Estonia supports the European Commission's Green Paper on a European energy strategy with some reservations. While it agrees with most proposals, it believes some require further explanation or would not achieve desired results. Estonia emphasizes the need to: (1) maintain member state sovereignty over energy sources and supply, (2) consider the needs of peripheral states, and (3) strengthen EU cooperation and solidarity. It also stresses the importance of energy security, supply diversification, and developing cross-border infrastructure to integrate markets while ending the isolation of Baltic states.

1. Position paper
Estonia's views on the European Commission's Green Paper "A European Strategy for
Sustainable, Competitive and Secure Energy"
Estonia considers that discussion of European energy policy is essential, and supports the initiative
to draw up a European energy strategy. In general we agree with the analysis presented in the
Green Paper. However, there are some proposals which Estonia believes would not produce the
desired result, or which require further explanation from the Commission.
The European Union's energy strategy should be based on the following principles:
(1) to maintain at Member State level the right to develop diversity in energy sources and
supply channels and the right to determine the structure of energy sources available in
the country;
(2) to take into account, when drawing up energy policy measures at EU level, the needs of
those Member States and regions which are not connected or are insufficiently
connected with the internal market, and also to take account of their particularities,
including the question of preserving energy security;
(3) to strengthen cooperation within the European Union based on the principle of
solidarity;
(4) to take into account the effect of environment, competition, foreign trade and foreign
and security policy on the shaping of energy policy.
Below are Estonia's views on the main questions raised in the European Commission's Green Paper
of 8 March 2006.
(i) We consider it essential that the European Union's starting point should be the need to
connect peripheral energy markets with the rest of the internal market.
The implementation of infrastructure projects which help to diversify supplies and at the same
time integrate peripheral markets into the EU internal market should be promoted at EU level.
It is important in this respect to end the isolation of the Baltic States.
One possibility would be for EU energy policy to do more to promote the setting up of
cross-border connection projects, which are vital for security of supply, as projects for
systems managers (national transmission system operators).
(ii) We emphasise the need to invest in new electricity generation capacity. An integrated
and long-term approach should be taken to opportunities for new investment, bearing in
mind the effects of other European Union policies on investment decisions.
In order to make major long-term investments, producers need regulatory stability in relation
to matters such as the environment and competition, to encourage investment in power
engineering under open market conditions. The European Union has not yet shaped common
criteria for assessing factors such as the risks associated with the opening up of electricity
markets. Likewise, there are no financial tools at EU level to promote actively the integration
of equally open electricity markets (for example through the creation of new open

2. communities). Application of the competition rules both nationally and at EU level may not
be sufficient; an open market should ensure both that security of supply is maintained and that
energy prices are acceptable to consumers.
An analysis of regional aspects would enable the particularities of the Member States to be
fully taken into account in the planning of investments, and also to assess more precisely the
possibilities for effectively opening up the market and increasing security of supply.
(iii) We regard as insufficiently justified the Green Book's proposals for the creation of a
single trans-European energy network (especially an electricity grid), a European grid
code, a European energy regulator and a European Centre for Energy Networks.
If they arise in further discussion, account should be taken of the existence of various
unsynchronised electricity systems in the EU, and of the powers of supervisory authorities in
national energy markets; the subsidiarity principle should be observed in the activities of
supervisory authorities and transmission system operators, etc.
(iv) We consider it essential to improve security of energy supplies and security of
infrastructure in the Community's internal market and we support the
European Commission's proposal to create a European Energy Supply Observatory.
In Estonia's view, continuous central monitoring of security of energy supply in the
Member States and in the European Union as a whole would help assess factors such as the
risks associated with dependence on external energy supplies. Furthermore, the
Member States have stated their willingness to elaborate common long-term visions for
energy supply and consumption. The work of the planned Observatory and the
Member States could be complementary. The first task of the Observatory could be to make
the exchange of energy-related information more effective at both Member State and
Community level.
(v) We support the European Commission's plan to draft a new legislative act on the
storage of natural gas in the Member States.
Extending the storage possibilities for natural gas in the Baltic countries is an important
question to which a solution must be found. In order to guarantee security of supply in the
Baltic States there should be more than one gas storage facility in the region. From the point
of view of security of supply, Estonia also needs to set up additional natural gas connections
across its borders.
(vi) We support the development of energy crisis mechanisms at European Union level and
solidarity between the Member States in emergency situations.
Action must be continued to ensure that the necessary mechanisms are in place for mutual
support in emergency situations. The mutual solidarity of the EU Member States in crisis
situations - in the event of disruptions to energy supplies - is an essential indicator of the
Member States' willingness and ability to develop their energy policies in the direction of
increased collaboration.

3. (vii) We consider that in the development of a European Union energy strategy it is essential
to pay greater attention to the need to diversify national energy mixes and thus to
develop regional energy cooperation with other EU Member States.
Each Member State shapes the structure of its own energy sources, including the difficult
question of its position on nuclear energy. In future discussions there should be more detailed
analysis of the actual possibilities for the Member States to ensure diversification of energy
sources. At least two points of critical importance should be taken into account in the choice
of energy sources: ensuring security of supply and reducing effects on the environment. We
see a need to reduce the potential risks for investment in the internal electricity market that
may be caused by electricity imports from third countries into the internal market. In the
unique situation of the Baltic countries, the way in which electricity imports from third
countries are handled has a direct effect on the development of the structure of the energy
sources available for electricity generation. There is no regulation of this in the current
acquis. However, in the case of natural gas for instance, it is essential to diversify storage
possibilities and external supply channels. In choosing energy sources, the objective of
ensuring acceptable energy prices for end consumers should also be taken into account. In
planning the long-term energy security of the Member States, greater account should be taken
of the regional dimension and regional cooperation in energy markets. For example in the
Baltic region it is essential to seek possibilities for security of energy supply with support
from both the other Baltic States (through coordinated generation capacity or joint
development) and from the rest of the EU internal market (through the development of
interconnection capacity, for example with the Nordic countries and Poland).
(vii) We support the regular presentation by the European Commission of a strategic energy
review
We consider that the review must contain a critical analysis of Member States' energy
dependence on third countries, taking account of both foreign and security policy
considerations and, especially, the relationship of energy supplies from third countries to the
security of the Member States. The European Union's common foreign and security policy
(CFSP) and energy policy should be better integrated, since energy questions have become an
essential aspect of national security. Cooperation between the Member States on energy
security matters should be considered more thoroughly in the context of possibilities for
strengthening existing structures, in accordance with their organisational objectives. The EU
should stand united against any attempts to use energy supplies to exert political or other
pressure on the Member States and on third countries.
(ix) We support the European Commission's plan to analyse the effect of trading in
greenhouse gas emissions on the energy sector and on energy prices in Europe. We
emphasise the need to create clear Community principles for the allocation of national
emissions, sustainable in the long term, which it will be possible to observe in the coming
trading periods and after 2012. At the same time, we regard it as essential to avoid
setting the share of energy sources producing carbon dioxide as a binding objective.
The effect of emissions trading on energy prices in Europe should be critically analysed, with
the establishment of clear principles which are sustainable in the long term. The
Commission's proposals to broaden the geographical extent of the EU Emissions Trading
Scheme should be considered in depth, bearing in mind above all that the stability of the
investment climate in the energy sector must not be compromised. It is vitally important to
continue implementation of the Montreal Action Plan under the United Nations Framework

4. Convention on Climate Change and to work out possible solutions for the period after 2012 as
rapidly as possible. At the same time it is essential to increase global acceptance of the
Conventions.
(x) We regard the proposal in the Green Paper to create a Europe-wide "white certificates"
system as insufficiently justified. The European Commission's proposal for an
international agreement on energy efficiency is interesting.
Above all Estonia is hoping for measures at European Union level to support the
implementation of the new Directives in the Member States. The European Union's energy
saving policy should be flexible, take regional particularities into account, and be based
predominantly on initiatives by the Member States. The creation and running of the white
certificate system could well prove to be unnecessarily expensive for Estonia and other small
countries.
Since energy savings projects may by their nature be very different, the methodology needed
to forecast how effective they may be or to prove their worth is cumbersome and their
development difficult. The administrative solutions for operating the system may also prove
to be too complicated.
(xi) We support the European Commission's proposal to create a Renewable Energy Road
Map for the European Union, which would take into account the particularities of the
Member States. We support the European Commission's initiative to draw up a
strategic energy technology development plan
We support the Commission's view that the development of renewable energy must be dealt
with in a long-term perspective reaching beyond 2010, and the proposal to draw up a Road
Map. On the other hand, the setting of new quantitative goals and deadlines for the Member
States should be avoided unless they are based on a thorough prior feasibility study and reflect
the particularities of the Member States. Thus for example further measures proposed under
the Biomass Action Plan and the Strategy for Biofuels should be flexible, i.e. take into
account the particularities of the Member States and leave the final right of decision to the
competence of the individual Member State.
(xii) Energy relations with third countries should be based on the principle of reciprocity.
We consider it essential to develop a treaty basis between the European Union and
Russia, and support continuing efforts to secure Russia's ratification of the Energy
Charter Treaty and accession to the Transit Protocol.
In addition, greater emphasis should be placed on the principle of harmonising global
environmental, safety and social standards. It is in Estonia's interests for action to develop
coherent, strategic and focused external energy relationships to continue, as advocated in the
document of 2 June 2006 on "An external policy to serve Europe's interests". In this light the
development of a treaty basis in the form of the drawing up of a new partnership and
cooperation agreement between the European Union and Russia is an important question
which needs resolving, and on which we believe the Member States need to find a common
position.

5. As regards the principle of reciprocation in relation to electricity trading, it is essential to
avoid a situation in which, as a result of the open EU internal market, electricity produced in
third countries with lower environmental and safety standards and artificially low fuel prices
has an unfair competitive advantage over the EU's domestic electricity generators.
(xiii) We support the European Commission's proposal to draw up priorities for the
construction of new infrastructure and interconnection capacity, which the EU needs to
ensure its energy supply. We also consider it essential that questions relating to the
planned natural gas pipeline in the Baltic Sea region (the North European Gas Pipeline)
should be addressed.
In planning the major Northern European gas pipeline running through the Baltic Sea, it is
essential to conduct environmental studies to meet international environmental requirements,
and to consider alternative routes for the pipeline and all the risks connected with its
construction and operation (for example the issue of dumped chemical weapons).