Energy Efficiency Obligations and Subsidies to Energy Intensive Industries in Latvia

The European Union's climate and energy policy for 2030 sets ambitious targets and will challenge current energy use patterns. At the same time, policy objectives are to maintain energy affordable for business and consumers, which means that energy and climate goals should be achieved in the most cost-effective way. There is a well-known energy efficiency gap between effectively implemented energy efficiency measures and potentially economically viable ones. The authors have made a statistical analysis of the energy costs intensity of manufacturing industries in Latvia compared to other Baltic Sea countries and have consented that the three most energy consuming manufacturing industries in Latvia show a higher share of energy costs in total production costs than in their peers over a long period of time, indicating the clearly visible possibilities for energy efficiency improvements. At the same time, Latvian energy policy provides subsidies for energy-intensive manufacturing consumers by reimbursing part of their actual electricity costs. The paper analyses the amounts of reimbursements and their breakdown by manufacturing industries, identifying the most important beneficiaries of subsidies. The authors argue that beneficiaries should direct these subsidies to further energy efficiency improvements.