CE in Estonia

By Alexandra KekkonenTondo’s associate

Estonia is an innovative nation in Northern Europe known globally for its digital ambitions. It is one of the top countries in Europe in terms of start-ups per capita and ranks first in the Entrepreneurship Index by the WEF. The country is a world pioneer in providing public services online – 99% of all public services provided 24/7 online. Thanks to smart e-solutions, it takes only a few hours to start a company and minutes to declare taxes.  

Estonia has a small population (1,3 m.) and territory (45,226 km²). Unlike other countries, the country is characterized by strong deurbanization tendencies in 15-years perspective. Another distinct feature of the Estonian society is so-called slow living approach: a large part of the population does not consider economic growth a priority[1]. These trends are enhanced by declining and ageing population (as of January 1, 2020, the share of people over 65 in the population structure of Estonia was 20.04% of the population)

Ecological footprint per person is 7.1 gha, whereas biocapacity [2] is 9.5 gha per person, leaving a room for improvement.

Approximately 71% of Estonia’s gross domestic product (by value added) is generated in the service sector, industries account for 25%, and extractive industries (including agriculture and mining) – about 4%, mainly oil shale. Estonia is the second largest emitter of CO2 per capita in the European Union and by far the most carbon-intensive economy among the OECD countries. The reason for that is oil shale, sedimentary rock that has been mined in Estonia for electricity generation since the fifties and, since recently, have also been used for liquid diesel fuel production. The country contains second largest deposits of oil shale (2.49 billion metric tons of shale oil) in the EU after Italy (10.45 billion metric tons of shale oil). The EU policies create strong incentives and pressures to decarbonize the economy. In the area of sustainable energy, Estonia is focusing on solar and wind power as well as bioenergy.  The projections suggest that Estonia could be among the leading renewable energy solutions suppliers by the year 2040, both Europe and world-wide.

[1] This is one of the examples of sets out four possible development scenarios (Scenario “A Peculiar Speaking Telegraph”) developed by the Foresight Centre https://www.riigikogu.ee/en/foresight-centre/energy-infrastructure-technology-estonia-directly-depend-developments-european-union/.  In common this kind of mentality is good for sustainability and circular economy development, but this could become a significant obstacle to investments into infrastructure and to economic development.

[2] “Biocapacity” is the capacity of a given biologically productive area to generate an on-going supply of renewable resources and to absorb its spillover wastes.

Currently, Estonia’s share of renewable energy sources in gross energy consumption nears 30 percent, already surpassing its 2020 target of 25 percent. The country takes 65 percent of its renewables from wind and 25 percent from biomass. The rest is shared between biogas, solar, hydro and waste sources.

Material flows and footprints

Nature conservation, water and air quality are at high levels, and access to drinking water is ensured. Nonetheless, considerable room for improvement remains. Estonia continues to be one of the most resource intensive countries throughout the EU and is strongly encouraged to progress towards more efficient solutions for its economy and industry. A similar verdict can be made for the nation’s waste handling, which continues to primarily rely on incineration and mechanical biological treatment. Especially the oil shale industry, which produces approximately 80% of total waste, is an inevitable point of concern.

Estonia’s major exports are machinery and equipment, wood (wood products), agricultural products and food preparations, miscellaneous manufactured articles and mineral products. Estonia’s main imports are machinery and equipment, transport equipment, agricultural products and feedstock, mineral  and chemical products. The dependency on the material import is high due to small territory and geographical position. All categories considered by EU as important criteria of circularity are exceeded except for the fossil fuels (table 1).

Table 1. Material import dependency in 2018, percentage

  Total Biomass Metal ores (gross ores) Non-metallic minerals Fossil energy materials/carriers
European Union – 27 countries (from 2020) 24,1 11,4 54,3 3,2 66
European Union – 28 countries (2013-2020) 23,4 11,1 54,9 2,9 63,5
Estonia 22,3 19,8 100 14,3 24,3

Source: Eurostat

Material flow diagrams for Estonia 2017, thousand tons

Estonia is an energy-independent country, providing more than 90% of its electricity needs with locally produced oil shale. Alternative energy sources, such as wood, peat and biomass, account for approximately 9% of primary energy production. Estonia imports the necessary petroleum products from Western Europe and Russia. Shale energy, telecommunications, textiles, chemicals, banking, services, food and fisheries, timber, shipbuilding, electronics and transportation are key sectors of the economy

Bridging the gap

Waste management system in Estonia is well developed, but there are some hurdles to overcome to meet demands of the Circular Economy Package of the EC. 28.4% of household waste is recycled. Compared to other European countries, this is quite small – the average figure in the EU is approximately 46%. From January 1, 2020, at least half (that is 50%) of the household waste generated in Estonia should be taken for reuse. In the world, approximately 13.5% of household waste is used, adding 5.5% that compost. More than half of the household waste collected in Estonia goes to incineration, and electricity and heat are generated from this. In 2016 in Estonia 56% of household waste was sent to the stove, and in Europe only 26% on average. Compared to other European countries, less household waste is dumped in Estonia. According to the rules of the European Union, by 2030 it will not be possible to store (i.e. take out to a landfill) more than 10% of household waste. If we consider plastic packaging separately, then 26.5% of them are recycled in Estonia (in Europe, on average, 41.9%)[3].

[3] Estonian Association of Circular Economic Enterprises (ERMEL) is non – profit association by 26 waste management companies. Today ECEIA has 30 members (majority private waste management companies). https://www.energiakeskus.ee/static/2020/05/RINGMAJANDUS_kogu-pakett_VENE.pdf

Key directions of the circular economy implementation

Estonia promotes the transition to a circular economy on national, regional (cooperation among Baltic states) and international levels.

Circular Economy policy is implemented through a set of priority areas including energy, digital infrastructure and technology (defined by analytics of the Estonian Parliament Foresight Centre). At the same time, term “circular economy” does not appear yet in the titles of official documents[4]. Estonia has committed to developing a circular economy strategic document and action plan by the end of 2021. The potential to develop an effective circular economy model in Estonia is promising thanks to a stimulating policy environment, orientation on technological development, digitalization and an innovation infrastructure.

[4] The only found by 24.06.2020) example is the title of program of Environmental Investment Centre (that was established by the Republic of Estonia, and the Ministry of the Environment as one of the main financiers of environmental projects in Estonia). The objective of the Circular Economy Programme is to support activities that contribute to the more efficient usage of the resources and help to introduce the principles of a circular economy, prevent waste and emissions, and reduce the environmental impact of activities – https://www.kik.ee/en/supported-activity/circular-economy-programme

Estonian universities and innovation centers organize regularly hackathons on climate and circular economy issues, devoted to finding eco-innovative solutions – action towards the sustainable future and growth (e.g. Garage48 Circular Economy, Circular Economy Hackathon by TalTech, AccelerateEstonia). At present the City of Tallinn and Technopol Science and Business Park have announced a Tallin innovation competition to find smart city solutions that will make the city’s services and environment even more comfortable and modern. So, topic of circular economy is rapidly developing in business and innovation field. Tallinn, the capital of Estonia is named as one of the smartest cities, as well as green ones. In 2020 Tallinn was chosen as one of four finalists for the title of European Green Capital 2022 got Green Leaf Awards (together with Dijon (France), Grenoble (France), Turin (Italy)). This cites “are showing continued commitment to sustainability” resulting “green cities are not only healthier places to live, they are also more resilient to the future crises caused by climate change, biodiversity loss and scarcity of resources”.

Although smart city is not and equivalent to circular city, this in serious step towards that direction. Private sector is actively engaging in developing circular economy solutions. There are a lot of innovative businesses, e.g. Estonian startups are contributing to the revolution in the circular economy of the textile industry or startups working on plant-based meat substitutes elsewhere have received investments from Bill Gates, Sir Richard Branson and many others.

Introduction in Estonia of Industry 4.0-type solutions impact everything from how quality is monitored to how much effort goes into supply chain management. At the center of the strategy is a concept called Real-Time Factory which, as the name suggests, allows managers to track key performance indicators in real time, showing where improvements can be made and allowing the entire factory to operate as one integrated system.  

Circular economy initiatives at business are well supported. The Environmental Investment Centre (EIC) opened an application round for the environmental program with a total volume of EUR 13.5 million. A total of EUR 4.1 million from the budget for the round will be directed to the circular economy, in order to support, for example, resource efficiency within companies, prevention of waste generation and hazardous waste collection rounds or the implementation of a green office and school. 

Estonia is promoting circular economy at the regional level. E.g. in February joint meeting of the Economics, Energy and Innovation Committee and the Natural Resources and Environment Committee of the Baltic Assembly (BA) was held, where circular economy and digital issues are discussed as economic cooperation of the Baltic States. The session was devoted to circular economy, recycling of bio, textile and construction waste. As the EU member state, Estonia supports most of the measures in the Circular Economy Package of the European Commission. Its implementation is based on existing policies and legislation in the field of sustainable development and proceeds from that measures. Goals for Estonian sustainable development have been agreed until the year 2030 in National Strategy on Sustainable Development “Sustainable Estonia 21” and The Estonian Environmental Strategy 2030[5].

[5] These goals are: vitality of Estonian cultural space; increase of people’s welfare; socially coherent society; ecological balance. Long-term development of the field of environment is governed by the goal “ecological balance” consisting of the following parts: use of natural resources in the manner and volume ensuring ecological balance; minimising pollution; conservation of biodiversity and natural areas. The Estonian Environmental Strategy 2030 aims at defining longterm development trends for maintaining a good status of the natural environment, while keeping in mind the links between the sphere of the environment and economic and social spheres and their impact on the natural environment and people. Other legislation base is the General Principles of Climate Policy Until 2050, and the National Development Plan of the Energy Sector until 2030, EU and global vision documents like the EU’s 7th Environment Action Program ‘Living well, within the limits of our planet’, the EU 2050 strategic vision ‘A Clean Planet for all’, the United Nations Framework Convention on Climate Change.


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