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Environmental charges in Estonia

Environmental charges apply in Estonia already since 1991. During 19 years the charges have been modified and charge rates gradually increased in order to improve their effect. The aim of applying environmental charges is to motivate companies to invest into production facilities with lower environmental impact and to use natural resources more efficiently and sustainably. Revenues from environmental charges are transferred back to environmental protection, helping to reduce and avoid pollution and impairment related to environmental resource management.

The basis for environmental charges is determined in the Environmental Charges Act that entered into force 01.01.2006 (PS! English version is not updated). The Act determines natural resources, air and water pollutants and types of waste charged with environmental charge, conditions and rules of charging. The Act and Government Regulations based on the Act set the pollution and resource charge rates for the period of 2006-2009.

In 2008 the Ministry of Environment initiated discussion over the future development of the environmental charges. Ministry conducted wide economic, social and environmental analysis and open forums and workshops involving experts and scientist from different areas, companies, local government representatives, interest group representatives etc. Open discussion resulted in preparation of draft version of “Principles of development of environmental charges until 2020”. The document included overview of the environmental charges in Estonia, the general principles, conditions and methods of developing environmental charges in coming years and for each of the 5 main charge category policy suggestions and detailed proposals for amendments of charge rates. The document was ready for approval in Government in November 2008. Considering the situation in economy and the goal of meeting the EURO-criteria, the Government decided in early 2009 not to increase taxes and charges in near future and the application period of the document was reviewed. In April 2009 the Government was apprised of the final version of the “Principles of environmental charges”, however, the final decision of actual application period was postponed. In June 2009 it was decided in the Government and Parliament that new environmental charge rates for 2010-2015 should however be set and amendments were done in the Environmental Charges Act, increasing the charge rates from year 2010. In most cases the new charge rates reflect the principles agreed in the document presented to the Government, but the proposals for amending the charges system, for example to abolish some inconsistencies within the system, were not included.

Due to change in legislation, the major changes in environment charge rates in 2010-2015 are as follows:

- The air pollution charge rates for CO, NO_x, VOC, heavy metals and mercaptans increase 5-10% annually; SO₂ and particulate matter charge rates increase 30%; CO₂ emission charges rate does not change;

- Water pollution charge rates for BOD₇, suspended particles, SO₄ and pH increase 5-10% annually; naphtha and other dangerous substances, N-compounds, phenols charge rate increases 15-20% and for P-compounds 50% in 2010 and 2011, 30% afterwards;

- Waste disposal charges increase in average 20% annually;

- Mineral resources charges rates increase considerably during 2010-2012. Oil shale extraction charge increases 20% annually; construction minerals charge rates increase 10-25% annually in average. Considerable increase is foreseen for peat – the charge rate will be in average on the level of 20EEK/ton from 2010. From 2013 the rates of most of the minerals increase 5% annually;

- Water abstraction charges increase gradually 10% annually in 2010-2012, after 2013 – 5%.

At the moment the environmental charge rates are in place until 2015. The coming steps with respect to environmental charges include analysis of charges until 2020, taking into account the developments and policy recommendations from the EU and OECD, for example the results of the attempts to coordinate CO₂ taxation in EU etc.