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Eco-Innovation in Estonia

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Eco-Innovation in Estonia Eco-innovation in Estonia EIO Country Profile 2018-2019 0 Eco-Innovation Observatory The Eco-Innovation Observatory functions as a platform for the structured collection and analysis of an extensive range of eco-innovation and circular economy information, gathered from across the European Union and key economic regions around the globe, providing a much-needed integrated information source on eco-innovation for companies and innovation service providers, as well as providing a solid decision-making basis for policy development. The Observatory approaches eco-innovation as a persuasive phenomenon present in all economic sectors and therefore relevant for all types of innovation, defining eco-innovation as: “Eco-innovation is any innovation that reduces the use of natural resources and decreases the release of harmful substances across the whole life-cycle”. To find out more, visit www.eco-innovation.eu and ec.europa.eu/environment/ecoap Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect the position of the European Commission. 1 Eco-Innovation Observatory Country Profile 2018-2019: Estonia Author: Dominik Beckers Coordinator of the work package: Technopolis Group Belgium 1 Acknowledgments This document has been prepared with the kind support and advice of the following experts: • Erki Ani, Chief Executive Officer, Cleantech ForEst • Mihkel Krusberg, Estonian Ministry of the Environment, Environmental Management Department. A note to Readers Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect the position of the European Union. A number of companies are presented as illustrative examples of eco-innovation in this report. The EIO does not endorse these companies and is not an exhaustive source of information on innovation at the company level. This brief is available for download from https://ec.europa.eu/environment/ecoap/country_profiles_en 1 Table of contents Summary …………………………………………………………………………………………………………….. 3 Introduction .......................................................................................................... 4 1 | Eco-innovation performance ............................................................... 5 2 | Selected circular economy and eco-innovation areas and new trends .. 9 3 | Barriers and drivers to circular economy and eco-innovation in Estonia 14 4 | Policy landscape in Estonia ................................................................ 16 REFERENCES ........................................................................................................ 22 ANNEX: Policy strategies and instruments ........................................................... 25 2 Summary Estonia continues to not capitalise on its full potential, which particularly lies in digital readiness and associated skills, and falls behind the EU average performance, hence finding itself at the lower-midfield end of the spectrum of the Eco-innovation Index 2019. Only Malta, Croatia, Slovakia, Poland, Romania, Cyprus, Hungary and Bulgaria trail Estonia’s overall composite Eco-innovation Index score of 73. However, this score, which is 27% below EU- average, represents a substantial improvement vis-à-vis previous years (2017: 60 / 2016: 62 / 2015: 59 / 2014: 58 / 2013: 56 / 2012: 63 / 2011: 62). This improvement can therefore be considered a positive sign in the country’s eco-innovation ambitions. In terms of sub- indicators, socio-economic outcomes and eco-innovation inputs are the nation’s two driving forces. Resource efficiency, on the other hand, is a major deficiency in which Estonia is ranked last among all EU Member States (MS). In general, a strong and consistent political and economic will to foster eco-innovation and circular economy in all its different shapes and forms is present in Estonia. In particular, the circular economy as a topic as well as an economic mode has increasingly gained attention. The three-stage development of the national circular economy action plan, of which the first stage has already been completed and the second one is currently in the making, is a testimonial for this endeavour. A novel measure that is intensively addressed in Estonia can be found in ecodesign. In light of the EU’s ecodesign directive, the EcoDesign Audit was developed by the Sustainable Design Lab of the Estonian Academy of Arts. The national bioeconomy strategy is currently being drawn up, too. The Ministry of Environment, being the institution in charge, intends to finalise and roll out this strategy once the Estonian bioeconomy development study “Bioeconomy value chains in Estonia” (2018-2021) is finished. Resource efficiency, albeit being one of the major weak points of eco-innovation in Estonia and its economy, and having considerable room for improvement, is addressed through programmes and support schemes as well. Several drivers and barriers can be identified, too. On one hand, digitalisation continues to be a major driving force benefitting eco-innovation. Being used across many different levels, digitalisation and Estonia’s approach to it has given the country a competitive edge. This has also translated into a considerable surge of cleantech and its establishment as a crucial pillar of the national economy. Within this context of technological and digital advancements, human resources and knowledge capital continue to develop in a direction favourable for eco- innovation and circular economy advancement. In particular, ICT professions are gaining in popularity among younger people. However, the generally high awareness of environmental concerns among the Estonian population has only poorly translated into lifestyle changes, as green values and attitudes are only partially adopted and followed through. Moreover, in terms of access to investments and funding, Estonia continues to be somewhat dependent on the EU’s means, particularly with regard to RDI. This is similarly reflected in the country’s overall RDI landscape, which is subject to several structural issues. In general, eco-innovation appears to be driven by the demand of foreign actors, which creates a distinct dependency of the entire Estonian scene on foreign support. 3 Introduction Estonia continues to be a prime address for businesses, foreign investment and knowledge capital, which is supported by an advanced digital infrastructure across different levels. However, one also needs to take into consideration that said foreign investment and knowledge capital is more of a prerequisite than a supporting driver to foster eco-innovation. In fact, the Baltic nation is somewhat dependent on foreign demand, investment and funding, the latter being a major burden for SMEs to access funds (Dutt, et al., 2019). The Northernmost Baltic country finds itself exposed to urgent environmental issues which, however, are not exceedingly more dramatic than in other countries. Nature conservation, water and air quality are at high levels, and access to drinking water is ensured. Nonetheless, considerable room for improvement remains. Estonia continues to be one of the most resource-intensive countries throughout the EU and has been ranked the most resource- intensive country within the scope of the current eco-innovation observatory. In this light, it is strongly encouraged to progress towards more efficient solutions for its economy and industry. A similar verdict can be made for the nation’s waste handling. While recycling has more than doubled since 2018, the rate of overall waste treatment reaches only half the EU average, thereby causing Estonia to not meet the EU 2020 recycling target of 50% (Ministry of Finance, 2018). In particular, the oil shale industry, which produces approximately 80% of total waste, is an inevitable point of concern (Directorate-General for Environment, European Commission, 2017). In light of the UN’s Sustainable Development Goals (SDGs), Estonia faces several challenges. For instance, the loss of terrestrial and marine ecosystems and a decrease in biodiversity are as much of a problem as they are a product of many different sources such as the use of fertilisers, changes in land use or increased overall pollution. Furthermore, “the absolute value of greenhouse gas emissions had not decreased in Estonia by 2016 as compared to the year 2000, instead, this value had slightly increased (13.4%)” (Oras, 2018) On a more immediate level, the COVID-19 outbreak, which was in full effect at the time of writing, has hit the Estonian economy considerably. Forecasts estimate that the economy as a whole will shrink by 6-14% in 2020 alone. Experts identified four major pathways through which impacts will be channelled: i) the direct impact of restrictions, ii) tourism and travel services, iii) exports and imports of production and iv) private consumption and investment (Eesti Pank, 2020) 4 1 | Eco-innovation performance The analysis in this section is based on the EU 28 Eco-innovation Index (EcoI Index) for the year 2019. The Eco-innovation index demonstrates the eco-innovation performance of a country compared with the EU average and with the EU top performers. EcoI Index is a composite index that is based on 16 indicators which are aggregated into five components: eco-innovation inputs, eco-innovation activities and eco-innovation outputs as well as environmental outcomes and socio-economic outcomes Figure 1 EU28 Eco-innovation Index 2019, composite index Source: EIO, 2019 Estonia continues to not capitalise on its full potential,
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