Estonia is unique in the world in that it uses indigenous oil shale as its main energy source. The only other significant indigenous fossil source is peat. As there is no oil and no refineries, all petroleum products are imported. Natural gas is imported from Russia. The Estonian chemical industry also uses oil shale for the production of shale oil, which is used in domestic applications as well as exported.
Power generation is dominated by oil shale at two large power plants, both situated in the North East of the country. District heating plants use a range of fuels including natural gas, wood, heavy fuel oil and oil shale.
Estonia invests relatively little in energy efficiency, much of which is focused on energy efficiency in the social sector. The contribution of multilateral and bilateral donors to energy efficiency projects over the last decade has very much exceeded the level of funding available from the national budget.
Some of the main barriers to energy efficiency in Estonia are the high proportion of low-income energy consumers, relatively unattractive financing conditions for energy efficiency investments, small-scaled investment opportunities which are not interesting to larger investors, etc.
Estonia has embraced the principles of rational energy pricing policy by successfully removing subsidies and cross subsidies from the energy sector and retaining subsidies for public transportation.
Energy efficiency policies are not stated explicitly, but are implicit in a number of planning documents, strategies and laws. The Long-term Energy Sector Development Plan for Estonia 1998 which had a strong focus on EU integration will be updated in 2003.
The Energy Efficiency Target Programme, which began in 2000, aims for energy consumption growth to be no more than half of the GDP growth and CO2 emissions to be reduced by 8% against 1990 levels, through energy efficiency and fuel switching. An associated Implementation Plan which was approved in 2001 defines the main activities to be carried out by 2005 in order to meet targets and reads like a well-designed textbook plan of the right things to do to improve energy efficiency on a large scale. However it is not clear that the budgets or political commitment to successfully convert this plan into concrete measures and actions to be implemented is yet in place.
A National Environmental Action Plan for 2001-2003 which was being carried out includes preventive, clean-up, restorative, monitoring and regulatory actions to improve the environment.
Based on the findings of the review team, specific recommendations are made on how the Government of Estonia could improve its performance in the fields of energy efficiency and related environmental aspects. These include creating and improving energy efficiency legislation, policies and strategies, improving energy price and markets, strengthening institutional frameworks and inter-institutional dialogue and other measures.