Foresight Centre: Green Investments Bring Major Economic Profit to Estonia

  • 2023-06-16

Estonia’s future economic success depends on the development of green technologies and yet the volume of green investments in Estonia is currently about half of what it should be, concludes the Foresight Centre in its recent report “Green Transition Trends and Scenarios in Estonia”.

SEI Tallinn (Stockholm Environment Institute Tallinn Center) has estimated that achieving a climate neutral Estonia by 2050 would require a total of EUR 17.5 billion in investments. The annual need for investments has consequently been estimated at 4% of the GDP, which is about twice the current level of green investments in Estonia – which is 2% of the GDP.

Head of Research of the Foresight Centre Uku Varblane emphasised that the green transition involves developing technologies in a broad range of fields, such as refining of biological resources, digitalisation, waste management, material production, wider introduction of AI and machine learning options, and many more. “Countries are currently engaged in a massive technological race and we need to ask ourselves how Estonia could benefit from this innovation and how we could make the new technologies work for us,” Varblane said. He added that with the 2030 climate goals in mind, Estonia should make use of the technologies that are already on the market, and yet these would not be enough to achieve the 2050 goals. “Many of the technologies that are vital for achieving climate neutrality have not yet even reached the market,” Varblane admitted.

The recent report of the Foresight Centre highlights that green investments bring major economic profit for Estonia, but the extent to which they stimulate the economy depends hugely on the proportion of domestic input. For every euro invested into greener economic activities, the whole production value could increase by EUR 1.2, and the tax revenue directed into offering public services could increase by 20 cents.

The analyses show that the investments that the green transition requires should be expected to have the ratio of one euro from public funds for every three euros from the private sector. Estonian businesses are already making green investments quite eagerly although the volumes are still half of what they should be; also, these are mostly directed into enhancing the existing systems as opposed to businesses in the European Union who are investing more into the introduction of new technologies. State support for the research and development activities of Estonia’s businesses has remained meagre and erratic compared to other countries and depending on the EU Structural Fund periods and conditions.

However, the Head of the Foresight Centre Tea Danilov elaborated on the conclusions of the report, which showed that green investments gained in popularity when options with a heavy environmental footprint were made more expensive through regulations and taxes; but we should still not forget the cost of living.

“When creating a favourable environment for green investments, we need to keep in mind both sides – not just make the options with a heavier footprint more expensive, but also make the sustainable options more affordable. The regularly offered relevant support instruments, like subsidies for buying electric cars or support for renovation and updating heating systems, are mostly appreciated by the wealthier groups who are able to manage self-financing and the intricacies of the application process, “ Danilov said. 

The Foresight Centre is a think tank at the Riigikogu that analysis socio-economic trends and builds future scenarios. The Centre researches a range of topics in order to anticipate emerging trends and potential disruptions.