In order to avoid this, companies must demonstrate that the burning woodchips are sustainably obtained, but there is little clarity on how to do this. Why this situation has developed – responsible ministries blame each other.
Latvia plans to increasingly use woodchips in heating in the coming years to reduce heating tariffs and dependence on Russian gas. Chips are among renewable energy sources, so it has had favorable conditions in the EU. Until now, the regulation actually assumed that the combustion of biomass, including chips, does not lead to CO2 emissions. However, as of 1 January, the principle of zero emissions will only apply to biomass produced sustainably, for example, biodiversity must not be affected when collecting it. According to officials, the chips obtained in Latvia will mostly comply with the rules, but the problem is to prove it. If heating companies fail to do this, they will have to buy CO2 emission allowances for the use of chips.
"At today's prices, I suppose heat rates could rise by €20 to €30 per megawatt hour. This is, of course, because the price of the chips would increase because of this cost,” said Valdis Vītoliņš, head of the Latvian Association of Heating companies and the Jūrmala heating supplier.
"This open issue could cost our company and Jelgava citizens €8 million over one year. So the risk is high. We are, of course, not satisfied that the impact was not communicated in time,” said Andris Vanags, Chairman of the Board of Governors of Gren Latvija.
CO2 emissions allowances will apply to those woodchip-burning houses with a capacity of more than 20 megawatts. Consequently, the impact will only be on big cities.
Although the directive on new rules for woodchips was adopted in the European Union in 2018, the government only this week approved rules developed by the Ministry of Economics to demonstrate the sustainability of chips. In the meantime, the Regulation allows the use of 14 so-called voluntary schemes for certification, none of which has been widely used in Latvia. The second option is to use a national scheme for certification, which Latvia also does not have.
Prior to the meeting, the Ministry also included a third option in the regulations - the merchant may form his or her own scheme. This requires new Cabinet regulations. “I also look forward to the involvement of the Ministry of Agriculture, so that we can implement it very quickly and swiftly so that these local biomass producers [..] can link with other countries and raw materials from other countries very easily, quickly and without much bureaucracy,” said the Minister for Economy Ilze Indriksone (National Alliance).
The minister denies delays with the rules, saying that the process of coordination with those involved has been lengthy, so application of CO2 emissions to chips could not be a surprise to anyone. At the same time, she points out that the Ministry of Environmental Protection and Regional Development is responsible for quotas, with which communication has been slow. Nor did the companies, in her opinion, understand the regulation: "The sector has not gone in. We have informed, but they may not have understood. At the moment, I have information that the Ministry of Environmental Protection and Regional Development has only called for a meeting on November 30 for representatives of members of the sectors of their responsibility, which I think is too late."
On the other hand, Environment and Regional Development Minister Arturs Toms Plešs stressed at the government meeting that energy is under the responsibility of the Ministry of Economics, and it is therefore also the responsibility for the certification of chips: “The European Commission has said in a number of documents that the biomass used here in Latvia is sustainably obtained and everything is right there. We simply must have papers in order, and here we look forward to a move from the Ministry of Economics as responsible for energy on this issue.”
As a temporary solution, the Minister for Economics also refers to free CO2 emission allowances that could be allocated to heating companies for heating chips.
However, the Ministry of Environmental Protection and Regional Development is skeptical about this and stresses that it is necessary to establish its own biomass certification system as soon as possible so that quotas should not be purchased. Deputy Secretary of State Dagnis Dubrovskis said: “This amount of allowances that we can allocate as free allowances is declining every year. Therefore, our offer is to build Latvia's national system as soon as possible."
In the meantime, the surveyed heating companies doubted whether any of the certification facilities included in the Cabinet regulations would be able to be implemented by the end of the year. The hope is that several large chip suppliers already have certificates on the sustainability of forest management. The most popular in Latvia is a PEFC certificate awarded to about half of Latvia's forests. However, it is not known whether the European Commission will declare the PEFC system valid in this case.
Boiler house managers also point out that even if the purchase of CO2 allowances is avoided, the requirement for a certificate will have to be introduced in the future in the purchase of chips. As a result, the price of chips could rise and it would no longer be purchased from small traders for whom the certificate would be too complicated.