At the same time, they are also moving forward with the idea of establishing a ship conversion center in Estonia, which, according to studies, could generate up to €70 million in annual tax revenue for the country.

Internationally agreed climate goals require shipping companies transition to more environmentally friendly fuels in the future, including electricity, methanol, or ammonia, with the aim of reducing greenhouse gas emissions.

On the one hand, the vessels of the future need to be capable of running on greener fuels. On the other, the green transition planned for the coming decades will require investments in ports too, to ensure they can accommodate the newer generation ships, running on sustainable fuels.

For example, hosting electric vessels necessitates a sufficient shore power infrastructure along with the necessary cables and connections.

Kaupo Läänerand, undersecretary for maritime affairs at the Ministry of Climate, has noted that the capacity of ports to receive ships powered by alternative fuels will increasingly determine the level of shipping calling in at Estonian ports in the coming years.

He said: "In future, shipping companies will choose which ports to call at based on which have the necessary infrastructure.

"Customers have become more demanding," Läänerand went on.

"A methanol-powered shipping line is to open soon in Estonia, but this vessels came here solely because we are ready to offer methanol bunkering," he added

The exact cost of bringing Estonian ports up to green standards is not yet known.

Edgar Peganov, CEO of consultancy firm Workboats Consulting, which has investigated the matter, said that ports are still running some figures

Undersecretary Läänerand said he estimates that the minimum cost of making ports compliant with green requirements by 2050 will come to €150 million.

He also noted that the Ministry of Climate sees the need to develop a specific support measure in the near future, to aid ports and industry to remain competitive under green transition conditions.

This measure would assist ports in developing the necessary infrastructure, including shore power systems.

The support measure could come to, for example, five to ten million euros annually, while initially it could support those ports which have made the most progress with their plans.

Läänerand said: "Whether the government will include additional requests in next year's state budget and what their priorities will be – that is all still up in the air."

Requirements might still outstrip available support, however, he added.

"The need is greater than the funds the Estonian state has available to support it," Läänerand remarked.

Vessel conversion center could bring in up to €70 million in tax revenues to the state

In addition to ports renovation, the worldwide green transitio is leading to a need for new vessels that run either on battery power or greener fuels, such as methanol or even ammonia.

In April, ERR reported how the Ministry of Climate would like to benefit from the major green transition taking place in the maritime sector, partly reimbursing the costs associated with ship conversions.

The Ministry of Climate would request, for example, close to €10 million from next year's state budget to support vessel conversions, plus €16 million the following year.

At the request of the climate ministry, a study has now been completed which revealed that a ship conversion center could bring up to €70 million in tax revenues to the state annually, at the existing capabilities.

Additionally, there would be indirect revenue from other sectors, such as furniture or catering, to take into consideration.

Estonia could convert 12 ships a year

According to the sector, over the next 20 years, there is existing potential to convert annually in Estonia two cruise liners, four passenger ferries of the Tallinn-Helsinki route size, plus six cargo ships

According to Workboats Consulting, which conducted the above study, the state could also set up a company or organization which it takes par tin which would promote the creation of this ship conversion center.

This entity would bring together Estonian shipbuilding companies, and would act as their neutral coordinator and leader, the consultancy firm said.

Among other things, the organization would represent the interests of shipbuilding companies, conduct joint marketing and development projects, and promote cooperation with other sectors.

"It might also prove worth analyzing the reforming of an existing organization or unit for this purpose," the analysis notes.

Edgar Peganov, who conducted the study, added that it could help businesses if the state came to assist in providing financial guarantees.

The need for financial guarantees may arise particularly for winning large-scale projects, Peganov said.

"Practice demonstrates that the state has a greater capacity to provide various trust and financial guarantees compared to companies individually. In the case of major projects, states compete with each other, doing their utmost to win the project for their [state's] companies," the study notes.

Kaupo Läänerand added that, for example, the state has already dealt with export guarantees, as many companies which have grown large no longer qualify for similar support measures as those which remain small or medium-sized.

Läänerand said: "We have a need to apply for state aid permission. Such permission has not been applied for before, but we have started preparations in the Ministry of Climate to apply for permission for large businesses as well."

"This is because we need to continue supporting their growth, not just to support small and medium-sized enterprises in becoming larger," he went on.

Läänerand added that a similar ship conversion center fits well with government discussions on how to improve the competitiveness of Estonian industry.

"This is exactly the kind of new industry, seizing these megatrends, creating jobs and tax revenue," he said.

Ships could be converted, for example, at the ports of Muuga, just east of Tallinn, or Sillamäe, in Ida-Viru County.

Potential locations for the ship conversion center highlighted in the study also included Vene-Balti sadam and the Bekker/Meeruse zone, both in the Kopli district of Tallinn, primarily due to the good maritime transport connections and the preexisting location of shipbuilding companies at these ports.

There are over 2,000 companies in Estonia which operate directly or indirectly in the maritime sector, including both traditional shipyards and high-tech robotics and software companies.

These firms contribute approximately 4.5 percent to Estonia's GDP, while the sector employs over 20,000 people.

The total sales revenue of the Estonian shipbuilding sector (ship construction, small shipbuilding, and ship repair) comes to approximately €275 million per year.

In 2021, the shipbuilding sector employed around 4,000 people in Estonia.

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