View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Policy Documentation Center Development of Electricity Markets – Options for Estonia Anton Laur Estonian Institute of Economics at Tallinn Technical University, 7 Estonia Ave., 10143 Tallinn, Estonia fax: 372-6998851, e-mail:
[email protected] Sulev Soosaar Estonian Energy Research Institute at Tallinn Technical University, 1 Paldiski Rd., 10137 Tallinn, Estonia fax: 372-6613653, e-mail:
[email protected] Koidu Tenno Estonian Institute of Economics at Tallinn Technical University, 7 Estonia Ave., 10143 Tallinn, Estonia fax: 372-6998851, e-mail:
[email protected] Abstract This chapter discusses the situation of electricity markets both in the European Union countries and in transition economies. We analyse the possibility of reducing the monopoly of oil shale-based energy production and opening the market in electricity in Estonia. To evaluate the prospects of oil shale-based electricity production, we analyse the formation of the oil shale-based electricity production price today and in the future, focusing on the share and growth of the environmental component in the production price. The environmental costs of oil shale-based electricity production depend primarily on the resource tax and pollution charge rates. We predict considerable growth of these costs, especially in the tax rates of greenhouse gases (mainly CO2) in connection with the tightening of the environmental requirements in the future. Journal of Economic Literature Classification numbers: O21, Q40, Q43, P22, C61, L94. Keywords: energy sector, electricity market, vertical integration, liberalisation, unbundling, oil shale, environmental costs, sustainable development. 2 Acknowledgements The authors would like to thank Prof.