The Latvian Ministry of Climate and Energy – the why, the what, and the how

In October of last year, parliamentary elections were held in Latvia, and for the first time ever in the Latvian history, a Minister of Climate and Energy was appointed as part of the new government.?

We asked our Latvian colleague and CEO of Miltton Latvia , Marta Mackevi?a , how the new ministerial portfolio has been accepted by the wider public, what the main focuses are for the coming years and what they've managed to accomplish so far.

The decision to create a new ministry in Latvia was approved by the parliament in early December 2022, with 52 out of 100 deputies voting in favour. This also meant the creation of a new position for a climate and energy minister. It was emphasized that the new ministry is necessary to promote Latvia's energy independence. The new ministry combined existing departments from the Ministry of Economy and the Ministry of Environmental Protection and Regional Development (with the Ministry of Economy taking over the energy policy area, and the Ministry of Environmental Protection and Regional Development taking over the climate policy area). During the discussions on the creation of the ministry, opposition deputies proposed that the functions of the climate and energy minister should be broader, with the minister also being responsible for the environment, but this idea was rejected.?

Overall, the opposition was critical of the idea of creating a new ministry, stating that all objectives could be achieved with the existing ministries and that an additional institution was not necessary. The party represented by the Prime Minister was accused of creating the new ministry only to secure a position for their representative (climate and energy minister Raimonds ?udars).

Discussions on the creation of the Climate and Energy Ministry took place against the backdrop of the war in Ukraine, and although there were some members of the public (and also parliament) who pointed out the additional expenses to the state budget that the new ministry would create, as well as the fact that another institution would expand the already large bureaucratic apparatus, overall no one denied the fact that Latvia needs to be energy independent from Russia and that achieving this goal requires strategic and long-term action. The creation of the ministry from existing departments, which meant relatively small additional costs, was a response to concerns about expenses, but on the other hand, it is now felt that it is not a fully-fledged institution.

Although the ministry has actively expressed its position in some months of operation, for example, objecting to the European Parliament's proposal to use less wood fuel and exclude forest biomass from sustainable fuel coverage and equate it with fossil fuel, very little attention has been paid to public discussions. At the end of last year and the beginning of 2023, when electricity prices strongly affected households and businesses, the lack of communication and explanation was very noticeable. This may be explained by the fact that the new ministry in Latvia was created by combining several departments from existing ministries - there is no department within the ministry responsible for public information, communication, and other related issues.

The ministry's agenda is more focused on issues related to the planning and coordination of the state's climate and energy policy, as well as reducing the fragmentation of climate and energy policies, which is essential considering the Russian war in Ukraine and the refusal of energy supplies from Russia. Less attention is paid to sustainability and environmental issues.

Various non-governmental organizations, such as the Wind Energy Association, have criticized Latvia for lacking a national-interest-based energy policy (in wind energy, Latvia lags behind Lithuania by five times and Estonia by less than three times), and it is also criticized that entrepreneurs and the public in general do not have a clear vision of the state's energy priorities and plans. These claims are partly true, but can also be explained by the fact that the Ministry of Climate and Energy is not a fully-fledged institution, but rather a consolidation of several departments, which does not carry out full-fledged communication with stakeholders. In addition, it should be noted that the ministry was only established in December 2022. In my opinion, the establishment of such a compromise ministry (from existing departments) has helped to save state budget resources, but in the long run, it will create capacity problems and lead to the inability to fully implement the goals. In this format, the ministry is not capable of actively engaging in dialogue with companies and society, instead it is chasing numbers and fulfilling the agenda set by the EU. At the same time, it is also clear that in the economic conditions that existed in the country at the end of 2022 and currently, the establishment of larger ministries (with a larger budget and more employees) would not be supported by society and parliament.

On the other hand, criticisms of non-governmental organizations are not entirely justified. Latvia has developed a National Energy and Climate Plan for 2021-2030, which also sets out the Ministry's actions. The long-term goal of the plan is to improve energy security and public welfare, promote sustainable, competitive, cost-effective, safe, and market-based development of a carbon-neutral economy. To achieve this, the plan aims to promote efficient use of resources, as well as their self-sufficiency and diversity; ensure significant reduction of consumption of resources, especially fossil and unsustainable ones, and simultaneous transition to sustainable, renewable, and innovative resource use, ensuring equal access to energy resources for all social groups; stimulate research and innovation that promotes sustainable development of the energy sector and mitigates climate change. A completely different issue is how relevant and understandable this plan is to industry entrepreneurs and society as a whole.

Speaking about future changes in the energy and climate sector in Latvia, it can be said that we can expect greater energy independence and stability, but the movement towards it is likely to be extremely slow. The Ministry has conducted an initial conceptual assessment of alternative solutions to enhance gas supply security. The Ministry of Climate and Energy also plans to work on the development of conditions for the joint use of the Paldiski liquefied natural gas (LNG) terminal built in Estonia to strengthen natural gas supply security. According to the Ministry's assessment, the availability of infrastructure is ensured for Latvia with such a regional liquefied natural gas network.

Currently, there is a lack of clarity about the Skulte LNG terminal, as none of the collaboration conditions submitted to the ministry have been deemed suitable. The industry minister has indicated that the terminal could be built if one of the developers completes an environmental impact assessment and builds the terminal on commercial grounds. The government has not abandoned the idea that Latvia needs its own LNG terminal for security reasons. The Ministry of Climate and Energy has been instructed to continue working on the creation of the terminal, including exploring the possibility of involving state-owned companies and providing them with the necessary funding.

In the context of Latvia's energy system, it should be noted that in contrast to the EU, renewable energy sources and liquid fossil fuels dominate primary energy consumption in Latvia, and the share of renewable energy sources in final energy consumption in Latvia is much higher than in the EU. There are no significant differences in the sectoral breakdown of final energy consumption in Latvia compared to the EU, where households and agriculture, forestry, and fisheries activities have a larger share in Latvia.

The national climate and energy plan places great emphasis on measures related to the Baltic energy market interconnections, the common energy market, and energy security issues. It is important for Latvia to coordinate measures among the Baltic states that affect not only infrastructure and electricity connectivity but also the flow of energy resources (both fossil fuels and biomass and biofuels) between the Baltic states.