Estonia burns through cash

  • 2012-05-16
  • From wire reports

TALLINN - In Estonia, four times more energy is used to produce one unit of gross domestic product (GDP) than in the European Union on average, and more also than Estonia’s neighboring states do, reports Postimees. “Challenges are very big for Estonia since the Estonian economy is very energy intense,” said KPMG Baltics energy sector manager Gregory Rubinchik.

“Estonia spends too much energy to produce one unit of GDP; reducing these figures needs major investments, but it is the key to the long-term development of the economy,” he said. Rubinchik said that Estonia will spend 3-5 billion euros on heat insulation alone in the coming years.

The high energy cost can be explained by the cold climate, but the needs of Finland for heating energy resembles that of Estonia, and there the energy intensity is by just 57 percent higher than the EU average.
The KPMG study indicated that Estonian companies will lose more than 300 million euros because of increases in the energy price in the coming years. KPMG followed the presumption that fuel prices will increase from 2011–2016 by 25 percent, heating energy by 19 percent and electricity by 13 percent.

However, KPMG says that the Estonian economy is more flexible in reacting to energy prices than Latvia or Lithuania. Latvia imports 30 percent, and Lithuania 59 percent of energy after the Ignalina nuclear power plant was closed.
Energy consumption in the Baltic States is growing. In 2000, the import of fuels formed 9.1 percent of GDP of the Baltic States; in 2010 the share was 13 percent, which is much more than in other EU states.