High voltage electricity transmission lines in Estonia. Photo: Janno Vaan/Getty Images

The Estonian electricity grid is increasingly interconnected with its EU neighbours, and in recent years, Estonia has started to import large-scale renewable energy while reducing its oil shale power production. But several reports (including SEI’s “Reaching climate-neutrality in Estonia”) have demonstrated that it is not yet on track to reach its zero-emission targets by 2050. At the same time, the decline of the oil shale industry threatens local economies in Eastern Estonia.

This study will propose and analyse institutional, administrative and growth-sustaining reforms in Estonia that will enable the country to achieve climate-neutral electricity production by 2050 while addressing any adverse socio-economic impacts of decarbonisation. It will support the Estonian Ministry of Economic Affairs and Communications by a) Defining pathways towards climate-neutral electricity production; and b) Proposing regulatory Action Plans on implementing decarbonisation measures and mitigating risks for eventual adoption.

Specifically, the project (with results scheduled for publication in early 2022) will involve:

  • Baseline collection of data describing the current situation of the Nordic-Baltic electricity market, probable future changes to this market, and potential technologies that can be used for climate-neutral electricity generation;
  • Development and modelling of several potential pathways toward climate-neutral electricity production;
  • Detailed socio-economic impact assessments on direct, indirect, and induced effects of each pathway on market participants in defined Estonian regions;
  • Thorough risk analyses on potential acceptance of the actions required to achieve each pathway;
  • Sensitivity analyses to determine how fluctuations in EU ETS and electricity prices impact pathway modelling results;
  • Detailing of action plans with proposed measures to achieve each decarbonisation pathway.

The results of these activities will be synthesized in a final report and training materials that will provide Estonian officials a clear understanding of the costs and benefits associated with different pathways to electricity decarbonisation, and an evidence base for future policy recommendations to scale Estonia’s low carbon transition. Moreover, the project will develop a transparent, updatable data set and modelling framework, as well as a cohort of networked local expertise that are able to create new scenarios and test arising needs from future industry and policy ideation processes.

Project partners:

The project is funded by the Directorate-General for Structural Reform Support of the European Commission (DG REFORM)