On Monday, the European Commission selected 77 European net-zero technology projects to receive a total of €3.4 billion in funding from the Innovation Fund call for applications launched in December 2025.

Among the funding recipients is Canadian-registered Neo Performance Materials, which owns the Silmet plant in Sillamäe and the permanent magnet factory in Narva, both located in eastern Estonia.

The Silmet plant, owned by Neo Materials, is dependent on raw materials from Russia but has pledged to phase them out. The plant has come under scrutiny after Estonia requested that its supplier be exempted from European sanctions.

"The project will establish a rare-earth permanent magnet production line in Estonia, covering separation, metallization and magnet manufacturing. The line will be capable of producing up to 3,000 tons of permanent magnets annually, one-third of which will be supplied to EU offshore wind farms," the project description states.

According to plans, the project will prevent the emission of more than 3.4 million tons of CO2 equivalent during its first 10 years of operation.

The funding will come from the Innovation Fund, using revenues from the EU Emissions Trading System (ETS).

The final terms of the grant agreements will be made public in the first quarter of 2027.

The Innovation Fund aims to channel an estimated €40 billion in revenue from the EU Emissions Trading System between 2020 and 2030 into investments in cutting-edge low-carbon and net-zero technologies to support Europe's transition to climate neutrality.

A methanol plant planned for Pärnu has previously received funding from the same program in Estonia.

Minister: Funding helps end reliance on Russia

Minister of Foreign Affairs Margus Tsahkna (Eesti 200) said the European Commission's decision to fund Neo Performance Materials' project "will help strengthen the resilience of European industry and end supplies of raw materials from Russia."

"Our goal is clear – industries of strategic importance to Europe must free themselves from supplies from the aggressor state Russia. This is a matter of both our economic independence and security. Today's funding decision will help accelerate the necessary changes, and we therefore expect NPM Silmet to act swiftly and decisively in finding alternative sources of raw materials so that rare-earth processing and permanent magnet production in Estonia can be launched as quickly as possible," he said in a statement.

The minister said Estonia has worked for a long time to ensure that the European Commission supports the expansion of rare-earth permanent magnet production in the country.

"It will help create new jobs in Estonia, ensure more secure supplies for European industry and reduce dependence on imports of critical raw materials. In addition, it provides an opportunity to develop Estonia into a centre of expertise in this field," he continued.

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