Investment decisions are closely linked to a country’s ability to ensure a stable, clear, and predictable regulatory environment. However, regulatory uncertainty, inconsistent interpretation of requirements, and insufficient coordination between national and local government decisions remain significant obstacles to investment development in Latvia.
Amendments to the Environmental Impact Assessment Law – A Test of Regulatory Predictability
The amendments to the Law on Environmental Impact Assessment (EIA), adopted by the Saeima on 29 October 2026, illustrate this broader challenge, demonstrating how unclear decision-making criteria and differing approaches among municipalities can create additional risks for investors.
Following a lengthy and complex legislative process, the adopted amendments generally improve the regulatory framework governing environmental requirements, including changes to administrative procedures and public information requirements. However, particular concerns arise from a provision supported during the final reading in the Saeima, allowing municipalities to establish a minimum distance of up to 2,000 metres from the boundary of a city or village to the nearest planned wind turbine or the boundary of a wind farm, provided that such a restriction is justified by the future development of the respective territory as outlined in the municipality’s sustainable development strategy.
The purpose of the EIA process is to assess the potential environmental impact of a specific project, taking into account its location and actual circumstances. Therefore, the introduction of general territorial restrictions must be particularly carefully justified. Municipal involvement in territorial development planning and the protection of local residents’ interests is essential. However, decisions must be based on verifiable data, clear criteria, and transparent reasoning. When municipalities are granted broad discretion to impose restrictions without sufficiently specific requirements regarding their justification and assessment, there is an increased risk that decisions will be influenced by differing interpretations of territorial development priorities rather than objective assessments.
Additional uncertainty also arises from the transitional provisions applicable to projects already under development. In certain cases, further decision-making will depend on a municipality’s opinion regarding the project’s compliance with territorial planning, as well as conditions relating to the total capacity of wind turbines already commissioned or granted building permits within the municipality and the project’s potential cumulative impact. Although the regulatory framework establishes specific conditions, investors also need certainty regarding how predictably these conditions will be applied to projects in which substantial financial resources and time have already been invested.
Jānis Zuļķis, Leader of FICIL’s Energy and Industrialisation Work Group, emphasises: “Predictable, evidence-based regulation is what matters most to investors. If, after years of project development, the state introduces the possibility of imposing new significant restrictions based on broadly interpretable criteria in municipal development strategies, this increases regulatory uncertainty and risks delaying precisely those energy investments that Latvia itself has identified as necessary.”
Regulatory Uncertainty – A Barrier to Investment Across Sectors
The amendments to the EIA Law are not an isolated example. Similar challenges can be observed in the construction and real estate development sectors, where investors face inconsistent and overlapping requirements, differing interpretations across municipalities, and lengthy approval procedures. Such practices complicate project planning, extend implementation timelines, and increase financing costs. This is particularly significant for large-scale residential, commercial, and infrastructure projects, where delays have direct financial consequences.
Uncertainty also affects the development of electricity infrastructure. FICIL has previously raised concerns regarding regulatory predictability in this area. As early as February 2025, FICIL highlighted the lack of clarity regarding the availability of transmission system services following the end of the transitional period on 31 December 2026 and called for the timely development of a predictable long-term regulatory framework. These concerns were addressed only on 26 March 2026, when the Public Utilities Commission adopted regulations governing changes to the types of transmission system services.
This challenge is particularly relevant in the energy sector, as Latvia has established clear objectives for 2050, including strengthening energy security and increasing the use of renewable energy sources. However, achieving these strategic objectives is hindered not only by infrastructure and financing challenges but also by complex permitting procedures, limited administrative capacity, and insufficient cooperation between national and local governments. When development priorities are established at the national level but their implementation is not sufficiently coordinated at the local level, investors face uncertainty regarding the feasibility and timelines of their projects. As a result, national strategic objectives may remain difficult to achieve due to a lack of consistent action to support their implementation.
National Development Objectives Must Be Supported by Consistent Action
FICIL believes that decisions at all levels of governance must be based on data, clear and consistently applied criteria, and aligned with the country’s long-term development objectives. Municipalities must have the opportunity to participate fully in decision-making processes while ensuring that their positions are supported by objective assessments and transparent reasoning.
To strengthen the predictability of Latvia’s investment environment, FICIL calls for:
- Establishing clear and objective decision-making criteria in cases where municipalities have the authority to impose additional restrictions or influence project development.
- Ensuring evidence-based decision-making by assessing the specific impacts of individual projects rather than applying general restrictions without sufficient justification.
- Strengthening municipal involvement in implementing national strategic objectives, ensuring that local development priorities and territorial planning decisions are aligned with the country’s long-term development direction.
- Respecting investors’ legitimate expectations by ensuring proportionate transitional arrangements and predictable conditions for projects in which investments have already been made.
Investors assess Latvia within the broader Northern European region. Regulatory predictability is not merely a matter of administrative convenience – it is an essential prerequisite for long-term investment, economic growth, and the achievement of national strategic objectives.