Energy Policies of IEA Countries: Estonia 2019 Review

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Energy Policies of IEA Countries: Estonia 2019 Review ENERGY POLICIES OF IEA COUNTRIES Estonia 2019 Review ENERGY POLICIES OF IEA COUNTRIES Estonia 2019 Review INTERNATIONAL ENERGY AGENCY The IEA examines IEA member IEA association the full spectrum countries: countries: of energy issues including oil, gas Australia Brazil and coal supply and Austria China demand, renewable Belgium India energy technologies, Canada Indonesia electricity markets, Czech Republic Morocco energy efficiency, Denmark Singapore access to energy, Estonia South Africa demand side Finland Thailand management and France much more. Through Germany its work, the IEA Greece advocates policies Hungary that will enhance Ireland the reliability, Italy affordability and Japan sustainability of Korea energy in its 30 Luxembourg member countries, Mexico 8 association Netherlands countries and New Zealand beyond. Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States The European Commission also participates in the work of the IEA Please note that this publication is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at www.iea.org/t&c/ Source: IEA. All rights reserved. International Energy Agency Website: www.iea.org Foreword The International Energy Agency (IEA) has conducted in-depth peer reviews of its member countries’ energy policies since 1976. This process not only supports energy policy development, but also encourages the exchange of international best practices and experiences. In short, by seeing what has worked – or not – in the “real world”, these reviews identify policies that achieve their objectives and bring concrete results. Recently, the IEA has moved to modernise the reviews by focusing on some of the key energy challenges in today’s rapidly changing energy markets. FOREWORD This is the first in-depth review of Estonia’s energy policies since it joined the IEA in 2014. Estonia has a unique energy mix among IEA member countries. Domestically produced oil shale dominates energy supply and is the main fuel input to electricity generation. This gives the country a high degree of energy independence but also the highest carbon intensity among all IEA countries. As the country seeks to decarbonise its energy supply, Estonia is now on the brink of a major energy transformation that will require a substantial change in the role of oil shale in its energy mix. This transformation represents a major economic and social challenge, and we recommend that it be supported by defining least-cost pathways for decarbonisation. I am pleased to see that Estonia has already achieved its EU-mandatory emission reduction and renewable energy targets for 2020. Looking forward, reaching its targets for 2030 will require determined and timely action. As with most IEA countries, Estonia’s main challenge as it moves to a lower carbon energy future is the decarbonisation of its transport sector, which is currently not on track to meet its short-term emission and energy efficiency targets. In this report, we recommend that the government review energy taxation of all fuels to better reflect externalities, including carbon and particulate emissions, to accelerate the switch to low-emission technologies, notably in the transport sector. It is my hope that this in-depth review will further guide Estonia in its energy transition and help it achieve the energy policy goals of providing affordable, secure and clean energy to its population, while adapting to a fast-changing, international energy landscape. Dr. Fatih Birol Executive Director 3 TABLE OF CONTENTS ENERGY INSIGHTS 1. Executive summary .....................................................................................................11 Overview ............................................................................................................................11 Energy sector transformation ............................................................................................11 Taxation .............................................................................................................................13 Energy market reform ........................................................................................................13 Energy security and regional integration ...........................................................................14 Key recommendations .......................................................................................................15 2. General energy policy .................................................................................................17 Country overview ...............................................................................................................17 CONTENTS OF TABLE Energy supply and demand ...............................................................................................19 Key institutions ..................................................................................................................24 Policy and targets ..............................................................................................................24 Energy sector transformation and independence .............................................................26 Taxation .............................................................................................................................27 Assessment .......................................................................................................................28 Recommendations .............................................................................................................30 ENERGY SECURITY 3. Oil shale ........................................................................................................................33 Overview ............................................................................................................................33 Supply and demand ...........................................................................................................33 Policy and regulatory framework .......................................................................................35 Industry structure ...............................................................................................................37 Environmental impact from oil shale production and use .................................................38 Future of oil shale ..............................................................................................................39 Assessment .......................................................................................................................41 Recommendations .............................................................................................................42 4. Oil ..................................................................................................................................45 Overview ............................................................................................................................45 Supply and demand ...........................................................................................................46 Market structure .................................................................................................................51 Prices and taxes ................................................................................................................52 5 TABLE OF CONTENTS Upstream – Oil shale liquefaction......................................................................................53 Infrastructure......................................................................................................................54 Emergency response policy ..............................................................................................56 Assessment .......................................................................................................................58 Recommendations .............................................................................................................59 5. Electricity......................................................................................................................61 Overview ............................................................................................................................61 Supply and demand ...........................................................................................................62 Electricity prices and taxes ................................................................................................66 Market structure .................................................................................................................68 Electricity security ..............................................................................................................72 Assessment .......................................................................................................................76 Recommendations .............................................................................................................79 6. Natural gas ...................................................................................................................81 Overview ............................................................................................................................81 Supply and demand ...........................................................................................................82
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