The study analysed the impact of three different scenarios on the development of Ida-Viru County’s population and labour market up to 2030. The analysis of the development scenarios were based on the data from Eesti Energia, Viru Keemia Grupp and Kiviõli Keemiatööstus. Three scenarios were evaluated: „Rapid extinction“, „Long-term decline“ and „Sustainable“. The changes in scenario were compared with the situation of the base year of 2013.

Three scenarios are different in terms of the duration and production intensity of the oil shale industry. Companies forecasted a change in production volumes and the contraction of the production or investments in new production capacities in accordance with the assumptions of the development scenario.

On the basis of these changes, the companies gave evaluations to the changes in the workforce related to each scenario up to 2030. The realization of the scenarios depends on the prices of carbon allowances and oil and on the environmental taxes; they may become so-called trigger for the realization of corporate investment decisions.

According to the „Sustainable“ scenario, the environmental limitations, national tax burden and market conditions allow companies to continue their activities together with investments in the extension of value chain. At least one fuel refinery will be built in Estonia and produced shale oil will be processed mainly to diesel fuels. The Eesti Energia’s strategy will be realized; the production of electricity by direct burning of oil is step wisely changed to cogeneration of oil and electricity. The strategic change will be realized by the year 2030.

According to the „Long-term decline“ scenario, the existing profitable production facilities are operated for some time but unprofitable ones are closed step by step. According to the „Rapid extinction“ scenario, the industry does not pay off economically and companies are closed by the year 2024.

Impact on employment, population and the budgets of local governments.

The scenario analysis shows that the impact of changes in oil shale industry is stronger on labour market and influences all the major cities in Ida-Viru region. 80% of the region’s population live in the cities. The development of oil shale industry affects the labour market in whole Estonia through direct, indirect and associated employment change.

In case of the realization of „Rapid extinction“ or „Long-term decline“, a situation may develop where too aggressive rise of the environmental taxes can inhibit investment decisions and thereby the development of the sector stops which in turn causes severe after-effect on the labour market. Local authorities do not get the share of the environmental taxes, so their income base remains unchanged. Personal income tax revenues dwindle due to the negative effects of the labour market and the social burdens of regions grow due to the problems of labour market.

This may create a situation where the state budget’s incomes grow but incomes of the affected regions fall and also the costs of social benefits rise. Local governments may not cope with such problems.

“The „Sustainable“ scenario has a positive impact on the region and labour market.”

Thanks to the investments, production volumes increase and new positions are added, both in oil shale mining and in the industry as a whole. To some extent, the incomes of the local governments will also increase thanks to the growing mining volumes but they do not exceed 20 million tons.

In all three scenarios, the environmental taxes are distributed unevenly to local authorities of Ida-Viru County. In addition, the formation of the rulebook in the coming years is still loose on how the revenue from environmental taxes will be divided between the state budget and local governments.