Energy, Estonia, Good for Business, Investments, Markets and Companies

"From the perspective of energy intensive industry, this is undoubtedly a positive step. Namely, due to regulated energy taxes and network fees, we pay 4-6 million euros more each year compared with a factory with the same consumption volume in Finland, Sweden, Germany and Austria. The impact is large financially, as Estonian Cell consumes approximately 2.5 percent of all electricity used in Estonia," Siiri Lahe, member of the management board of Estonian Cell, told BNS.

Lahe said that the excise duty on electricity is one of three factors alongside renewable energy fees and network fees that impacts competitiveness. "Implementing a reduced rate for the excise duty is hopefully the first notable step for reducing energy taxes. In order to establish a second factory next to the current one, a progressive change would be required in all three components," he said.

"We hope that the draft legislation concerning the reduced rate of the excise duty on electricity will receive the parliament's approval in the next few months. This will determine our owner's decision whether to start a smaller investment program developed in the factory, the total cost of which is more than 17 million euros," Lahe said. The company is prepared to start with the investment program already this year.

She said that the additional growth investments expect larger and progressive changes in energy taxes. "With a view toward the distant future, we have discussed both the elimination of additional production volume bottlenecks in the existing factory as well as the construction of a second line or factory next to the existing one," she said.

"As the latter investment in millions of euros would have a three-digit number, it would require greater legal certainty than today, but also significantly lower energy taxes for ensuring production with a competitive price. The impact of energy taxes is especially important for an energy intensive exporting industry. Namely, nobody will pay more for the Estonian product on the global market just because the production cost is higher by regulated components than that of the competitors," Lahe said.

Lahe said that when it comes to this topic, it is remarkable that since the moment implementing excise duty on electricity and gas in Estonia, there have been complete tax exemptions for certain energy intensive industries. The reduced excise duty rate follows the suggestions of the EU directive and is a logical step towards also ensuring the competitiveness of the energy intensive industries of other sectors on international markets.

The Estonian government at a sitting on Thursday approved law amendments, with which the electricity excise duty rate of energy intensive industrial companies will be reduced 90 percent from the current 4.47 euros to 0.5 euros per megawatt-hour. Once approved by the parliament, the law is to enter into force on Jan. 1, 2019. Companies that receive the reduced excise duty license in 2019, can apply for partial excise duty return for their consumption in 2018.