Latvia’s peat memorandum and the Baltic policy split
On 18 December 2025, Latvia’s Ministry of Agriculture and the Latvian Peat Association formalised cooperation through a memorandum aimed at securing predictable access to peat resources, promoting higher value-added products—especially professional growing media—and reinforcing export orientation. The agreement also signals private investment commitments by association members through 2050.
This is not a routine sectoral accord. It is a defensive move shaped by a difficult production year and a tightening European policy environment that increasingly challenges the economic logic of peat extraction, even when peat is used for horticulture rather than energy.
Why the sector seeks protection now
First, the 2025 season disrupted supply. Across the Baltics, unusually wet conditions reduced extraction volumes, particularly of upper-layer fractions crucial for professional substrates. For growers and substrate manufacturers, this translates directly into higher prices and less predictable deliveries ahead of the 2026 planting season.
Second, EU climate logic has become function-agnostic. From a carbon-accounting perspective, peat is increasingly treated as an emission at the point of extraction or drainage, irrespective of whether it is burned or used to grow plants. This approach narrows policy space for distinguishing horticultural peat from energy peat and raises costs through fiscal and regulatory channels.
Latvia’s memorandum responds to both pressures by attempting to stabilise expectations—among producers, investors and buyers—before market confidence erodes.
Latvia’s position
Latvia frames peat as a strategic agri-input, not a fuel. The sector’s structure supports this claim: roughly 97% of extracted peat is used in horticulture and forestry, and Latvian peat accounts for around 30% of the peat used in EU professional horticulture. Exports reach more than 100 countries and have averaged about 1.4% of Latvia’s total exports over the past five years. Employment—over 2,300 jobs—is concentrated in rural regions and the eastern border area.
The memorandum’s emphasis on value-added products and energy efficiency reflects a clear choice: remain inside European food and forestry supply chains rather than drift toward managed decline.
Neighbours, different paths
The Latvian move stands out against regional contrasts.
Estonia has opted for a harder line. Fiscal measures and climate policy are steering the sector toward reduced extraction and toward monetising peatland restoration through emerging carbon and rewetting mechanisms. The direction is explicit: less digging, more restoration-based revenue.
Lithuania occupies a middle ground. With a less severe production shock in 2025, companies are focusing on adaptation—reformulating substrates, increasing the share of blends and processing—to preserve export positions while preparing for higher costs later in the decade.
Together, these paths illustrate a Baltic policy divergence under a shared EU framework.
The market risk: trust, not bans
The principal risk for Latvian producers is loss of buyer trust, not immediate prohibition. Professional greenhouse growers—particularly in the Netherlands—value consistency, repeatability and long-term contracts. Rising prices and forced changes in substrate recipes undermine that predictability. Under ESG and financing pressure, growers may be pushed to adopt “peat-free” or “low-peat” alternatives even if performance is inferior.
Once large growers retool production protocols, retrain staff and re-certify supply chains, switching back is slow and costly. Market exits driven by regulation are often structurally irreversible.
Image: photos/photo_124@18-12-2025_20-49-12.jpg