European Union grants Estonia nearly €1 billion in support

Raha. Source: Siim Lõvi /ERR

Friday, the European Union Council approved Estonia's updated recovery plan, approving €953 million in funds from the EU's Recovery and Resilience Facility (RRF), primarily for commercial and governmental green reform initiatives. By mid-2026, the measures specified in the strategy must be completed.

The finance ministry explained that the final RRF allocation for Estonia is €863,3 million, plus €90 million in REPowerEU support in the second half of 2022, which will concentrate on quickly reducing reliance on fossil fuels and promoting green reform.

The scheme will channel a total of €543 million to increase electricity grid capacity, improve the energy efficiency of apartment buildings and small-scale residencies increase resource efficiency, develop green technologies, deploy hydrogen integrated circuits, and finance additional private and public green investments. This increases the proportion of climate-inclusive measures in the plan from 37 percent to nearly 60 percent.

The REPower plan, which is included in the Renewable Energy Plan amendments originally approved in 2021, will allocate €31.8 million to reforming the acceleration of renewable energy deployment, and €18 million to grid investments to expedite authorization procedures and bring new renewable energy capacity to market. Also, €20.2 million will be set aside to enhance biogas production and distribution. All of these expenditures are expected to be completed by the spring of 2026, at the latest.

The Council of Finance Ministers adopted Estonia's original recovery plan in the fall of 2021, but it had to be changed due to decreasing RRF support, supply chain interruptions, high inflation and the energy crisis.

Initially set at €969 million, the maximum sum of support for Estonia under the Recovery and Resilience Facility was reduced to €863 million due to a change in the method of calculating support and a weaker-than-expected economic performance in 2020 and 2021. However, Estonia requested that its portion of the Brexit adjustment reserve be transferred to the recovery plan. With this transfer and the support for reducing the proportion of fossil fuels, the new recovery plan will still total €953 million.

The Ministry of Finance said during the amendment process, which began in the summer of 2022 and ended with Friday's decision, both the timetables and the composition of projects were modified, with a greater emphasis than before on climate-related investments, particularly in business support measures, but also in the energy sector.

The administration confirmed the formal submission of the recovery plan revision to the European Commission in February of this year. Following the subsequent deliberations, the European Commission allowed changes to Estonia's recovery plan in May and requested that the amended plan be approved by the Council of the European Union, which represents the governments of the Member States. It was accepted at the Finance Ministers' meeting on Friday.

Mart Võrklaev, the minister of finance, said that in light of the changed conditions and new challenges, it was necessary to reevaluate the recovery plan's priorities and what is practically possible within the timetable.

We may use this money in the next years to invest in future-proofing and to generate prospects for innovative, clever solutions. It will also boost our companies' competitiveness, open up new export opportunities, and provide the framework for long-term economic growth, according to Finance Minister Võrklaev.

The fund's total value is €750 billion

The Recovery and Resilience Facility (RRF) is the foundation of the Next Generation EU program. The RRF's purpose is to support long-term economic recovery investments and reforms, to strengthen member states' economic and social resilience, and to promote green and digital transformation.

The European Commission launched the REPowerEU plan on May 18, 2022, with the goal of fast transitioning to clean energy and ending the EU's reliance on Russian fossil resources that have invaded Ukraine. The EU imports 90 percent of its natural gas, with Russia accounting for more than 40 percent. Russia also accounted for 27 percent of the EU's petroleum imports and 46 percent of its coal imports. To reduce the EU's dependency on Russian fossil fuels, energy must be conserved and increased efficiency, the transition to renewable energy must be accelerated, supply sources must be diversified, and energy supply security must be ensured. These objectives can be met by investment, change, or a combination of both.


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Editor: Mait Ots, Kristina Kersa

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