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Sides to incoming government unveil coalition agreement

Lauri Läänemets, Kaja Kallas and Lauri Hussar.
Lauri Läänemets, Kaja Kallas and Lauri Hussar. Source: Priit Mürk/ERR

The incoming cabinet of the Reform Party, Eesti 200 and the Social Democratic Party (SDE) unveiled its coalition agreement on Saturday, which prescribes tax hikes, including a car tax from 2024, carving up Eesti Energia, and pledges to render family benefits more universal and cost-efficient, as well as abolish income tax exemptions for children and housing loan interest payments.

The coalition agreement prescribes hiking VAT and income tax from 20 percent to 22 percent starting from January 1, 2024, and January 1, 2025, respectively. The basic exemption will rise to €700 a month. Accommodation providers' VAT exception will be abolished, while Estonia will also be laying down a car tax in 2024.

The coalition pledges to carry out a revision of the state budget and initiate a zero-budget reform, which means developing a new system of putting together state budgets from scratch. Terrestrial infrastructure of Estonia's eastern border needs to be finished by late 2025.

Green transition

A green reform in public, private and tertiary sector cooperation and passing a climate law make for major goals for the new government.

The coalition wants to renovate as many buildings as possible to seek energy efficiency, which includes the public sector. "We will implement a lifelong CO2 evaluation methodology in design and construction, lay down a smart energy class monitoring obligation for public and commercial buildings," the agreement reads.

"We will introduce a principle based on which new public buildings should ideally be constructed of wood. That constitutes climate-neutral construction and carbon storage."


The coalition says it does not plan to open new oil shale mines and prefers fully utilizing existing ones.

The Reform-Eesti 200-SDE government has big plans for national energy company Eesti Energia from which DSO Elektrilevi and oil shale mining operations will be separated. This raises questions regarding the future of Eesti Energia in general.

A separate entity will be created to oversee oil shale mining, which will give all market participants equal access to the resource at market prices.

Mineral resource surveys regarding materials prioritized in the EU will continue, meaning that phosphate rock mining remains a theoretical possibility.

The government will hold a tender for a managed power generation capacity reserve in 2027.

The burning of wood in industrial power generation will end, while use of biomass will continue in local cogeneration plants.

Transport and infrastructure

Free county public transport will be abolished, with free rides available only to children, the elderly and people with disabilities.

The government will continue reconstructing currently dangerous sections of the Tallinn-Tartu and Tallinn-Pärnu highways to have 2+2 or 2+1 lanes.

The Haapsalu railway has not made the coalition agreement, while efforts to electrify more of Estonia's railways will continue. The government supports the European Commission's initiative of switching rail traffic to the European track gauge in the Baltic region.

Regional policy

Estonia will get a regional investments program, while the practice of so-called Riigikogu protection money, or direct investments decided by MPs, will be abolished.

A special representative will be appointed for the region of Ida-Viru County.

The division of tasks between the central and local governments as well as the latter's funding model will be revised.


There are plans to finance the construction of ERR's new building through the Estonian Cultural Endowment.

Taking inventory of objects of heritage protection is also planned.

The government promises to look for ways of taxing international streaming platforms and seek fair taxation of global digital giants.

Social policy

The new coalition also wants to amend the Family Benefits Act toward a fairer and more efficient support system.

People coming out of the parental leave period will have their sick and care leave days compensated based on their salary before parental leave as opposed to the minimum rate.

But the coalition agreement also pledges to abolish additional tax exemptions for children, spouses and housing loan interest starting from 2024.


The coalition plans to switch to exclusively teaching in Estonian in preschool education from 2027 and in basic education from 2030.

The coalition promises to allow the Unemployment Insurance Fund's retraining support to be used for tuition payments.

Public administration and political matters

The coalition wants to reorganize units of recent institutions in charge of spatial planning to create a single land and spatial planning agency to, among other things, advise on local climate plans, which, coupled with more professional spatial planning, help adjust to climate change, avoid segregation, prepare for the future and safeguard the environment.

Privatization of non-strategic partly or fully state-owned companies will continue, with a list of such enterprises to be compiled by late 2023.

An amendment to reduce the state budget support of political parties that have a criminal conviction will be introduced.

The presidential election law will be complemented to allow candidates to be set up earlier while searching for political consensus in the Riigikogu to amend the process of presidential election.

There are plans to reshuffle electoral districts for parliamentary elections and weigh whether to give 16 and 17-year-olds the right to vote in Riigikogu elections.


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Editor: Aleksander Krjukov, Marko Tooming, Mirjam Mäekivi, Marcus Turovski

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