Production of oil shale-based electricity covers Estonian electricity consumption and enables also to export electricity. Oil shale-based electricity production is by now competitive on the electricity market of the Baltic States and of the neighboring EU Member States. However, production of oil shale-based electricity has low energy efficiency, demands large investments for renovation and has high environmental risks. Taxation of environmental damage will be more severe in the future, lowering the competitiveness of oil shale-based electricity. Therefore, the key issue of sustainable development of Estonian energy sector is reduction of the environmental damage of the oil shale-based electricity production, or reduction of the share of oil shale in the energy balance at the expense of other energy resources, especially renewable energy.