Educate. Connect. Inspire

Educate. Connect. Inspire

May 25, 2012

Green Economy in Europe (part 2)

While Estonia was part of the Soviet Union its economy underwent robust industrialisation, the establishment of large-scale industry and the replacement of the formerly small-scale (farms)-based agriculture by industrial production (large state and collective farms, major dairy, pig and poultry farms). Large energy production capacity in energy based on local fuel – oil shale – was developed. The environmental impact of that type of production was naturally high, ecological problems became acute and awareness of them increased especially in the 1970s and 1980s. An economic restructuring process took place during the transition to market economy. A significant share of the large-scale production lost its markets – predominantly the former USSR – resulting in a steep decline in output volumes in industry as well as agriculture and later the emergence of a radically different economy. The steep fall of production volumes brought along a comparable decline in environmental impact and ecological problems lost their high profile in the public awareness compared to the problems faced by the people having to cope in the new market economic society. It is true that new ecological problems copped up at the same time as others declined: the steep rise in the number of automobiles meant increasing air pollution in the larger cities; intensive logging of forests, the increase of volume of everyday waste (packages etc.).

The ecological, sustainable worldview has quite deep roots in Estonia. This is partly based on an approach typical of the traditional Estonian peasant culture, where life and production had been rather harmoniously linked to the natural environment throughout centuries. Conscious nature protection traditions are also quite long in Estonia (the 100th anniversary of Estonian national nature protection was marked in 2010). After the restoration of independence Estonia came under the influence of the mentality prevailing in the neighbouring countries – Finland, Sweden and other Nordic countries – with strong ecological views. These neighbouring countries also extended considerable support to Estonia in the funding of environment recovery and the spreading of know-how of ecological technologies. This transfer of ecological viewpoints and know-how from the neighbouring countries made is somewhat easier for Estonia to meet the European Union environmental requirements when acceding to the EU.

However, it should be pointed out that the ideas of green economy, i.e. those concerning the more environmental and ecological organisation of production processes in general were transferred to Estonia less rapidly than the more traditional ideas and technologies concerning nature protection and the improvement of the state of environment. Accordingly the early years of transition saw intensified attention to the disposal of industrial and municipal waste (e.g. the construction of waste treatment plants for cities) rather than to the replacement of old technologies by new and ecological ones. The slowly recovering economy also lacked the sufficient resources or the awareness needed for introducing structural changes towards more ecological and economical production. Activities were launched in some sectors of green economy, e.g. organic farming, but as niche production based on a few enthusiasts.

When comparing the newly independent Estonia with other countries as to the indicators reflecting ecological aspects (the ecological footprint, the energy, material and “waste” intensity of products), Estonia would not rank high, especially to the background of the neighbouring Nordic countries. Yet according to most criteria Estonia’s ecological situation can be considered quite good with the problems of waste from the oil shale-based power stations mainly accounting for the negative aspects.

Activities in Estonia take place, although with varying intensity, in practically all spheres traditionally viewed as related to green economy: organic farming, bioenergy, energy efficiency related activities, sustainable transport etc. Considering the specific circumstances of Estonia the activities of primary importance are the various measures for more environmentally friendly and economical energy sector, the development of methods and technologies for more efficient and less environmentally harmful use of the most important local mineral – oil shale, and more complex and economical use of the forest resources.

These and other spheres of green economy offer huge opportunities for the Estonian enterprises undergoing restructuration, which was hastened by the international economic crisis. In some cases these opportunities are related to the so-called green export (e.g. the export of more environmentally friendly and efficient oil shale processing technologies) and participation in wider international value chains of green production (e.g. the already operating participation of several Estonian companies in the production of components for wind generators).

At least 15 national level sectoral development plans and other strategic documents presently concern green economy in Estonia. The more significant ones are the following: the Estonian Renewable Energy Development Plan until 2020 (which is currently in progress), the Estonian Rural Development Plan 2007–2013, the Organic Farming Action Plan 2007–2013 and the plan for its implementation, the Development Plan 2007−2013 for Enhancing the use of Biomass and Bioenergy. The measures through which the state supports the development of green economy or creates premises for it are the investments in infrastructure, measures related to production technologies, measures for the improvement of the corresponding awareness and the various types of financial support to companies. The support opportunities available via the EU structural funds play a very important role.

A more general basis for the green economy activities in Estonia is provided by such broader strategies as Sustainable Estonia 21 and The Estonian Environmental Strategy 2030. However, these documents have been formulated from the aspect of a general ecological or sustainability-based worldview rather than directly advancing green economy. Therefore they can be viewed as documents creating background for green economy yet they contain few statements, which would concern it directly. A strategy paper immediately concerning green economy is the Development Plan of Environmentally Friendly Economy, yet this document is predominantly a collection of targets and positions already previously expressed in various sectoral plans (Estonian Energy Sector Development Plan until 2020, Transport Development Plan 2006–2013 etc.), rather than an independent strategy document. Besides it does not cover all the spheres of green economy. Therefore it has to be admitted that present-day Estonia possesses a body of policies pertaining to green economy, not very closely related to each other, but not green economy as a strong and coherent political focus. The situation may be changed by the document Estonia 2020 currently in progress, which will perform the role of Estonia’s national strategy in linking to the completed Europe 2020 strategy of the EU.

Besides the ecological and economic impacts the development of green economy in Estonia will also provide a social impact in the form of additional employment and income, which is partly evident in agricultural areas (e.g. in case of organic farming and nature tourism), partly in the cities. However, most of the spheres of green economy would not provide major additional employment, being frequently limited to seasonal/part-time work and related opportunities for extra income. As an exception can be seen the various activities of the energy sector’s modernisation and changing the profile of oil shale mining as well as adapting the former mining areas for new functions, which concern the North-east Estonian industrial region and which would provide a significant amount of new employment opportunities, although these would have to compensate for the lost “old” jobs.

Positive factors in Latvia for Green economy:
  • Traditions and values
  • Negative net annual greenhouse gas emissions if the land use and land use change and forestry are included in the total net emissions 
  • 11 per cent of terrestrial land is the protected areas for biodiversity (in EU -13 per cent) 
  • We still have many species which are extinct in the rest of Europe 
  • Comparatively high rankings in different environmentally related indexes (EPI, HPI, ecological footprint).
Negative factors in Latvia for Green economy:
  • Good environmental situation is a result of not doing rather than doing.
  • High material and energy intensity of production, lack of clean technologies, underdeveloped waste management system.
  • Insufficient interest in Green economics from government and lack of support from it.
  • Disinterest of inhabitants and also business  people in environmental issues.
  • Market failures must be corrected by internalising the external costs, so that the incentives for ecological conduct would be built into the everyday economic life. The state can then function less as a police authority and more as a coordinator.
  • Support mechanisms for renewable energy, waste management and other projects for the improvement of sustainability must be transparent, just and available to all interested parties.
  • Rise in productivity inevitably reduces employment if the demand does not increase. As the resources are limited, an  increased demand is not a sustainable solution. Employment in green jobs - in the sectors of renewable energy, organic agriculture, sustainable forestry, recycling, adaptation to climate change, education, and culture could be a solution in line with Green economics.

On April 6th 2010 Lithuanian minister of Environment has signed legislation establishing green investment scheme (GIS). Lithuanian GIS is rather innovative in the market as it is based on the revolving fund framework, where money from any carbon trade that is under government’s disposition is spent in the form of subsidies, soft loans and capitals investments in the climate change projects ensuring the sustainability of the programme.

Lithuania has a surplus of 50 million assigned amount units (AAUs) which it is willing to sell. In order to be eligible for international trade, Lithuania started to build its GIS when the new government came into power at the end of 2008. It is estimated that there is 9 billion of assigned amount units surplus in the market and the demand is calculated as being around 2 billion. The competition for the buyers, mainly Japanese firms is fierce and the country was trying to create what the minister of Environment Gediminas Kazlauskas calls a sustainable and self- replenishing GIS.

Lithuania rejected the straight forward idea of short term financial instrument which relies solemnly on the revenues from surplus AAUs trade, as seen in majority GIS in the market. “It took us longer as we have done a lot of research and considered many options for the scheme. We were aiming to create a sustainable framework that would serve in disbursing money generated from any Kyoto units trade now and in the future as well as revenues from auctioning of the EUAs from 2013” – says one of the architects of the Green Investment Scheme in Lithuania, adviser to the minister Laura Dzelzyte.

According to Lithuanian GIS at least 40% of the revenues from carbon trade must go to energy efficiency, 40% to renewable energy and the rest to other climate change projects. The money is distributed through subsidies, soft loans and capital investment ensuring fiscal returns to the programme and self-replenishing. The system also puts a requirement for guaranteed CO2 reductions per every euro spent on the financed project.

Lithuania is advocating international carbon trade regulation to ensure the transparency of the carbon dealing. “We built our GIS as a carbon trading tool to finance Lithuania’s long term climate change strategy that would underpin the way to green and sustainable economy. Carbon trade is a very important source of finance for the environmental projects especially in the face of economic downturn and we do not wish to see the market being discredited because of unfair or opaque dealings of other market players” – says Mr Kazlauskas.