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Giving free carbon quota to Eesti Energia not certain – Estonian State Audit Office

Estonian news - eteap October 13, 2011

Baltic News Service, 13.10.2011

The Estonian State Audit Office says there’s no certainty about it that the European Commission will permit Estonia to give a carbon emission quota to the state-owned energy group Eesti Energia for free. 

The State Audit Office described in its annual report the originally planned state aid scheme for a new oil shale fueled power plant of Eesti Energia and Estonia’s withdrawal in June this year of its application for permission to give state aid.

After criticism of the state aid application by the European Commission Estonia decided to support the construction of new oil shale fueled power generating units through free carbon emissions quota. Free emission credits would leave in the hands of Eesti Energia the money it would otherwise have to spend to buy the credits in an auction. “Thus we are effectively still speaking about state support,” the State Audit Office said.

An investment using free quota must modernize electricity production to reduce carbon dioxide emissions and must not bring with itself unjustified distortions to competition. According to the State Audit Office building of a new oil shale fueled generating unit may not fulfill these goals and therefore it isn’t sure that the Commission will permit Estonia to support electricity producers by handing out free quota.

The State Audit Office also pointed out that while there was still no decision by the Commission and it remained unclear from what sources construction of the new power plant would be financed, Eesti Energia had started construction of the plant with the government’s approval and was awaiting the state’s support for the investment.

The original state aid scheme that Estonia took back would have brought Eesti Energia support in the amount of up to 953 million euros. The new proposal based on free quota would give the power company about 300 million euros.

The new power plant of Eesti Energia will cost about a billion euros. Construction of the plant’s first generating unit has been decided while the decision about unit no. 2 has to be made next year.

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