Greenhouse Gas Emissions as a Commodity

The Kyoto Protocol is an international treaty on climate change adopted on December 11,1997 and put into force on February 16, 2005 that commits industrialized countries to reducing greenhouse gas emissions. Article 17 of the Kyoto Protocol outlines the accepted targets for reducing pollution for each country. However, if countries have emission units to spare—as in that they are being permitted to create more than they are actually utilizing—then they are permitted to sell these emission permits to other countries. Thus, there is now a new international marketplace that has been created, known as the “carbon market,” where carbon is traded much like any other commodity.

Green Investment Schemes in Estonia

Under the Kyoto Protocol, Estonia has an 8% reduction target from their 1990 base year; this means that a total of 196 million Assigned Amount Units (AAU) are allotted to Estonia for each period. However, only 107 million are utilized within the country, creating an 85 million AAU surplus that has allowed for the creation of a Green Investment Scheme. Established in 2000, the Estonian Green Investment Scheme utilizes the income from the sale of their surplus emission credits to fund a variety of other environmentally-focused projects.

The main perceived benefits of implementing this funding scheme are that projects are developed either by acquiring the greenhouse gases emission reductions or creating the infrastructure necessary for these reductions. Such projects range widely in focus but all are related to energy consumption effectiveness, renewable energy resources, and climate change management; some examples include increasing the efficiency of energy in buildings, utilizing alternative fuel sources for transportation, developing a forestry certification project, reducing the risk of flooding, and overall international climate cooperation initiatives. The total sum earned in income from the sale of their carbon emission credits to date is €1,558,116,753, allowing the funding of 9,737 projects in total. It is expected that projects financed through this scheme will reduce CO2 emissions by 1.5 million tonnes over the next 20 years.

Example: Promotion of the Use of Electronic Cars

In 2011, the Government of the Republic of Estonia sold 10 million AAUs to Mitsubishi Corporation. Through the Green Investment Scheme, the income was invested into establishing a country-wide initiative to promote the use of electric cars. To do this, charging infrastructure was built throughout the nation and a grant scheme was put in place to support the purchase of electric cars by private individuals. Additionally, 500 electric cars were purchased for social workers to use to promote environmental and energy saving awareness in over 200 Estonian municipalities, while simultaneously improving the quality of the social services provided. As of 2012, 250 quick charging stations were installed to cover all major cities, highways, and transport links. Estonia’s Minister of the Environment, Keit Pentus-Rosimannus said in a statement, “The fact that recharging is so easy is one of the main reasons more and more Estonians will decide in favor of electric cars in the future.” Thus, this program contributes to Estonia’s overall goal of achieving a 10% share of the use of renewable energy within the transportation sector.

Example: Improving the Quality of Public Transportation

In 2011, the Estonian Government approved the sale of emission rights to the Kingdom of Spain; 45 million euros of AAU sales revenue were as a result able to be invested to develop environmentally friendly public transportation systems. To accomplish this, Estonia built entirely new trams that would rely on the most up-to-date technology for improving environmental efficiency, such as utilizing regenerative brake systems, on board energy saving systems, along with better insulation materials. These trams will also have greater transport capacity, allowing their power to be used more efficiently. The overall goal of this project is to help increase the use of public transportation and reduce the number of cars in Tallinn city, which would reduce pollution concentration in the city center.

The Overall Impact

Estonia has faced problems associated with the legacy of their Soviet Era history and its obsolete industries, which failed to prove economically or environmentally efficient. However, after their economic collapse in 1990, environmental pollution has declined considerably; while this is undoubtedly due to their reduction in industrial output, it also can be attributed to the successful investments in the environment. The Kyoto Protocol and the Green Investment Scheme has provided the opportunity for increased financing of green economy initiatives that Estonia might not otherwise have the monetary means to accomplish. The importance of the continuance of such investment projects are also highlighted by the considerable amount of valuable, untouched natural areas located in Estonia along with the overall global and local goals to reduce carbon emission footprints.

Sources

https://unfccc.int/process/the-kyoto-protocol/mechanisms/emissions-trading

https://www.mkm.ee/en/objectives-activities/foreign-financing/green-investment-schemes

https://news.err.ee/990338/selling-greenhouse-emissions-credits-earned-estonia-141-2-million-in-2018

https://books.google.com/books?id=Ees9DgAAQBAJ&pg=PA114&lpg=PA114&dq=green+investment+schemes+estonia&source=bl&ots=PWP48WnKfp&sig=ACfU3U2pb_fT4GLF0YGyWbUAH4OnPUSxOA&hl=en&sa=X&ved=2ahUKEwiVpdT91szoAhXdgnIEHZakA5AQ6AEwCXoECAwQKQ#v=onepage&q=green%20investment%20schemes%20estonia&f=false

https://www.valitsus.ee/en/news/estonia-will-promote-use-electric-cars-under-green-investment-scheme

https://sustainabledevelopment.un.org/index.php?page=view&type=99&nr=148&menu=1449