Recent energy policies in Estonia have delivered "strong results" and helped to reduce the carbon intensity of the country's energy sector, says the International Energy Agency (IEA).
The Baltic state has made commitments to reduce the levels of direct combustion of oil shale in the power sector as well as increasing the share of renewable energy in energy supply.
The country has also expanded research and development efforts and implemented energy market reforms.
Overall, Estonia's greenhouse gas emissions have roughly halved since 1990, says the IEA in its latest review of Estonia's energy policies. It has praised the country's efforts to revamp its energy sector, and has called for measures to secure long-term energy supplies and increase funding for energy efficiency measures.
Estonia has a high degree of energy independence because of its oil shale resources, but use of the fuel is carbon dioxide-intensive. It is attempting to increase the production of liquid oil from oil shale - an energy-rich rock that should not be confused with shale oil, or tight oil.
The country is also expanding its wind energy and biomass sector, and the IEA has suggested that more stable renewable energy policies will help to grow this sector and secure sustainable, long-term energy supplies. "Growth in renewable energy can also improve the balance of trade by freeing up domestic oil shale resources for export to new markets," said the IEA in a statement.
Since joining the EU in 2004, Estonia has undertaken a significant programme of reforms in the electricity market: the electricity sector has been liberalised; Estonia is part of the wider Nord Pool wholesale market; a strong independent regulator is in place; and the transmission system operator is investing in new infrastructure to strengthen regional electricity supply.
Conversely, in the natural gas market, the country remains isolated from most of the EU, sharing connections with only nearby Latvia and Russia, and it relies on one country for all its needs. A decision on a regional LNG terminal is outstanding, and a single privately-owned utility maintains a dominant position. IEA Executive Director Maria van der Hoeven cautioned that "the lack of a properly-functioning gas market poses a significant risk in terms of security of supply".
Closer integration with EU energy markets is an important policy goal for Estonia and, given the small size of the domestic energy sector, a regional solution is required. The IEA report urges Estonia to strengthen structural co-operation at a regional level and within existing European mechanisms, as well as with its neighbours in the east, in order to enhance security of supply at reasonable cost.
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