Sutt: Estonia's first preference is to completely abolish ETS 2

Energy and Environment Minister Andres Sutt said that Estonia most wants to abolish the EU's new carbon quota system ETS 2, but the immediate goal is to achieve another delay in its implementation. Currently, Estonia does not have enough allies to achieve this. Prime Minister Kristen Michal also supports delaying and abolishing ETS 2, calling the bureaucracy associated with the system too burdensome.

Estonia's Energy and Environment Minister Andres Sutt (Reform Party) explained to ERR that Estonia has taken a clear position on the ETS 2 issue: ideally, the European Union's new carbon quota trading system should be abolished altogether. As a nearer step, Estonia wants to achieve an additional delay in implementation, but allies are scarce.

Why Estonia opposes ETS 2

"In our assessment, ETS 2 in its current form is not the most effective tool for reducing emissions from the transport or district heating sectors," said Sutt. He added that Estonia has already made one step forward, with ETS 2 implementation postponed from the beginning of 2027 to the beginning of 2028, but this is not sufficient.

Prime Minister Kristen Michal (Reform Party) also confirmed on Tuesday in the Vikerraadio programme "The Prime Minister is in the Studio" that he supports delaying and subsequently abolishing ETS 2. "It should be postponed and abolished because the bureaucracy that comes with ETS 2 is too great," said Michal.

The Prime Minister emphasised that his and future governments' goal should be to postpone the system further from 2028 or at least abolish it in its current form. "In its current form, this comes with too much bureaucracy and cost to society," he added.

Allies are scarce, but hope remains

Sutt acknowledged, however, that Estonia currently lacks sufficient support for an additional delay. "Right now, there are fewer countries that see an additional postponement as necessary than would be needed," he noted.

At the same time, Sutt does not consider the situation final. He pointed out that on 15 July, the European Commission will present proposals for ETS 1 reform, and it is not ruled out that ETS 2 will be opened simultaneously with ETS 1. "That probability is certainly not zero. It depends very much on what happens around us," he said.

Directive not yet transposed, preparations underway

Estonia has not yet transposed the ETS 2 directive, partly because the system was still under negotiation. The Transport Fuel Association has warned that this could damage Estonian companies' opportunities to purchase quotas more favourably.

Sutt explained that technical preparation for the possible transposition of the directive has nonetheless been ongoing in parallel in the Climate Ministry. He also highlighted a second criticism: "The reporting obligation is very complicated, that is, very burdensome." The government cabinet will discuss the next steps in the coming days.

What is ETS 2?

ETS 2 is the European Union's second emissions trading system, which will start to set a price on CO₂ emissions from heating and transport fuels from 2028 onwards. The aim is to accelerate the transition to electric transport and cleaner heating solutions. Last week, negotiators from the European Parliament and member states agreed that if the carbon price exceeds €45 per tonne of CO, the stability reserve will release 40 million tonnes of additional allowances to the market, twice as much as in the previous plan.