Proposals of the Latvian peat sector concerning the Proposal for a Regulation of the European Parliament and of the Council establishing the Just Transition Fund

18 / 03 / 2020

Latvian peat industry wants to see the European Green Deal as an intention for the promotion of peat extraction for the horticulture and forestry use, for creating greater added value to peat products in Latvia, contributing to the national economy and population, as well as achieving climate neutrality through compensatory measures.

The European Green Deal should not be interpreted as an intention to eliminate the peat extraction industry, but rather to limit the use of peat fot energy production, which produces industrial emissions. 
Of the peat extracted in Latvia, 95% is used for horticulture – peat is used for growing food, ornamental plants, and tree seedlings . Although peat extraction generates greenhouse gas (GHG) emissions, carbon dioxide (CO2) is captured while peat is used for the growing of the green plants.
The use of peat in Latvia differs significantly from other EU countries (Ireland, Sweden, Finland and Estonia), as only 2% of the extracted peat is used for energy purposes (burning for heating and energy production, thus creating immediate GHG emissions).
In GHG inventory, emissions from peat are broken down as follows: 71% of the amount of peat extracted (accounting emissions): 1) in the energy sector and 2) in the LULUCF sector. It should be stressed that emission capture by plants grown in peat is not taken into consideration. However, plants compensate the emissions instead of producing immediate emissions which are calculated using the "immediate oxidation" method defined in IPCC guidelines . Emissions from degraded peatlands (historical, not after-used peatlands) comprise 16%, 9% – from peatlands where currently peat is being harvested; 5% - from after-used areas . In 2017, GHG emissions from peatlands and areas related to peat extraction accounted 14.5% of total GHG emissions, including the LULUCF sector.
In the European Union, on average, GHG emissions have decreased by 23.5% since 1990, while in Latvia – by 56.9%. However, GDP has increased by 58% on average in the EU and just by 16% in Latvia. Therefore, maintaining the harvesting and processing of horticultural peat as a successful and export-capable industry in portfolio of extractive industries in Latvia is of national importance. 
Latvia's total GHG emissions in 2017 were only 0.26% of total EU emissions. 
Figure 1. Comparison between Latvia and the EU: reduction of GHG emissions and GDP growth (1990-2017).
1att_seg_gdp_es_lv.jpg (47,62 KB)Figure 2. Reduction of GHG emissions and GDP growth in Latvia (1990-2017) 
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The dynamics of the proportion of peat used for energy production and for horticulture in Latvia since 1990 shows that Latvia has achieved the objectives of the EC Green Deal Initiative almost 20 years ago, in at least the peat extraction sector, and the industry has already transformed to horticultural peat extraction. The use of peat for energy production has decreased by 98.8% since 1990 and the share of peat in total energy consumption in 2017 has reached only 0.01%. 
Figure 3. Peat extraction in Latvia since 1990 – proportion of energy peat and horticultural peat.
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We would also like to emphasize that peat is an essential part of the production of healthy food worldwide, it is the most economically efficient substrate with the least 'ecological footprint'. 
In 2050, peat extraction and processing are ongoing, and the industry continues to work, providing jobs, primarily in the regions, providing economic contribution, and sustainably using natural resources for growth of Latvia.
The sector has been modernized, the types of peat use have been improved, the created added value significantly increased, and it contributes even more to the national economy and, as far as possible, reduces GHG emissions.
GHG emissions, which are inevitable to a certain extent in the industry, are compensated by after-use measures of post-harvested peatlands – for example, through afforestation, creation of plantations of blueberries or cranberries, or by other compensatory measures, such as wind parks in post-harvested peatlands, etc.
Figure 4. Predicted turnover in peat industry
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1. Improve GHG inventory methods and use national GHG emission factors in Latvia's National GHG Inventory Report which is prepared annually under the UN Framework Convention on Climate Change. National GHG emission factors for organic soils, calculated for Latvia by LIFE Restore project (co-funded by the EC LIFE Environment and Climate Program) will lead to a reduction of estimated GHG emissions by 1.8 million tons of CO2 equivalent per year, or approximately by 17% of the total national emissions. This will allow for a more accurate planning of the national climate change mitigation policy and measures to be implemented according to the real situation . Not only will it be possible to recalculate emissions from the peat industry (reduction of around 20%), but it will also be possible to refine emissions calculated within the LULUCF sector. It is also important to evaluate the possible improvements in GHG inventory methods, specifically, in the inventory of horticultural peat emissions. Emission calculations should take into account CO2 capture by plants grown in peat, which is currently not taken into account. This would enhance reduction of overall emissions in the LULUCF sector. In addition, it would be important to find a solution to include in the Latvian emission balance the capture that has took place in all countries that use horticultural peat obtained in Latvia. 
2. To develop a set of compensatory measures for the state under clear conditions, which means including compensatory measures in the concept of climate neutrality. Compensation of emissions from peat extraction and peat products production with emission capture measures such as wetland restoration, afforestation of organic soils, use of renewable energy sources in energy to achieve "net-zero" GHG emissions in the industry as a whole. 
3. After-use of historical post-harvested peatlands – to allocate 25% of the planned funding. Post-harvested peatlands where peat extraction was discontinued at a time of re-establishment of Latvia's independence (36% of the post-harvested peatlands in Latvia ) and where peat extraction is not possible, shall be re-used or converted to other types of land use. The most appropriate after-use measures should be chosen which are site-specific and most effective for GHG reduction. Such measures are, for example, afforestation, wetland restoration, or their return to economic cycle (berry plantations etc.). Where appropriate, the development of infrastructure for nature tourism and nature education should be considered. 
4. Modernization of peat extraction technologies and technological processes - 10% of the funding. The objective is to reduce GHG emissions from the extraction process. Investments in research and in the creation of related start-ups are necessary. 
5. Development and promotion of horticulture and plant production in Latvia – 30% of the funding. Development of seedling production in Latvia, creation of export product (such as tree seedlings). This would allow to avoid the transport emissions caused by the export of peat as a raw material and the import of vegetables, as well as increase the capture of GHGs right here in Latvia. It would also reduce packaging usage and waste volume, and create new jobs in the regions. 
6. Production of peat products with added value – 35% of funding.
• Construction of processing plants in Latvia; research. This would increase the contribution of peat industry to the Latvian economy as a whole, reduce the export of raw peat and create new jobs in the regions.
• Improvement of peat substrates (seedlings for horticulture, forestry) – investments in research, innovation and production technologies are necessary.
• Development of innovative, promising products, creation of new products in Latvia, including promotion and marketing of these products, such as peat filters, sorbents (for water purification, decontamination), construction materials (thermal insulation materials, peat color, filling compounds), works of decorative design and art , raw materials for the chemical industry, industries of pulp and paper, and textiles.

1. Economic aspects:
• Peat industry pays an average of 18.5 million EUR a year in taxes . This means that in about three years the industry will pay in tax the amount that the EC is offering to Latvia under the Just Transition Fund over a seven-year period.
• Related industries (services to industry), such as pallet and film manufacturers and transporters pay in taxes an average of 50 million EUR per year .
• Over the year, the industry pays an average of 54 million EUR in taxes and salaries .
• Total exports of peat industry in 2018 reached 180 million EUR .
• A contribution from the peat industry to the Latvian economy per one hectare is 14,566 EUR (for comparison, EUR 400 per hectare in dairy farming ).
• The peat industry employs 1,800 – 3,000 people, mainly in the regions (depending on the season). The salaries of people working in peat extraction and processing companies are higher than the average salary in the region of operation and the average salary in the country .
2. Peat is the basis of horticulture and forestry:
• 6,000 tree seedlings can be grown in one cubic meter of peat. With these seedlings, 3 hectares of forest can be established, which can capture 1,110 tons of CO2 in 50 years.
• Wood is an important product for the Latvian economy, which is not only a significant export product (about 3.5 billion EUR), but also a raw material for the production of other products.
• In one cubic meter of peat, also 7000 vegetable seedlings can be grown, which can later produce 16 tons of cucumber crop or 32 tons of tomato crop – a considerable amount of food.
3. The afforestation of organic agricultural soils (158 000 ha) would result in a significant GHG emission reduction corresponding to 4.3 million tons of CO2 eq year .
4. Latvia is a country rich in peat resources – 1.5 billion tons of peat are accumulated in peat deposits. In total, peatlands cover 10% of the country's territory . Peat extraction is ongoing or has occurred only in 4% of all peatlands (degraded areas) or 0.4% of the territory of Latvia. Due to favorable climatic conditions, the annual increase of peat in Latvia considerably exceeds the extraction volumes. Approximately 1.6 million tons of peat are accumulated per year (average accumulation rate is about 2 mm per year ), or 0.4 million tons of carbon. Over a ten-year period, an average of 0.95 million tons of peat is extracted annually, resulting in an annual increase of 0.65 million tons. Peat is not a fossil resource but a slow-renewable resource.
5. Latvia is a “superstate” of horticultural peat on a European scale, as peat produced in Latvia corresponds to 31% of the peat used in professional horticulture in Europe . Peat is an essential part of the food production worldwide. Of the substrates used in professional horticulture worldwide, 70% are peat substrates. It is estimated that the world population will reach 10 billion by 2050, and this will require 415% more substrates for food, ornamental plants and tree seedlings. Demand for horticultural peat will increase by at least 250% (taking into account the increase of other substrates by up to 1000%) . Although Latvian peat is used throughout Europe, the currently used GHG emission accounting method states that all emissions stay in Latvia. This shortcoming of method should be optimized as mentioned above. Or, by using peat resources purposefully, the development of horticulture in Latvia can be purposefully promoted.
6. When discussing the replacement of horticultural peat substrates with other types of substrates (such as rock wool, expanded clay, coco coir, others), GHG emissions from the production and use of various peat substitutes, as well as their potential for further use or recycling are not taken into account. For example, rock wool is waste after its use, whereas peat after its use in seedling cultivation is used for soil improvement, so promoting GHG emission capture and producing no waste.