Completion of the first stage of investments into energy conservation for apartment buildings and private homes (MOIEEP, 2011). Agricultural sector According to the National Energy Efficiency Plan energy savings are expected for this sector through the adoption of energy efficient technologies and the awareness of the people involved in this sector for such issues (MOIFEE, 2011). The following policy instruments are proposed for achieving the aforementioned outcomes: - Economic policy instruments: Subsidies for the farmers that will purchase new equipment or practices that are more energy efficient compared to the ones they already use. - Dissemination policy instruments: Awareness campaigns or short term seminars so that farmers are informed about the climate change impacts on the Estonian agriculture and the available modern technologies and practices that they can use in their work for consuming less energy.

Policy instruments for the transport sector Since sea connections are important to Estonia’s economy, their functioning must be ensured year-round. Therefore it is important to support a joint icebreaking policy on the Baltic Sea, operational cooperation between Member States and the effective use of available resources (EEUP, 2011). Walking and cycling should become an integral part of urban mobility and infrastructure design. Additionally, potential trends include moving the system of fees and taxes in the transport sector towards the ‘user pays’ and ‘polluter pays’ principles, including fuel taxes, taxation of the carbon dioxide component, imposing road user charges and taking into account expenses related to local externalities such as noise and air pollution. Simultaneously, the oil dependence of the transport sector needs to be reduced for avoiding risks in the mobility of goods and passengers and thus the competitiveness of the EU (EEUP, 2011). A downside to increasing tax burden is the potential damage to competitiveness of the EU and Estonia: increasing transportation service costs may hinder the availability of services, have a negative impact on the economic situation of transport operators and increase the need for public sector subsidies (EEUP, 2011). In order to reduce future problems in this sector, it is important to apply measures of slowing down its rapid growth. Traffic intensity growth rate is at the level of year 2005, measured as the average level of the past three years (last three years the growth rate of traffic intensity was 7,4%) (TDP, 2009). There are no new direct measures undertaken for increasing energy efficiency in transport sector during recent years. Some aspects of energy efficiency are dealt with the Transport

67 KredEx home page: http://www.kredex.ee/apartment-association/toetused/rekonstrueerimise-toetus/

63 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Development Plan 2006–2013 (passed by the Parliament in January 2007) (TUT EEPM, 2009). The following additional policy instruments will be part of the Opt scenario:

Regulatory policy instruments The rail transport and rail network density (km/km2) in Estonia is used quite seldom, and are one of the lowest in Europe (TUT EEPM, 2009). Because of Estonia’s peripheral location and lack of transport connections, the completion of the Rail Baltic and the Via Baltica projects is necessary in order to create modern connections between the Baltic States and the rest of the EU (EEUP, 2011). The target to increase the market share of rail passenger traffic to 10% and rail goods traffic to 15% of the total volume of all modes of transport could be supported by improving the links of road and railway network and public transport system: - increasing the Tallinn-Tartu rail connection schedule and reducing the duration of the journey with new trains; - implementing the county planning to specify the location of the Rail Baltic railway route corridor; - creating pan-Baltic joint-venture in order to develop Rail Baltic; - analyzing the re-opening of the Tallinn - St. Petersburg passenger train line (MOIEEP, 2011). Financial policy instruments This type of policy instruments is considered due to the fact that less than half of all registered during 2010 vehicles in Estonia were brand-new ones (Tallinn University of Technology, 2012). The age of the vehicles, in road transport in particular, is an important factor for the achievement of energy savings. Subsidies and grants are expected to increase the number of new technology cars.

Subsidies In March 2011, the Government launched the Electric Mobility Programme (EMP) combining the extensive introduction of electric vehicles with available revenues from the Kyoto Protocol mechanisms (from sales of emission allowances in the amount of 10 million AAUs) (Tallinn University of Technology, 2012). Estonia offers subsidies of up to 50% for private Electric Vehicle (EV) purchases. The maximum grant rate is 18000€, but the grant can not exceed 50% of the acquisition price of the car or 1000€ per 1 kWh of battery capacity, proceeding from the lower price of the two (Tallinn University of Technology, 2012). Subsidies are awarded only to new cars that are pure electric vehicles (Tallinn University of Technology, 2012). Different types of hybrid cars, including chargeable hybrid vehicles, are not supported. In 2011, the Estonian government started providing 507 Mitsubishi i-Mi EV to social workers around the country, and made plans to install AC chargers at municipality office. The Estonian government plans to build a network of 200 EV fast-charging stations to serve all urbanized areas with more than 5000 inhabitants. On main roads, they aim to install a fast charger every 50 kilometers, creating the highest concentration of direct current chargers in Europe68.

Grants According to the Draft Conditions and procedure of the support to the development of sustainable transport the public transport (tram, trolleybus and rail) shall be granted for the

68http://www.steelguru.com/international_news/ABB_wins_tender_to_build_a_network_of_200_EV_charging_sta tions_in_Estonia/245359.html 64 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” construction of a sustainable public transport infrastructure and reconstruction and for the acquisition of rolling stocks, where the financial maximum rate is 85% of the project financing needs. This policy instrument has already been launched. In May 2011, 45 MEUR (from AAU sales revenue under the GIS) were invested in public transport ie energy efficient and environment benign trams for the city of Tallinn (Tallinn University of Technology, 2012). The trams will use electricity generated from RES. Currently, the average age of trams in Tallinn is 25 years (Tallinn University of Technology, 2012). The revenues from the GIS allowed the purchase of 15–16 up-to-date trams that will be used on a 16 km route since 2014 (Tallinn University of Technology, 2012).

Policy instruments for promoting biofuels – transport and agricultural sectors The most important resource inputs for the production of biogas are: energy crops from unused agricultural land; slurry and manure from livestock farms which are registered in Estonian Agricultural Registers and Information Board69; semi-natural grasslands; larger landfills; biodegradable waste; and waste water sludge (TU, 2010). According to the respective EU Directive biofuels are to increase at 5,75% in the energy consumption of the transport sector by 2020. This will be done by supporting new technologies in cars.

Policy instruments for emission trading There are no additional policy instruments concerning emission trading since Estonia is already using EU-ETS, JI and GIS.

Policy instruments for promoting carbon capture and storage (CCS) technologies Carbon capture and storage technologies are considered as an expensive component. Although Estonia is an emerging economy and these technologies were not considered as part of the policy portfolio for the other PROMITHEAS-4 beneficiary countries, as an EU Member State it needs to implement Directive 2009/31/EC70. Although no separate free allowances have been prescribed for carbon dioxide capture and storage (except up to 300 million tons up to the end of 2015 to be set aside in the new entrants reserve for supporting EU demonstration projects), the Emissions Trading Directive enables Member States to use in the time interval 2013-2016 the income received from the auction of allowances for the promotion of the construction of highly efficient power plants, including the construction of new power plants enabling carbon dioxide capture and storage. In case of new installations with the efficiency exceeding the efficiency values provided for power plants in Annex 1 to the Commission decision 2007/74/EC (e.g. the reference value for separate production of electricity from oil shale is 39%), Member States may bear up to 15% of the total cost of the investments related to the new installations enabling carbon dioxide capture and storage (EESDP, 2009).

Policy instruments for waste management Regulatory policy instruments for recycling and reuse Estonia considers important the development of national waste prevention programmes in all Member States and to strengthen the monitoring of enforcement of waste management legislation. Estonia supports the meeting of the waste reuse targets of 2020, according to which 50% of yearly household waste is to be recycled and 70% of yearly construction and demolition waste is to be reused. In order to meet these targets, separate waste collection must

69 www.pria.ee 70 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0114:0135:EN:PDF 65 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” be promoted since it will ensure a higher quality of recycled waste materials. Implementation and development of new technology make it possible to reuse waste that cannot be recycled as materials for energy production or other purposes (EEUP, 2011).

Policy instruments for environmental charges The environment charge rates in 2010-2015 are as follows:

- the air pollution charge rates for CO, NOx, VOC, heavy metals and mercaptans increase 6% annually; SO2 and particulate matter charge rates increase 35%; CO2 emission charges rate does not change by 5%; - water abstraction charges increase gradually 10% annually in 2010-2012, after 2013- 15% (MoE, 2005).

Adaptation

Policy instruments for water management Estonia hopes that the new EU water policy will take into account the water problems of all Member States and include waste-related aspects. A necessary target for development is the implementation of integrated water resource management in order to allow for the effective use of particular water resources in several areas. For example, the possibilities of using cooling water and acid mine drainage in heat production should be researched and promoted; this would correspond to energy policy targets and help reduce the ecological footprint of water use (EEUP, 2011).

Policy instruments for forest management There are no additional policy instruments concerning the forest management.

Main characteristics of this policy portfolio This policy portfolio sets stringent mitigation targets in all sectors. It is oriented towards the principles of the EU climate change policy and adjusted according to the needs of Estonia as drivers. Simultaneously it takes into consideration the national priorities in climate change policy as they are expressed through official documents. One of the main components of the policy portfolio for the OPT scenario is the achievement of energy savings. Oil shale will continue being extracted and used for the production of electricity, but it needs to be processed in the most environmentally friendly and sustainable way and considering the accompanying social impact (NDPUOS, 2008). Energy savings in the energy sector, households, transport and agriculture allow the sustainable consumption of oil shale (NDPUOS, 2008). In this scenario the existing fluidised bed combustion units would operate and more efficient new oil shale based units would be built. The construction of CHP plants using biomass will increased the level of heat generation from biomass (Ministry of the Environment of the Republic of Estonia, 2011). The use of RES will be extended in the next years to heat generation in boiler stations, which are not included in the EU ETS (Ministry of the Environment of the Republic of Estonia, 2011). On the other hand, the nature of the production processes, does not allow increased use of RES in Estonian industrial plants, which are included in the EU ETS (Ministry of the Environment of the Republic of Estonia, 2011). Approximately 1000 MW of wind farms would be in operation by 2020 that would cause the exceeding of RES share and decrease the GHG emissions significantly. The additional policies concerning the transport sector and the promotion of biofuel in agriculture and transport sectors could bring the additional GHG emission savings by 2050. 66 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Key assumptions The key assumptions used for the development of scenarios are similar to those used in previously published studies and papers for Estonia. The categories of the key parameters are common for all scenarios and are divided as follows:

Demographics and Economy The demographics and economy assumptions described in BAU scenario are used for all three (3) scenarios (BAU, OPT, PES).

Climate Statistics Precipitation For the Opt scenario precipitation is increased by an annual growth rate of 7,5% (O ´Brien (ed.), 2000).

Figure 20: Climate Statistics: Precipitation. Temperature There are two different projections for Opt scenario: - temperature will increase at 6,7°C by 2050 (O´Brien (ed.), 2000). - temperature will increase at 8,1°C by 2050 (CiscarJ., Iglesias A., 2010). The air temperature that will be taken into account in Opt scenario is 7,4 °C by 2050.

67 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 21: Climate Statistics: Temperature. Frequency of extreme events For the Opt scenario the increase in the frequency of the heat waves follows the increase of the temperature in the same scenario. Water resources The increasing of surface water for the Opt scenario is assumed to be the minimum 5% by 2020 and 9% by 2050 (O’Brien (ed.), 2000). The increasing of groundwater is estimated at 5% by 2050 in Opt scenario (O’Brien (ed.), 2000).

68 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 22: Climate Statistics: Surface waters.

Figure 23: Climate Statistics: Groundwater.

Policies and Measures Feed – in – tariff system For the Opt scenario they follow the time development of the costs per RES technology type according to bibliographic references. Land management There are no other assumptions related to land management.

Global trends Crude oil price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Natural gas price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Coal price Projections are used. EUA price Projections about literature. ERU price Projections about of the EUA price. CER price 69 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Projections about the ERU price are similar to those of the EUA price.

Adaptation Water Use There are no other assumptions related to water use. The historical data would be taken into account.

General Area of country No assumptions for this parameter. Energy intensity growth It is calculated by LEAP as a function of total energy and GDP. No assumptions needed.

70 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Energy Demand Households There is an assumption that it will be proceeding with subsidies from KredEx in Opt scenario for whole household sector. Energy efficiency policy instrument are presented in the respective session for the OPT policy portfolio.

Figure 24: Final Energy Demand in Household Sector.

Agriculture Energy efficiency policy instruments are applied (see policy portfolio of OPT scenario). However, it is worth mentioning that emissions from this sector dropped significantly (56.9%) for the period 1990-2009, due to reduction in livestock population, decreasing use of fertilizers and reduction in manure applied to agricultural lands (UNFCCC, 2011). The applied policy instruments have very small effect in the GHG reductions of the sector.

Industry Energy efficiency policy instruments are applied only for one type of industry that of “Non metallics” which is one of the most energy consuming under this branch.

Transport There is change concerning the penetration of electric cars in OPT scenario. Not even a widespread transition to electric cars in Estonia would result in a rapid decrease in GHGs. While most of Estonia’s electricity continues to be produced from oil shale, electric cars using such energy source will produce significantly more GHG than the vehicles used in Estonia at present. However, electric vehicles would justify their use in urban areas and as public transport because they produce less noise and air pollution. It is expected that with these incentives hybrids can increase their market penetration so that by 2050, 20% of the market for cars and SUVs is for hybrids (CSDTR, 2010).

Figure 25: Final Energy Demand in Transport Sector.

71 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Transformation Transmission and Distribution losses Transformation module contains the assumption of 8,27% in base year. This value is assumed to decrease by 0,6% annually (EE, 2012).

Figure 26: Transformation: Transmission and Distribution losses of electricity and heat.

Electricity generation For developing the Opt scenario the following requirements were added to the set of data used for the BAU scenario: building of additional offshore wind farms with an annual electricity production of 4 PJ (wind farms capacity is up to 900 MW71) (EE, 2012). This scenario also includes the building of an additional fluidised bed unit with capacity 300MW in the period up to 2020 and constructing of a nuclear power plant with capacity 600MW in Estonia by 2023 (EE, 2012).

Figure 27: Transformation: Electricity Generation.

Heat production The assumptions for heat production were slightly altered compared to those in BAU scenario. They were adjusted by taking into consideration that the Development Plan for Enhancing the Use of Biomass and Bioenergy for 2007–2013 sets a target to increase the share of district heating produced from RES in total from 21% in 2005 to 33% in 2013 (UNFCCC, 2011). The shares of peat and biogas were increased in the expense of natural gas.

71 There are a number of conducted pre-feasibility studies to install wind energy capacity of approximately 1,000 MW by 2020 (UNFCCC, 2011). Ea Energy Analyses in 2010 developed for Estonia three different scenarios with 900 MW and 1800 MW wind power capacity by 2016 (Ea Energy Analyses, 2010). 72 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Coal transformation There is no coal transformation in Estonia.

73 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Global warming potential (GHG emissions) Figure 30 shows the GHG emissions which are attributed to each “energy consuming” sector. The non – energy sector, presented above, concerns the emission sources and sinks attributed to land use change, agriculture and forestry. No data on the emissions of methane due to waste are presented.

Figure 28: GHG emissions per sector.

74 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” References AAPA, 2004. Ambient Air Protection Act (RT I 2004, 43, 298) (RT L 2004, 59, 990). Riigi Teataja. 2004. CC. Climate change: the European scale. Estonia. http://www.climateadaptation.eu/estonia/en#climate- change-european-scale Ciscar J., Iglesias A., Feyen L.. Physical and economic consequences of climate change in Europe. December, 2010. http://www.pnas.org/content/early/2011/01/27/1011612108.full.pdf CSDTR, 2010. The Commission for Sustainable Development. Transport Report. 2010 Rapporteur: Estonian Council of Environmental NGOs. http://valitsus.ee/UserFiles/valitsus/en/government- office/growth-and-jobs/sustainable-development/Summary%20of%20the%20report%20(pdf, %2042%20KiB).pdf DPEES, 2010. Ministry of Economic Affairs and Communications. Development Plan of the Estonian Electricity Sector until 2018 http://www.mkm.ee/public/ELMAK_EN.pdf Ea Energy Analyses, 2010. Wind Power in Estonia - An analysis of the possibilities and limitations for wind power capacity in Estonia within the next 10 years. Available at: http://www.ea- energianalyse.dk/reports/1001_Wind_Power_in_Estonia.pdf EE, 2012. Eesti Energia homepage. www.energia.ee EEA homepage: http://www.eea.europa.eu/soer/countries/ee/soertopic_view?topic=climate%20change EEIC. The Estonian Environment Information Centre webpage. www.keskkonnainfo.ee EESDP, 2009. Estonian Electricity Sector Development Plan until 2018. Report to Ministry of Economic Affairs and Communications of Estonia. Tallinn, 2009. (In Estonian). www.mkm.ee Eesti Energia AS. Annual Report 2010/2011. Tallinn EEUP, 2011. Government of Est. onia, 2011. Estonia’s European Union Policy 2011-2015. Available at: http://valitsus.ee/UserFiles/valitsus/en/government-office/european-union/eu-policy-of-the- government/Eesti%20EL%20poliitika_ENG.pdf Elering webpage. www.elering.ee EREF, 2012 European Renewable Energies Federation. Estonia proposes retroactive cuts in Feed-In Tariff Support. Brussels, 2012. http://www.eref-europe.org/attachments/pr_2012/press-release- estonia.pdf IMF, 2011. World Economic Outlook, Tensions from the Two-Speed Recovery Unemployment, Commodities, and Capital Flows, April 2011 - World Economic and Financial Surveys. Available at: http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf ; http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/tables.pdf Ministry of the Environment of the Republic of Estonia, 2011. Estonia’s National Allocation Plan for 2008-2012 (Translation). Available at: http://www.envir.ee/orb.aw/class=file/action=preview/id=1174608/NAP_2008_2012.pdf MoE, 2005. Ministry of the Environment, 2005. Environmental charges in Estonia. Available at: http://www.envir.ee/1106192 MOIEEP, 2011. Ministry of Economic Affairs and Communications, 2011. Mid-term overview of implementation of Energy Efficiency Plan 2007–2013 and further implementation. The second energy efficiency action plan of Estonia. Available at: http://ec.europa.eu/energy/demand/legislation/doc/neeap/estonia_en.pdf NRP, 2012. Government of Estonia, 2012. National Reform Programme “ESTONIA 2020”. Available at: http://valitsus.ee/UserFiles/valitsus/en/government-office/growth-and-jobs/Estonia%202020%20in %202012/ENG%20national%20reform%20programme%20Estonia%202020.pdf O´Brien K. (ed.). Developing Strategies for Climate Change: The UNEP Country Studies on Climate Change Impacts and Adaptations Assessment. Report 2000:2. Center for International Climate and

75 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Environmental Research, Oslo, 2000. http://eslamian.iut.ac.ir/Teaching/Meteorology/climat %20change-2000.pdf Report (2011). Report pursuant to Article 3(2) of Decision 280/2004/EC. 2011. Estonia. Estonian Ministry of the Environment. SP, 2012. Stability Programme 2012, Tallinn, April 2012. http://ec.europa.eu/europe2020/pdf/nd/sp2012_estonia_en.pdf Statistical Office of Estonia http://www.stat.ee Tallinn University of Technology, 2012. Energy Efficiency Policies and Measures in Estonia ODYSSEE - MURE 2010, Monitoring of EU and national energy efficiency targets. Available at: http://www.odyssee-indicators.org/publications/PDF/estonia_nr.pdf TDP, 2009. Ministry of Environment, 2009. Transport Development Plan 2006-2013. Available at: https://www.riigiteataja.ee/aktilisa/0000/1278/4604/12784610.pdf (in Estonian). Teckenburg E., Rathmann M., Winkel T., 2011. Renewable Energy Policy, Country Profiles – 2011 version based on policy information available in March 2011. Available at: http://www.reshaping-res- policy.eu/downloads/RE-SHAPING_Renewable-Energy-Policy-Country-profiles-2011_FINAL_1.pdf TUT EEPM, 2009. Tallinn University of Technology, 2009. Energy Efficiency Policies and Measures in Estonia, Monitoring of Energy Efficiency in EU 27, Norway and Croatia (ODYSSEE-MURE). Available at: http://www.odyssee-indicators.org/publications/PDF/estonia_nr.pdf TU, 2010. Tarty University, 2010. Background Paper on Biogas Sector in Estonia: Current Status and Development Needs. Available at: http://www.lote.ut.ee/orb.aw/class=file/action=preview/id=882699/Background+paper+on+Biogas+Se ctor+in+Estonia_Current+Status+and+Development+Needs.pdf United Nations, Department of Economic and Social Affairs, 2011. World Population Prospects – The 2010 Revision, Volume I: Comprehensive Tables. Available at: http://esa.un.org/unpd/wpp/Documentation/pdf/WPP2010_Volume-I_Comprehensive-Tables.pdf World Energy Outlook 2010, IEA. http://www.worldenergyoutlook.org/

76 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” PESSIMISTIC SCENARIO (2000 – 2050) Pessimistic scenario description General comments The Pes scenario is structured by: i) the mitigation/adaptation policy instruments that the country has set into force after the 1st January 2011; ii) no other additional policy instruments apart from those already decided to be implemented and in line with the EU climate change policy; the EU policy instruments will be adjusted to the needs and priorities of the examined country and iii) the minimum exploitation of the potential of Estonia in energy efficiency and RES by limiting the possible technological options only to the promotion of the most promising for Estonia RES i.e. biomass and wind power. The focus of the climate policy portfolio will be the energy and the agricultural sector since these have the highest share in GHG emissions. These are the sectors with the highest potential in energy efficiency and these are the most promising for the country types of RES. According to “Estonia’s European Union Policy 2011-2015” the primary task for the period 2011–2015 is to exit the crisis in the euro area and to ensure a stable economic environment to foster sustainable economic growth all over EU. The first task of the Member States is to reduce budget deficit and government debt and also ensure that in the medium term, the perspective budget positions are close to balance or in surplus (EEUP, 2011).

Policy portfolio for this scenario Existing policy instruments Policy instruments for the promotion of RES There are no amendments to the Acts of the BAU scenario concerning RES nor was a new Law been set into force after 31 December 2010. Policy instruments for energy efficiency There are no amendments to the Acts of the BAU scenario concerning RES nor was a new Law set into force after 31 December 2010. Policy instruments for the transport sector There are no amendments to the Acts of the BAU scenario concerning RES nor was a new Law set into force after 31 December 2010. Policy instruments for promoting biofuels – transport and agricultural sectors There are no amendments to the Acts of the BAU scenario concerning RES nor was a new Law set into force after 31 December 2010. Policy instruments for emission trading There was an amendment at the following Acts after 31 December 2010. Ambient Air Protection Act72 (RT I 2004, 43, 298; 2010, 44, 261, date: 30.09.2004, amended by RT I, 04.07.2012, 4, date: 15.07.2012, partly 01.01.2013 and 01.03.2013)73 . The purpose of the amendments in Ambient Air Protection Act is to amend the legal regulation of the emissions trading permitted for states and implementation of the Green Investment Scheme. The more detailed information could be found in description of Optimistic scenario.

72 https://www.riigiteataja.ee/akt/104072012009?leiaKehtiv 73 Ambient Air Protection Act (RT I 2004, 43, 298; 2010, 44, 261, date: 30.09.2004, amended by RT I, 04.07.2012, 4, date: 15.07.2012, partly 01.01.2013 and 01.03.2013) 77 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Policy instruments for promoting carbon capture and storage (CCS) Technologies There is no Act yet in Estonia for this technology, so there is no amendment to.

Additional policy instruments Mitigation Policy instruments for the promotion of RES There are no amendments to the Acts of the BAU scenario nor was a new Law set into force after 31 December 2010. However, there are proposals for changes due to the reasons mentioned in the Optimistic scenario. For Pessimistic scenario the subsidies would drop by as much as 26€ (33$) (or 48%) per megawatt hour of electricity, according to Brussels-based EREF lobby group (Bloomberg, 2012). This will apply for the types of RES that are not promising.

Policy instruments for energy efficiency There is only one additional policy instrument concerning energy efficiency in households. According to the last information published in KredEx homepage 74 the funds earmarked for the reconstruction are exhausted due to the great interest of the apartment houses. Reception of applications for apartment houses will continue, but the benefits will be appointed, unless there are additional funds. This scenario assumes the cutting of subsidies for apartment building's renovation and audit costs. In such a case the country will achieve only part of the expected energy savings. Since the policy portfolio is not stricter the energy savings are not reaching their target.

Policy instruments for the transport sector There are no additional policy instruments concerning the transport sector.

Policy instruments for promoting biofuels – transport and agricultural sectors The combination of the current economic situation in Europe (and consequently in Estonia) with the unprofitability of bio energy, does not allow the uptake of a political decision and subsequently of financial policy instruments to support bioenergy (TU, 2010). Small towns and regions are unable to invest without incentives that would encourage smaller boiler houses to shift to using bioenergy, having also an actual positive socio-economical influence by creating new jobs (TU, 2010). Estonia is of the opinion that during the next budgetary period the volume of instruments for rural development in the common agricultural policy should remain at the current level or increase in Member States and the EU as a whole (EEUP, 2011). The incentives for reinforcing this sector and at the same promoting the biofuels are to provide soft loans or subsidies. Biofuels will not reach the 5,75% according to the Directive, but less at 5%.

Policy instruments for emission trading There are no additional policy instruments concerning the emission trading.

Policy instruments for promoting carbon capture and storage (CCS) Technologies Carbon capture and storage technologies are considered as an expensive component. Although Estonia is an emerging economy and these technologies were not considered as part

74 KredEx homepage: http://www.kredex.ee/kredexist/uudised/kredexi-korterelamute-rekonstrueerimistoetuse- vahendid-loppesid/ 78 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” of the policy portfolio for the other PROMITHEAS-4 beneficiary countries, as an EU Member State it needs to implement Directive 2009/31/EC. Charges Another issue that is related to Pes scenario is environmental charges. The environment charge rates in 2010-2015 are as follows:

- the air pollution charge rates for CO, NOx, VOC, heavy metals and mercaptans increase 4% annually; SO2 and particulate matter charge rates increase 25%; CO2 emission charges rate change by 2.5%; - water abstraction charges increase gradually 10% annually in 2010-2012, after 2013- 5% (MoE, 2005).

Adaptation Policy instruments for water management There are no additional policy instruments concerning water management. Policy instruments for forest management There are no additional policy instruments concerning forest management

Main characteristics of this scenario In Pes scenario the existing fluidised bed combustion units and only planned capacities would operate, no other new power units or plants would be built. The existing mitigation policy portfolio has the same main components as in the OPT scenario and concerns the approved targets and policies by 2020. The additional policies concerning the cutting of feed- in-tariffs for supporting RES-E and biofuels in agricultural sector could lead the decreasing of penetration RES-E and increasing of the GHG emissions.

79 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Key assumptions The key assumptions used for the development of scenarios are similar to those used in previously published studies and papers for Estonia. The categories of the key parameters are common for all scenarios and are divided as follows:

Demographics and Economy The demographics and economy assumptions described in BAU scenario are used for all 3 scenarios (BAU, OPT, PES).

Climate Statistics Precipitation For the Pes scenario precipitation is increased by an annual growth rate of 24% (Ciscar, A. Iglesias, 2010).

Figure 29: Climate Statistics: Precipitation. Temperature There are two different projections for Pes scenario: - Temperature will increase at 9,7°C by 2050 (O´Brien K. (ed.), 2000). - Temperature will increase at 9,9°C by 2050 (Ciscar J., Iglesias A., 2010). The air temperature is assumed to be in the Pes scenario 9,9 °C by 2050.

80 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 30: Climate Statistics: Temperature. Frequency of extreme events For the Pes scenario the increase in the frequency of the heat waves follows the increase of the temperature in the same scenario. Water resources The increasing of surface water for the Pes scenario is assumed to be the maximum 15% by 2020 and 22% by 2050 (O’Brien (ed.), 2000). The increasing of groundwater is estimated at 15% by 2050 in Pes scenario (O’Brien (ed.), 2000).

Figure 31: Climate Statistics: Surface waters. 81 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Figure 32: Climate Statistics: Groundwater.

Policies and Measures Feed – in – tariff system For the Pes scenario they follow the time development of the costs as they are presented by RES technology type of Pes scenario. Land management There are no other assumptions related to land management.

Global trends Crude oil price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Natural gas price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Coal price Projections are used. EUA price Projections about literature. ERU price Projections about of the EUA price. CER price 82 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Projections about the ERU price are similar to those of the EUA price.

Adaptation Water Use There are no other assumptions related to water use. The historical data would be taken into account.

General Area of country No assumptions for this parameter. Energy intensity growth It is calculated by LEAP as a function of total energy and GDP. No assumptions needed.

83 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Energy Demand Households According to the last information published in the KredEx webpage75 the funds earmarked for the reconstruction are exhausted due to the great interest of the owners of the apartment houses. Reception of applications for apartment houses will continue, but the benefits will be appointed, unless there are additional funds. The Pes scenario assumes the cutting of subsidies for renovation of apartment building and audit costs. In such a case the country will achieve only part of the expected energy savings.

Figure 33: Demand: Final Energy Demand in Household Sector.

Agriculture Described in the policy portfolio of the OPT and PES scenarios, but with less energy savings.

Industry Described in the policy portfolio of the OPT and PES scenarios, but with less energy savings.

Transport Described in the policy portfolio of the OPT and PES scenarios, but with less energy savings.

75 http://www.kredex.ee/kredexist/uudised/kredexi-korterelamute-rekonstrueerimistoetuse-vahendid-loppesid 84 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Transformation Transmission and Distribution losses Transformation module contains the assumption of 8,27% in base year. This value is assumed to decrease by 0,15% annually (EE, 2012).

Figure 34. Transformation: Transmission and Distribution losses of electricity and heat.

Electricity generation The electricity production assumptions for Pes scenario are presented in BAU scenario.

Figure 35: Transformation: Electricity Generation.

Heat production The heat production remained stable as in BAU scenario.

Coal transformation There is no coal transformation in Estonia.

85 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Global warming potential (GHG emissions) Figure 38 shows the GHG emissions which are attributed to each “energy consuming” sector. The non – energy sector, presented above, concerns the emission sources and sinks attributed to land use change, agriculture and forestry. No data on the emissions of methane due to waste are presented.

Figure 36: GHG emissions per sector.

86 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” References

Bloomberg Businessweek. News From Bloomberg. (http://www.businessweek.com/news/2012-05- 17/estonia-won-t-cut-green-subsidies-retroactively-minister-says ) Ciscar J., Iglesias A., Feyen L.. Physical and economic consequences of climate change in Europe. December, 2010. http://www.pnas.org/content/early/2011/01/27/1011612108.full.pdf Climate change: the European scale. Estonia. http://www.climateadaptation.eu/estonia/en#climate- change-european-scale EEA, 2012. http://www.eea.europa.eu/soer/countries/ee/soertopic_view?topic=climate%20changeEesti Energia AS. Annual Report 2010/2011. Tallinn EEUP, 2011. Government of Est. onia, 2011. Estonia’s European Union Policy 2011-2015. Available at: http://valitsus.ee/UserFiles/valitsus/en/government-office/european-union/eu-policy-of-the- government/Eesti%20EL%20poliitika_ENG.pdf Elering webpage. www.elering.ee Estonia’s National Renewable Energy Action Plan 2020. Report to Ministry of Economic Affairs and Communications of Estonia. Tallinn. (In Estonian). www.mkm.ee IMF, 2011. World Economic Outlook, Tensions from the Two-Speed Recovery Unemployment, Commodities, and Capital Flows, April 2011 - World Economic and Financial Surveys. Available at: http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/tables.pdf KredEx homepage: http://www.kredex.ee/kredexist/uudised/kredexi-korterelamute- rekonstrueerimistoetuse-vahendid-loppesid/ MoE, 2005. Ministry of the Environment, 2005. Environmental charges in Estonia. Available at: http://www.envir.ee/1106192 O´Brien K.(ed.). Developing Strategies for Climate Change: The UNEP Country Studies on Climate Change Impacts and Adaptations Assessment. Report 2000:2. Center for International Climate and Environmental Research, Oslo, 2000. http://eslamian.iut.ac.ir/Teaching/Meteorology/climat %20change-2000.pdf Reihan A., Roosimägi J.. PROMITHEAS-4. Mapping national procedures in Estonia. Tallinn, 2011. Stability Programme 2012, Tallinn, April 2012. http://ec.europa.eu/europe2020/pdf/nd/sp2012_estonia_en.pdf Statistical Office of Estonia http://www.stat.ee TU, 2010. Tarty University, 2010. Background Paper on Biogas Sector in Estonia: Current Status and Development Needs. Available at: http://www.lote.ut.ee/orb.aw/class=file/action=preview/id=882699/Background+paper+on+Biogas+Se ctor+in+Estonia_Current+Status+and+Development+Needs.pdf United Nations, Department of Economic and Social Affairs, 2011. World Population Prospects – The 2010 Revision, Volume I: Comprehensive Tables. Available at: http://esa.un.org/unpd/wpp/Documentation/pdf/WPP2010_Volume-I_Comprehensive-Tables.pdf World Energy Outlook 2010, IEA. http://www.worldenergyoutlook.org/

87 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” RESULTS OF LONG – RANGE ENERGY ALTERNATIVES PLANNING SYSTEM (LEAP) Demand

Figure 37: Comparison of energy demand for the 3 scenarios. The above figure presents a comparison of the energy demand in the 3 studied scenarios. It could be observed that OPT can be characterized by the lowest energy demand, while PES - with the highest one.

88 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” Transformation

Figure 38: Comparison of transformation capacities for the 3 scenarios. The above figure shows that this capacity is the highest in OPT and the lowest in PES. This can be explained with the low availability of renewable energy capacities, typical for OPT and partly BAU scenarios.

Figure 39: Comparison of the electricity generation capacity for the 3 scenarios. The above figure shows that this capacity is the highest in OPT and the lowest in PES. This can be explained with the low availability of renewable energy capacities, typical for 89 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios” OPT and partly BAU scenarios. Additionally new oil shale based unit would be built in OPT scenario. Global warming

Figure 40: GHG emissions per sector. The above figure shows that global warming potential is the highest in BAU and the lowest in OPT.

90 PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios”