Foreign Investors’ Council in Latvia (FICIL) calls the Latvian government and the Parliament to act upon thorough assessment of consequences in case of non-adoption of the three draft laws – the Economic Sustainability Law, amendments to the Pollution Law, and the Transport Energy Law. Currently 3 infringement procedures have already been initiated against Latvia for failure to implement EU directives, and that is why urgency status is assigned to adoption of ESL and amendments to the Law on Pollution.
The rapid and substantial increase in the national defence budget has forced all other ministries to review their expenditures and look for ways to save money. However, based on estimates from the Ministry of Climate and Energy (KEM), regardless of savings found across the ministries and the additional borrowing for defence, the failure to adopt the three draft laws – Economic Sustainability Law, amendments to the Pollution Law, and the Transport Energy Law – poses a high risk of triggering immediate and financially significant consequences for Latvia. Below are presented potential impacts if the three draft laws are not adopted, based on KEM assessments.
What is at stake if these laws are not adopted
First, the European Union funds allocated to Latvia until 2030, amounting to EUR 6.9 billion, might be frozen[1]. Consequently, Latvia could lose or fail to attract private investments of EUR 2–4 billion during this period[2]. Reducing state budget expenditures is not in Latvia’s interest unless it is accompanied by purposeful economic development. A growing economy is a critical precondition for people choosing to live and work in Latvia, start families, and keep their culture and national identity alive.
Second, without updated national regulation for the emission trading systems (ETS1 and ETS2)[3], district heating companies will be forced to purchase emission quotas already during the upcoming heating season, thereby potentially increasing heating tariffs. Airline ticket prices are also likely to rise, and major financial claims could be raised against Latvian ports for covering losses, as airlines will not be able to receive additional free quotas, and international shipping companies will not be able to exchange them. Therefore, aviation companies and ports of Latvia are likely to become less competitive not only within Baltics, but also in the European Union.
Third, approximately EUR 460 million in the European Union funds intended to support socially vulnerable groups might be lost[4]. The state budget does not have an equivalent or larger amount available to compensate residents for the sharp rise in heating costs or to at least partially offset the growing cost of living. While the sharp increase in the cost of living may trigger a repeated wave of emigration, which Latvia cannot afford with its shrinking number of residents and lack of workforce.
FICIL advocates risk-aware and consistent policy-making
In view of this, FICIL urges the government and the Parliament to act only upon thorough assessment of short- and long-term negative consequences to be caused by the (non)adoption of these draft laws: impact on economic development, domestic and foreign investments, demography, amounts of payable state aid and similar aspects. Such approach would demonstrate adherence to consistent policymaking and to the good governance principles.
We recognize that the draft laws raise discussions and differing opinions. However, in view of FICIL, non-adoption of these draft laws might have a high cost, simultaneously jeopardizing the ability to invest in the national defence. By adopting these laws Latvia does not undertake any new obligations related to already undertaken climate goals. While in fulfilling obligations to implement the directives does not exempt from their fulfilment, meaning that they will have to be transposed irrespective of penalties. Therefore, foreign investors call on the Government and the Parliament to take urgent and decisive action. The decision lies in their hands – one that will determine whether Latvia will face significant European Union sanctions.
[1] Presentation of Ministry of Climate and Energy to the Parliament Commission on 2 October 2025 “Status and risks of Green Deal legislative documents”, calculation is included and explained in slide 6
[2] Ibid, slide 6
[3] Ibid, slide 7
[4] Calculation of Ministry of Climate and Energy