Estonia willing to discuss more predictable EU Emissions Trading System
According to Prime Minister Kristen Michal, options worth considering include introducing a price cap or adding additional allowances to the system.
After German Chancellor Friedrich Merz said the European Union's Emissions Trading System (ETS) needs reform, carbon prices began to fall. Estonia also supports changing the system. The European Commission has promised to present its proposal before the summer.
Merz and several other European leaders said last week that the ETS must be revised because it undermines the competitiveness of European industry.
According to Merz, the emissions trading system was not designed to generate revenue but to motivate companies to transition to carbon-free production. Following his remarks, the price of emission allowances dropped sharply to their lowest level in the past six months.
Economic expert Heido Vitsur said the European Union miscalculated when creating the ETS.
"When Europe moved to this system, it assumed it had the strength to set global standards and that it would be able to bring a significant number of countries into the system. In reality, it did not," Vitsur said.
Economic expert Raivo Vare said the best solution would be stability.
"As with any tax — because this is essentially a green tax — it should be stable. We could know that it costs €25 per ton and that's the end of it. Like in China. Then investors would know and everyone would know that even in 20 years it will cost that much. Based on that, investments can be planned and everything calculated. Right now, there is no certainty at all because it is a speculative market and poorly designed at that," Vare said.
Prime Minister Kristen Michal (Reform) said Estonia also considers change necessary.
"Since allowance prices in the ETS are quite speculative and unpredictable, the system should be reviewed. Various proposals have been made. There has been talk of a price cap, of adding allowances to the system — all of these options are on the table," Michal said.
"Both I and other heads of government have asked the European Commission to present an additional analysis of the ETS in the spring or summer, after which we can assess proposals to change the system. The main concern is the fluctuating or volatile price of allowances, which does not allow for predictability. At the same time, I looked at the preliminary analyses and in Estonia the ETS component makes up a relatively small share of the final energy price. Estonia is ready to discuss all proposals that would make the system more predictable, but first I am waiting for the Commission's proposals," the prime minister said.
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Editor: Marcus Turovski, Mirjam Mäekivi
