Estonia is fully committed to green and digital conversion of SMEs in recovery plan

A crisis like the corona pandemic requires sharp action. The EU has 723.8 billion released to use the Corona Recovery and Resilience Facility (RRF) to pull the European economy out of the recession caused by the corona. Member States submit to the European Commission a plan to claim a share of the large money pocket. In the Decarbonizing Europe series, we put these plans under a magnifying glass.

Superficially, they are about the same size, the average man is about the same height, the landscape is about the same flat and both countries are far ahead in terms of digitization: Estonia and the Netherlands have some similarities. Estonia, however, although of the same size as the Netherlands, with 1.3 million inhabitants (half of the country consists of forests) is a much smaller player within the EU.

The Estonian recovery plan is not of a large size from a budgetary point of view. The European Commission has allocated 936.3 million euros to the country, of which 42 percent must go to the green transition. 22 percent is reserved for the digital transition.

Green companies, green energy and green mobility

The green transformation of companies is an important and important part of the Estonian recovery plan. € 220 million will go to support companies in this transformation, for example by modernizing revenue models, implementing green technology and developing green competencies.

Another major cost item in the green transition is to make mobility more sustainable. 96 million will go to harmonize public transport in the capital Tallinn and improve the railway network.

Then energy transition. By 2030, half of all energy consumed in the country must be sustainable. To achieve this goal, the recovery plan is earmarked 92 million euros to “reduce dependence on fossil fuels and facilitate the introduction of renewable energy.”

Next Generation EU

The corona crisis is one of the greatest challenges of our time. With NextGenerationEU – with 806.9 billion euros the largest recovery plan ever – the EU wants to help member states emerge stronger from the crisis. The Corona Recovery Fund forms the core of this plan (723.8 billion euros).

This fund has two objectives: firstly, to pull the European economy out of the recession caused by the corona pandemic. At the same time, it must set in motion important investments for the future and measures to implement change.

The original deadline for submitting a plan was 30 April 2021, but that deadline has since been moved to June 2022. Currently, 26 of the 27 Member States have submitted a plan. According to the plans, Member States must spend at least 37% of their budget on climate action and 20% on digitization.

Oil shale, a rock from which oil is produced.

Unique position

There is still a lot to do if the government is to achieve that goal. Estonia has a unique position in energy supply. It is heavily dependent on domestically produced oil shale, a sedimentary rock that can be burned to generate heat, electricity and liquid fuel.

This means that the country is largely self-sufficient when it comes to energy, but as a result it also had the highest carbon intensity of all countries that are members of the International Energy Agency (IEA) in 2019. Converting oil shale into electricity is the most CO2-intensive combustion technology.

But the transition has begun. While in 2019 only 22 percent of the electricity produced in Estonia came from renewable energy sources, this percentage was almost half in the first half of 2021

That e-stonia-miracle

While the country still has a lot of work to do in the green transition, it is an absolute frontrunner in the digital transition. In fact, Estonia is Europe’s undisputed ICT pioneer. Entrepreneurs can register a new business within twenty minutes via the E-Business Register. The X-Road system guarantees smooth communication between public and private e-services. Esters can vote online. And Prime Minister Stenbocki Maya’s home is completely paperless, as the country has the world’s first e-government.

When the country became independent from the Soviet Union in 1991, it embarked on a series of reforms to modernize its economy. “Estonia was a relatively poor country. The public wanted to offer good quality. It was done digitally back then, because it was cheaper and easier, “said former Prime Minister Kersti Kaljulaid in an interview with CNBC.

SMEs as a priority

Another example of the nickname ‘e-stonia‘explains, is e-Residency, an initiative that allows people to start a business in Estonia without living there. Supporting companies is a government priority for both the green transition and the digital transition. 83 million has been set aside to support companies in their digitization processes focusing on SMEs.

Further digitization of the government (97 million euros) through robustness, security and efficiency is also a major cost item. In addition, 24 million euros will be invested to reduce the digital divide between rural and urban areas.

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