THE IMPACT OF ENVIRONMENTAL REGULATIONS ON REGIONAL DEVELOPMENT IN EASTERN ESTONIA

The European Parliament (EP) in 2012 established Sulphur Emission Control Areas (SECA) in Northern Europe including the Baltic Sea where ships from 2015 must not fuel with a sulphur content exceeding 0.1%w/w. Russian-Estonians have had discussions if and how these regulations impact maritime stakeholders and the economy in the Baltic Sea Region (BSR). Estonia oil shale industry is located in the Eastern part of the country (Ida-Viru County) and represents up to 5% of the national economy. Ida-Viru County is an economic weakly developed region and shares a common border with Russia with majority Russian speaking Estonians. Approximately half of regional workforce is employed directly or indirectly in this industry giving the oil shale industry an important role in the county's economic wellbeing. A large part of shale oil is used for the production of maritime bunker oil. Unfortunately, the sulphur content of shale oil is higher than it is allowed by the SECA regulations. In addition, the low oil price is putting extra pressure on oil sector which endangers the traditional business model of the Estonian oil shale industry. This paper investigates the impact of the environmental SECA regulations on the Estonian oil shale industry and discusses its consequences on the regional development as well as the economic and social cohesion in Ida-Viru County. Methodically, the research is based on expert interviews, a case study, and a further exploration of potential options to overcome possible economic distortions and to strengthen the social coherence in Eastern Estonia in the frame of the Estonian smart specialisation strategy.