EUROPEAN COMMISSION Brussels, 8.9.2022 SWD(2022) 255 final COMMISSION STAFF WORKING DOCUMENT Environmental Implementation Review 2022









Country Report - ESTONIA



















Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Environmental Implementation Review 2022: Turning the tide through environmental compliance







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This report has been written by the staff of the Directorate-General for Environment, European Commission. Any comments are welcome to the following email address: ENV-EIR@ec.europa.eu More information on the European Union is available on the internet ( http://europa.eu ). Photographs: For reproduction or use of these photos, permission must be sought directly from the copyright holder. ©European Union, 2022 Reproduction is authorised provided the source is acknowledged. Table of Contents Executive summary Part I: Thematic areas 1. Circular Economy and waste management Measures towards a circular economy Waste management

2. Biodiversity and natural capital Nature protection and restoration Marine ecosystems Ecosystem assessment and accounting 3. Zero Pollution Clean air Industrial emissions Major industrial accidents prevention – SEVESO Noise Water quality and management Chemicals 4. Climate Action Key national climate policies and strategies Effort sharing Key sectoral developments Use of revenues from the auctioning of EU ETS allowances Part II: Enabling Framework: Implementation Tools 5. Financing Environmental investment needs in the European Union EU environmental funding 2014-2020

EU environmental funding 2021-2027 National environmental protection expenditure Green budget tools Overall financing compared to the needs 6. Environmental Governance Information, public participation and access to justice Compliance assurance Effectiveness of environmental administrations Reforms through the Commission’s Technical Support Instrument (TSI) TAIEX EIR peer-to-peer projects



Executive summary The main challenges identified in past EIRs with regard to implementation of EU environmental policy and law by Estonia were: ·reducing the intensity of resource use to improve industrial resilience; ·creating greater capacity in recycling to offset the overcapacity in incineration and the mechanical biological treatment of waste. Estonia is now on track to decouple municipal waste generation from economic growth and has made steady progress over the past decade on stepping up its recycling rate. However, with only 28.9% of municipal waste recycled in 2020, Estonia remains well below the EU average and needs to progress faster to achieve the 2025 targets. An increase in the circular material usage to 17.3% in 2020 - above the EU average - is a good achievement. However, with EUR 0.63 generated per kg of material consumed in 2020, resource productivity in Estonia is dragged down by resource intensive industries. After completion of the Technical Support Instrument project on Estonian waste system analysis, including good circular economy measures in the Recovery and Resilience Plan (RRP) and adoption of the circular economy action plan planned in 2022, Estonia has excellent conditions for accelerating its transition towards a circular economy. Moving away from oil shale extraction and use is expected to bring along multiple benefits for the environment in terms of reduced amounts of waste and pollution, improved resource productivity and less pressure on water resources. This transition will be crucial to achieve the climate neutrality goal. Improvements are needed in the Land Use Land Use Change and Forestry (LULUCF) sector, as removals by sinks have decreased between 2013 and 2019 and a six-fold decrease of the LULUCF carbon sink by 2030 has been projected in the Estonian National Energy and Climate Plan (NECP).

In general terms of biodiversity, Estonia presents a mixed picture. It is the second-best Member State in the EU as to the share of EU-protected species and habitats in good conservation status and its uptake of organic farming of 22% is not far from the EU 2030 target of 25%. At the same time, most of its mire, forest and semi-natural grassland habitats remain at unfavourable status. Despite efforts to halt the deterioration, the numbers of key farmland and forest birds are declining under pressures from agriculture and forestry. For the Natura 2000 network, Estonia has designated all Sites of Community Importance as Special Areas of Conservation, but still needs to establish site-specific conservation objectives and measures to meet its obligations under the Habitats Directive. Estonia also needs to improve the management of semi-natural grasslands and forests and enhance the protection and assessment requirements under Article 6 of the Habitats Directive by amending the Nature Conservation Act. Estonia is one the pioneers of wetland restoration. Estonia’s expertise in promoting restoration will be very valuable under the future Nature Restoration Law, demonstrating that restored wetlands can bring multiple benefits and co-exist with successful farming practices. The new Estonian Nature Conservation Development Plan, which will be finalised by the end of 2022, would be an excellent tool to include the targets from the Nature Restoration Law – particularly in relation to the restoration of peatlands, grasslands and forests. On air pollution, although the emissions of key air pollutants have decreased significantly over the last years, Estonia should continue to address emissions to air from usage of fossil fuels and other emitting sources replacing them with cleaner solutions. On sustainable water management, Estonia demonstrates very high compliance with the Drinking Water Directive and the Urban Waste Water Treatment Directive except for the issues related to the use of individual or other appropriate systems in the sparsely populated areas. As for the Nitrates Directive, Estonia needs to reduce and prevent eutrophication of inland and marine surface waters where the agricultural pressure is significant. An acute eutrophication problem affecting 97% of the Baltic Sea is a shared problem with neighbouring states. A significantly large portion of waters in the region are assessed to be below good eutrophication status. EU financing continues to provide support for the environmental implementation gap, and Estonia is due to receive over EUR 969.3 million from its RRP (2021-2026) in grants and EUR 2.2 billion from the cohesion policy (2021-2027). Estonia’s environmental financing for investments was at an annual 1.25% of GDP in 2014-2020, with over two thirds of it coming from national sources. The environmental investment needs in the coming period (where country-level breakdown is available) are found to be in a similar range (1.13% of Estonia’s GDP), suggesting that the majority of environmental investment needs would be met. Nevertheless, investment needs for water protection, wider environmental sustainability, higher circularity, R&D focused on environment-related issues as well as nature restoration can trigger additional needs for financing over baselines (i.e. an investment gap). Part I: Thematic areas 1. Circular Economy and waste management Measures towards a circular economy The new Circular Economy Action Plan adopted in March 2020 is one of the main building blocks of the European Green Deal. The EU’s transition to a circular economy will reduce pressure on natural resources and will create sustainable growth and jobs. It is also a prerequisite to achieve the EU’s 2050 climate neutrality target and to halt biodiversity loss. The Action Plan announces initiatives along the entire life cycle of products, aiming to reduce the EU's consumption footprint and to double the EU's circular material use rate by 2030. It targets how products are designed, promotes circular economy processes, encourages sustainable consumption, and aims to ensure that waste is prevented and the resources used are kept in the EU economy for as long as possible. The circular material use rate is a good indicator of an economy’s circularity, as it includes all the materials that are fed back into our economy. Large differences in the circularity rate exist across countries. To help achieve the EU circular economy action plan’s goal of doubling the EU circular material use rate by 2030, ambitious measures targeting the whole product life cycle are needed at a Member State’s level. Such measures range from sustainable product design which can increase the durability, reparability, upgradability and recyclability of products, to other measures such as remanufacturing, increasing the circularity in production processes and recycling, as well as boosting eco-innovation and increasing the uptake of green public procurement. Estonia’s circular (secondary) material use rate was 11.8% in 2016 and 17.3% in 2020, well above the EU average of 12.8%, demonstrating a strong increase in the secondary material usage in the past few years. Figure 1 – Circular material use rate (%), 2010-2020 Resource productivity expresses how efficiently the economy uses material resources to produce wealth. Improving resource productivity can help minimise the negative impacts on the environment and reduce dependency on volatile raw material markets. As shown in Figure 2, with EUR 0.63 generated per kg of material consumed in 2020, resource productivity in Estonia is well below the EU average of EUR 2.09 per kg. Figure 2: Resource productivity 2010-2020

Circular Economy Strategy The Commission encourages Member States to adopt and implement national/regional circular economy strategies covering the whole life cycle of products. This is because such strategies are one of the most effective ways to progress towards a more circular economy at Member State level. Since the launch of the European Circular Economy Stakeholder Platform in 2017, national, regional or local authorities have used the platform to share their strategies and roadmaps. Currently, Estonia’s circular economy action plan is in consultation. The strategy is entitled ‘Estonian Circular Economy White Paper and Action Plan’, and it is to be adopted in 2022. No implementation timetable is yet available. The strategy is also a part of the Environmental Development Plan scheduled for 2023. The Minister of Environment has established an advisory group at the level of deputy secretary-generals that consists of all ministries as well as the Government Office and will advise the Minister of the Environment in the process of developing policy measures under the Circular Economy White Paper. Transition to a circular economy is also stated as one of the priority reforms the new holistic national strategy document ‘Estonia 2035’ which was adopted by the Parliament in 2021. Estonia does not have a specific sectoral strategy for plastics; the sector is currently being addressed only through the Single Used Plastics Directive. Nor does it have a specific sectoral strategy for textiles. A strategy on construction, however, is in place. In 2021, the long-term view on ‘Construction 2035’ was adopted. Through seven steps, the focus is on identifying the best developments for the construction sector, shaping a high-quality built environment. The adoption of the circular economy action plan by 2022 is also a reform included in the Estonian Recovery and Resilience Plan. Eco-Innovation A successful transition to a circular economy requires social and technological innovation. This is because the full potential of the circular economy can only be reached when it is implemented across all value chains. Eco-innovation is an important enabling factor for the circular economy. New approaches to product design and new business models can help to produce circularity innovations, creating new business opportunities. In 2021, Estonia ranked 18th on the 2021 Eco-Innovation Index, with a total score of 97, resulting in an average eco innovation performer status. In three out of five components of the Eco-Innovation Index of 2021, Estonia performs below the EU average, namely on eco-innovation inputs, eco innovation activities and resource efficiency outcomes, while for ecoinnovation outputs and socioeconomic outputs, it performs above the EU average. Figure 3 – Eco-innovation performance, 2010-2019

Green Public Procurement (GPP) Public procurement accounts for a large proportion of European consumption, with public authorities’ purchasing power representing 14% of EU GDP. Public procurement can help drive the demand for sustainable products that meet repairability and recyclability standards. 8 323 public procurements were carried out in Estonia in 2020. The value of public procurement was EUR 3.7 billion which makes up 14% of GDP and 32% of the state budget. Official statistics shows that only 4.5% of the total number of procurements and 17% of the total procurement cost are GPP. As from 1 January 2022, mandatory GPP criteria have been introduced for the central government sector for furniture, cleaning products and services, copying and graphic paper and computers and monitors. GPP is periodically monitored through the official electronic public procurement website (EProcurement Estonia). EU Ecolabel and the Eco-Management and Audit Scheme (EMAS) EU Ecolabel and the Eco Management and Auditing Scheme (EMAS) The number of EU Ecolabel products and EMAS-licensed organisations in a given country provides some indication of the extent to which the private sector and national stakeholders in that country are actively engaged in the transition to a circular economy. It also shows how committed public authorities are to supporting instruments designed to promote the circular economy. As of September 2021, Estonia had 974 products, out of 83 590 and 22 licences, out of 2 057 registered in the EU Ecolabel scheme , showing a low take-up of the products and licences. Moreover, 20 organisations, amounting to 42 sites from Estonia are currently registered in EMAS, the European Commission's Eco-Management and Audit Scheme. Since the last report in 2019, there have been 663 new product registrations of the EU Ecolabel, as well as ni,e new licences. Under EMAS, 12 new organisations were registered. As Estonia has committed to the adoption of a circular economy action plan in its Recovery and Resiliance Plan, the corresponding priority action from 2019 is fulfilled. Waste management Turning waste into a resource is supported by:

(i) fully implementing EU waste legislation, which includes the waste hierarchy, the need to ensure separate collection of waste, the landfill diversion targets, etc.; (ii) reducing waste generation and waste generation per capita in absolute terms; (iii) limiting energy recovery to non-recyclable materials and phasing out landfilling of recyclable or recoverable waste This section focuses on the management of municipal waste for which EU law sets mandatory recycling targets. Preventing products and materials from becoming waste for as long as possible is the most efficient way to improve resource efficiency and to reduce the environmental impact of waste. Waste prevention and reuse are the most preferred options and are therefore at the top of the waste hierarchy. The amount of municipal waste generated is a good indicator of the effectiveness of waste prevention measures. Estonia is one of the Member States with the lowest municipal waste generation per capita, with 383 kg/capita in 2020, well below the EU average of 505 kg/capita. Its total waste generation has increased only slightly between 2010 and 2018 and even decreased in 2019. The fact that Estonia’s GDP has grown steadily during the same time indicates that Estonia is on track to decouple total waste generation from economic growth. Estonia’s Waste Prevention Plan, implemented since 2014, might partially explain the positive total waste generation trend observed from 2014 onwards. However, concerns have been raised about the lack of a unified data management system at the local level, and the quality of the data provided. Figure 4: Municipal waste by treatment in Estonia, 2010-2020 Figure 4 also shows municipal waste by treatment and by kg per capita. Estonia has moved away from heavy reliance on landfill to treating municipal waste by incineration, which accounted for 45% of waste treatment in 2019. Since 2014, landfill has increased again, although the latest figures for 2019 suggest that this trend is slowing down. Estonia has made slow but steady progress over the past decade in stepping up its recycling rate but with only 29% of municipal waste recycled in 2020, it remains well below the EU average of 48%. Figure 5 shows that Estonia needs to step up investment in recycling to meet the EU 2025 recycling targets.



Figure 5: Recycling rate of municipal waste, 2010-2020 The Commission's 2018 Early Warning report' listed Estonia as one of the countries at risk of missing the EU 2020 target of recycling 50 % of municipal waste. The report listed key priority measures which Estonia should take to close the implementation gap. The Commission is currently finalising its analysis of the progress on the recommendations from the Early Warning Reports as a well as an analysis of progress towards achieving the 2025 waste recycling targets. This report will be presented at the end of 2022 and will make recommendations as appropriate. Implementation of the 2018 waste legislative package Estonia has notified the transposition of the 2018 waste package to the Commission. A conformity assessment is now ongoing. Waste Management Plans and Waste Prevention Programmes are instrumental for a sound implementation of the EU waste legislation. They set out key provisions and investments to ensure compliance with existing and new legal requirements (e.g. waste preventiion, separate collection for a number of specific waste streams, recycling and landfill targets). Revised plans and programmes were due on 5 July 2020. Estonia has extended the current waste management plan (2014-2020) until the end of 2022 and intends to adopt the new updated waste management plan (2022-2028) by the end of 2022. When the plan is notified to the Commission the Commission will assess whether it meets the requirements of Article 28 of the revised Framework Directive on Waste. Estonia benefited from the Technical Support Instrument project 20EE03 funded by the Structural Reform Support Programme 2020 for Estonian waste system analysis. Under this project, the World Bank assessed the Estonian municipal waste management system, analysed options and proposed an action plan and policy recommendations on how to improve its effectiveness and make it more circular. The project was completed in October 2021 and it will feed into the new waste management plan.

There has been some progress since the 2019 EIR as regards measures for improving waste management and increasing recycling rate, but a fair amount of work is still needed to fully address the recommendations. In light of the upcoming Early Warning Report 2022, all 2019 priority actions are proposed again. 2022 priority actions ·Introduce new policy instruments, including economic ones, to promote waste prevention, make reuse and recycling more economically attractive and shift reusable and recyclable waste away from incineration and landfilling. ·Set mandatory targets for recycling and generation of residual waste at the municipal level, with financial penalties for non-compliance. Develop and run implementation support programmes for municipalities to help support their efforts to organise separate collection and improve recycling performance. ·Improve and extend separate collection of waste, including for biowaste. Establish minimum service standards for separate collection (e.g. frequency of collections, types of containers etc.) in municipalities to ensure high capture rates of recyclable waste, and put in place civic amenity sites. Use economic instruments such as pay-as-you-throw. ·Shift reusable and recyclable waste away from incineration. ·Improve the functioning of extended producer responsibility systems, in line with the general minimum requirements on EPR22 . 2. Biodiversity and natural capital The 2030 EU biodiversity strategy adopted in May 2020 aims to put the EU’s biodiversity on a path to recovery and sets out new targets and governance mechanisms to achieve healthy and resilient ecosystems. In particular, the strategy sets out ambitious targets to: (i) protect a minimum of 30% of the EU’s land area and 30% of its sea area and integrate ecological corridors, as part of a true trans-European nature network; (ii) strictly protect at least a third of the EU’s protected areas, including all remaining EU primary and old-growth forests; (iii) effectively manage all protected areas, defining clear conservation objectives and measures, and monitoring them appropriately. The strategy also sets out an EU nature restoration plan – a series of concrete commitments and actions to restore degraded ecosystems across the EU by 2030, and manage them sustainably, addressing the key drivers of biodiversity loss. The EU’s Habitats and Birds Directives are key legislative tools to deliver on the targets in the EU’s biodiversity strategy for 2030, and are the cornerstones of the European legislation aimed at conserving the EU’s wildlife. Additional goals as set in the Estonian Nature Conservation Development Plan are to strictly protect at least 10% of forests, to restore 10 000 ha of mire habitats and to have 45 000 ha of semi-natural grasslands under active management by 2020. According to preliminary estimates, the level of management of grasslands will have reached 40 000 ha in 2020. The Prioritised Action Framework (PAF) 2021-2027 foresees funding to improve management of 60 000 ha of semi-natural grasslands by 2028. The new Strategy identifies 2030 goals reflected into more than 100 measures, each with corresponding indicators, priorities, deadlines, verification means, tools and responsible entities. Estonia intends to compile management plans for protected habitats (wet forests, dry forests, rocky habitats, rivers, lakes, dunes, coastal habitats, marine habitats).

A national action plan for all forest habitats will be prepared under the LIFE integrated project (to be finalised by 2029). In 1994, Estonia ratified the Convention on Biological Diversity. Nature protection and restoration Natura 2000, the largest coordinated network of protected areas in the world, is the key instrument to achieve the objectives in the Birds and Habitats Directives. These objectives are: (i) to ensure the long-term protection, conservation and survival of Europe's most valuable and threatened species and habitats; and (ii) to maintain or restore the favourable conservation status of these species and habitats. Key milestones towards meeting the objectives of the Birds and Habitats Directives are: (i) the setting up of a coherent Natura 2000 network; (ii) the designation of sites of community importance (SCIs) as SACs ; and (iii) the setting of site-specific conservation objectives and measures for all Natura 2000 sites. Setting up a coherent network of Natura 2000 sites Estonia hosts 60 habitat types and 95 species covered by the Habitats Directive. The country also hosts populations of 75 bird taxa listed in the Birds Directive Annex I. By 2021, 17.9% of the national land area of Estonia was covered by Natura 2000 (EU coverage 18.5%), with Special Protection Areas (SPAs) classified under the Birds Directive covering 13.7% (EU coverage 12.8%) SCIs under the Habitats Directive covering 17.2% (EU coverage 14.2%) of Estonia’s territory. The latest assessment of the SCI part of the Natura 2000 network shows that the designation is complete. Figure 6: EU-27 marine & terrestrial protected area coverage, 2021

Figure 7: Natura 2000 terrestrial protected area coverage, 2021 Designating SACs and setting conservation objectives and measures The six year deadline set by the Habitats Directive to designate SCIs as SACs and establish appropriate conservation objectives and measures been met, as Estonia has designated all SCIs as SACs. The Commission is concerned that the quality of the objectives and measures set is only partially in line with legal requirements and it will further investigate the matter. Progress in maintaining or restoring favourable conservation status of species and habitats To measure the performance of Member States, Article 17 of the Habitats Directive and Article 12 of the Birds Directive require reporting on the progress made towards maintaining or restoring the favourable conservation status of species and habitats. The results of Habitats Directive Article 17 and Birds Directive Article 12 reports on progress towards maintaining or restoring favourable conservation status of species and habitats are key to measure the performance of Member States.

According to the report submitted by Estonia on the conservation status of habitats and species covered by just Article 17 of the Habitats Directive for the period 2013-2018, the share of assessments for habitats in good conservation status in 2018 is 5% more than the 51.67% reported under the previous reporting period (2007-2012). As for protected species, the share of assessments in good conservation status in 2018 is 56.67%, which is 2.71% more than the 53.54% reported under the previous reporting period (2007-2012)) . Of the 27% of EU forest area protected under the EU nature directives, only 20% of Estonian habitats show a favourable conservation status. As far as birds are concerned, 60% of the breeding species showed short-term increasing or stable population trends (for wintering species this figure was 85.72%). At the same time, the share of habitats in bad or poor conservation status has decreased to 44% (from 48% in the previous reporting period) and the share of assessments for species in bad or poor conservation status has slightly increased to 36% (from 35% in the previous reporting period). The main pressures for habitats (in descending order) are agriculture, natural processes and forestry. The main pressures for species (in descending order) are forestry, agriculture and human-induced changes in water regimes. Figure 8: Assessments on conservation status for habitats for 2007-2012 and 2013-2018 reporting periods Figure 9: Assessments on conservation status for species for 2007-2012 and 2013-2018 reporting periods While the overall share of habitats and species in good conservation status has slightly increased in Estonia, the majority of mire, forest and semi-natural grassland habitats remain in an unfavourable status. In June 2021, the Commission initiated an infringement procedure which raises concerns about the incorrect transposition and bad application of the Habitats Directive and the SEA Directive, in particular with regard to appropriate assessment procedure concerning logging activities in Natura 2000 areas As an example of a good practice, Estonia included restoration of 10 000 ha of mire habitats by 2020 in tuts nature conservation development plan. This was implemented by the action plan for protected mires. The restoration programme has been carried out with different funding sources,the most prominent being the EU Cohesion Fund and LIFE project “Conservation and Restoration of Mire Habitats” . The programme helped to halt the degradation of wetlands affected by drainage and restored some former peat extraction sites. Bringing nature back to agricultural land and restoring soil ecosystems Agricultural land The Biodiversity Strategy works in tandem with the new Farm to Fork Strategy and the new Common Agricultural Policy (CAP) to support and achieve the transition to fully sustainable agriculture. The Biodiversity and Farm to Fork strategies have set four important targets for 2030: - 50% reduction of the overall use of – and risk from – chemical pesticides, - 50% reduction of the use of more hazardous pesticides, - 50% reduction of losses of nutrients from fertilisers while ensuring there is no deterioration of soil fertility (which will result in 20% the reduction of the use of fertilisers), - bring back at least 10% of agricultural area under high-diversity landscape features and increasing areas under organic farming to at least 25%. As shown in the Figure 10, Estonia, with an estimated 22.41% of it surface area under organic farming is among the EU leaders - second only to Austria - and far above the EU average of 9.07% (2020 data, Eurostat). This is not far from the EU 2030 target of 25%.

Figure 10: Share of total utilised agricultural area occupied by organic farming per Member State, 2020 ’s utilised agricultural area amounts to 1 Mha, representing 23% of the total land area. As described in the Commission analysis of Estonia’s CAP strategic plan, an above-average proportion of Estonia’s farmland is considered to be intensive and steps to improve nutrient management are important. The Farmland Bird Index was at 59 in 2019 , having fallen sharply from a value of 102 in 2007. This is below the EU-27 average of 75. The trend has been confirmed by a marked decline in the breeding population of the skylark – a key indicator species in Estonia as in many EU countries. As mentioned above, the conservation status of grassland habitats of EU interest affected by agriculture is deteriorating with only 8% of them in favourable status. There is concern that the presence of permanent grassland is being eroded and where grassland is still in place, noted threats include cultivation and fertilisation. Biodiversity and ecosystems could benefit from improvements to overall CAP support for the management of semi-natural grasslands, and from efforts to re-introduce landscape features in areas where they have been lost.



Soil ecosystem Soil is a finite and extremely fragile resource. It is increasingly degrading in the EU. The new EU soil strategy, adopted on 17 November 2021, stresses the importance of soil protection, of sustainable soil management and of restoring degraded soils to achieve the Green Deal objectives as well as land-degradation neutrality by 2030. This entails: (i) preventing further soil degradation; (ii) making sustainable soil management the new normal; (iii) taking action for ecosystem restoration. One factor in the degradation of soil ecosystems is the area of soil that is sealed or artificialised . Despite a reduction in the last decade (land take was over 1 000 km2/year in the EU-28 between 2000 and 2006), land take in the EU-28 still amounted to 539km2/year in 2012-2018. The concept of ‘net land take’ combines land take with the return of land to non-artificial land categories (re-cultivation). While some land was re-cultivated in the EU-28 in 2000-2018, 11 times more land was taken than returned. In Estonia (Figure 11) the land taken per year in the period 2012-2018 can be seen as a measure of an important pressure on nature and biodiversity, land use change, which as the same time constitutes an environmental pressure on people living in urbanised areas. Estonia ranks slightly above the EU average as regards net land take with 93.7 m2/km2 (EU-27 average: 83.8 m2/km2). In 2018, Estonia updated its reporting on land degradation according to the new 'Performance Review and Implementation System (PRAIS30 reporting platform with actions intended to achieve the degradation identified. Figure 11: Land take and re-cultivation in EU27 (m2/km2), 2012-2018 However, Estonia has not yet committed to set Land Degradation Neutrality targets under the United Nations Convention to combat Desertification (UNCCD).

As already stated in the EIR 2019, soil organic matter plays an important role in the carbon cycle and in climate change. Soils are the second largest carbon sink in the world after the oceans. Forests and timber The EU forest strategy for 2030, adopted in July 2021, is part of the ‘Fit for 55’ package. The strategy promotes the many services that forests provide. Its key objective is to ensure healthy, diverse and resilient EU forests that contribute significantly to the strengthened biodiversity and climate ambitions. Forests are important carbon sinks, and conserving them is vital if the EU is to achieve climate neutrality by 2050. Out of the 27% of the EU forest area protected under the Habitats Directive, less than 15% of assessments show a favorable conservation status. In 2018, bad conservation status increased from 27% to 31% in the EU compared to 2015. In Estonia, forests cover 58.44% of the territory and 52 000 ha are covered by primary forests . More than 75% of the assessments of EU-protected forest habitats reveal a bad to poor status . The National Forest Programme post-2020 is under development and will be finalised by the end of 2022. Figure 12: Conservation status of forests protected under the Habitats Directive in EU Member States, 2013-2018 (% assessments) The European Union Timber Regulation (EUTR), prohibits the placing on the EU market of illegally harvested timber. In accordance with the EUTR, EU Member States’ competent authorities must conduct regular checks on operators and traders, and apply penalties for non-compliance. With the amendment of Article 20 of the EUTR, reporting every 2 years has been changed to annual reporting, and covers the calendar year as of 2019. In the period March 2017 - February 2019 , Estonia carried out 825 checks on domestic timber operators. It also carried out five checks on operators importing timber. It is estimated that Estonia had 10 000 operators placing domestic and 450 operators placing imported timber types on the single market over the reporting period. The new Deforestation Regulation will repeal and replace the EUTR, as it will essentially integrate and improve the existing system to check the legality of timber. Invasive alien species (IAS) IAS are a key cause of biodiversity loss in the EU (alongside changes in land and sea use, overexploitation, climate change and pollution). Besides inflicting major damage on nature and the economy, many IAS also facilitate the outbreak and spread of infectious diseases, posing a threat to humans and wildlife. The implementation of the EU Invasive Alien Species Regulation and other relevant legislation must be stepped up. The biodiversity strategy for 2030 aims to manage recognised IAS and decrease the number of ‘red list’ species they threaten by 50%. The core of the Regulation on IAS (the IAS Regulation) is the list of IAS of Union concern. The total number of IAS of Union concern is currently 66, of which: 30 are animal species and 36 are plant species; 41 are primarily terrestrial species, 23 are primarily freshwater species, 1 is a brackish-water species and 1 is a marine species. According to a 2021 report on the review of the application of the IAS Regulation, the implementation of the IAS Regulation is already starting to deliver on its objectives such as a coherent framework for addressing IAS at EU level and increased awareness of the problem of IAS. At the same time, the above report identified some challenges and areas for improvement. Given that the deadlines for implementing the various obligations of the IAS Regulation applied gradually between July 2016 and July 2019, it is premature to draw conclusions on several aspects of the implementation of the IAS Regulation. A 2021 report on the baseline distribution shows that of the 66 species on the Union list, 11 have been observed in the environment in Estonia. The spread can be checked in Figure 13. Figure 13: Number of IAS of EU concern, based on available georeferenced information for Estonia, 2021

2022 priority actions ·Ensure sustainable management of forests, i.a. by adopting the National Forest Programme post-2020. ·Establish site-specific, legally compliant conservation objectives and measures for all SACs. ·To consider the conservation objectives of forest habitats when developing the National Forestry Strategy post-2020. ·To take the necessary measures to ensure that favourable conservation status of the relevant species and habitats is also achieved in privately owned forests. ·To take into consideration the possible impacts of drainage infrastructure on the conservation objectives of protected habitats and species and take any necessary measures to rectify them and not to incentivise them through the CAP. ·To intensify efforts in order to improve management of 60 000 ha of semi-natural grasslands by 2028. ·To improve the system of implementation of Article 6, paragraphs 2, 3 and 4 of the Habitats Directive by amending the Nature Conservation Act in order to ensure a stand alone appropriate assessment procedure. To ensure that an appropriate assessment is carried out according to the requirements of Article 6(3) of the Habitats Directive before granting/renewing permits for forest logging (forest notifications). Marine ecosystems The EU Biodiversity Strategy 2030 aims to substantially reduce the negative impacts on sensitive species and habitats in marine ecosystems and to achieve good environmental status as well as eliminate or reduce the incidental catches of protected, endangered, threatened and sensitive species to a level that allows species recovery and conservation . The Marine Strategy Framework Directive (MSFD) requires Member States to achieve good environmental status (GES) of their marine waters. To that end, Member States have to develop marine strategies for their marine waters, and cooperate with Member States sharing the same marine region or subregion. These marine strategies comprise different steps to be developed and implemented over six-year cycles. Among other obligations, the MSFD requires Member States by 15 October 2018 to define a set of GES characteristics for each descriptor (article 9), and to provide an initial assessment of their marine waters (article 8). The Commission then assesses whether this constitutes an appropriate framework to meet the requirements of the Directive. The Commission assessed Estonia’s 2018 determinations of GES for each MSFD’s 11 descriptors and determined their level of adequacy in relation to the Commission Decision on criteria and methodological standards on GESof marine waters . A good or very good score indicates that the national determinations of GES are well aligned with the requirements of the Commission GES Decision, providing qualitative and quantitative national environmental objectives to be achieved for their marine waters. Figure 14: Level of adequacy of GES determination by Estonia (BAL region) with criteria set under the Commission GES Decision - Article 9 (2018 reporting exercise) Estonia has one marine sub-region, BAL-Baltic Sea. In this marine sub-region, seven out of 11 determinations of GES were assessed as good or very good. The national determination of GES by Estonia is consistent for seven out of 11 descriptors.

The MSFD also requires that Member States make an assessment of the current environmental status of their marine waters in relation to the determination of GES. A good or very good score indicates the Member State has good capabilities for assessing its marine environment in accordance with the requirements set out in the Commission GES Decision. Figure 15: Level of adequacy of initial assessment of Estonia’s marine environment (BAL region) with criteria set under the Commission GES Decision - Article8 (2018 reporting exercise) 9 descriptors out of 11 scored as good or very good. Estonia’s assessment of its marine environment is consistent with the requirements set under the Commission GES Decision for nine out of 11 descriptors. As highlighted in the Commission’s report on the implementation of the MSFD, while regional cooperation has improved since the adoption of the MSFD, more cooperation is needed to attain full regional coherence of the marine strategies, as required by the Directive. Furthermore, in March 2022, the European Commission published a Communication with recommendations for Member States. The Commission assessment highlights that Member States need to step up their efforts to determine the good environmental status and the use of the criteria and methodological standards according to the Commission GES Decision. The above considerations form the basis for the 2022 priority actions. 2022 priority actions ·Ensure regional cooperation with Member States sharing the same marine (sub) region to address predominant pressures. ·Implement the recommendations made by the Commission in the Staff Working Document accompanying the Communication on recommendations per Member States and region on the 2018 updated reports for Articles 8, 9 and 10 of the MSFD. Ecosystem assessment and accounting The EU biodiversity strategy for 2030 calls on Member States to better integrate biodiversity considerations into public and business decision making at all levels and to develop natural capital accounting. The EU needs a better performing biodiversity observation network and more consistent reporting on the condition of ecosystems. An ecosystem assessment is an analysis of the pressures on – and the condition of – terrestrial, freshwater and marine ecosystems and their services. It uses spatially explicit data and a comparable methodology based on European data about the functions of ecosystem assets and the ecosystem services they produce. Ecosystem accounting is built on five core accounts (ecosystem extent, ecosystem condition, physical ecosystem services, monetary ecosystem services and monetary ecosystem assets). These accounts are compiled using indicators of ecosystem assets and the ecosystem services they produce. In 2020, countrywide biophysical mapping and assessment of ecosystem services (MAES) of the main terrestrial ecosystems (>99% of the area of the mainland natural ecosystems) was completed in the course of the national MAES project ELME (Establishment of tools for integrating socioeconomic and climate change data into assessing and forecasting biodiversity status, and ensuring data availability) co-funded by the European Union Cohesion Fund and the national foundation Environmental Investment Centre. As an outcome, maps of the extent, condition of ecosystems and ecosystem services were made publicly available and are being implemented in practice (e.g. in spatial planning). In 2021–2023, countrywide socioeconomic mapping and assessment of terrestrial ecosystem services is conducted under the ELME project. Maps of selected marine ecosystem services created in the ELME project in 2019 are integrated into the maritime spatial planning process. LIFE IP CleanEst project (2019–2028) is developing and implementing methodology for MAES of freshwater ecosystems, initially at regional level (in northeastern Estonia), with potential perspective to upscale to a countrywide level. The initial assessments were completed in 2021.

Eurostat has provided three grants for piloting ecosystem accounts in Estonia. The first results were published in 2019, the latest project lasts from 2021–2023. As Figure 15 shows significant progress has been recorded regarding national MAES actions since January 2016 (this assessment is based on 27 implementation questions and updated every six months). Although there are a multitude of open-source large-scale data sets covering Estonia, compiling those in the countrywide mapping exercise has been challenging. Creating one whole national natural capital accounting system will be the joint effort of different MAES and accounting projects, governmental institutions, scientists and NGOs in the coming years. Uptake of the results by decision makers and other users will be crucial. Figure 16: ESMERALDA MAES Barometer (January 2016 - March 2021)

Progress on ecosystem accounting implementation is assessed on a national scale based on 13 questions (see Figure 17). Figure 17: Ecosystem accounting Barometer 2022 priority action ·Continue supporting the mapping and assessment of ecosystems and their services, and ecosystem accounting development, through appropriate indicators for integrating ecosystem extent, condition and services (including some monetary values) into national accounts; continue supporting the development of national business and biodiversity platforms, including natural capital accounting systems to monitor and value the impact of business on biodiversity. 3. Zero Pollution Clean air EU clean air policies and legislation need to significantly improve air quality in the EU, moving the EU closer to the quality recommended by the WHO and curbing emissions of key air pollutants. Air pollution and its impacts on ecosystems and biodiversity should be further reduced with the long-term aim of not exceeding critical loads and levels. This requires strengthening efforts to reach full compliance with EU clean-air legislation and defining strategic targets and actions for 2030 and beyond. The 2030 zero-pollution action-plan targets are to reduce the health impacts of air pollution by 55% and to reduce the EU ecosystems threatened by air pollution by 25%, compared to 2005. The EU has developed a comprehensive suite of air quality legislation, which establishes health-based air quality standardsand emission reduction commitments per Member State for several air pollutants. Air quality in Estonia is generally good with exceptions. The latest available annual estimates (for 2019) by the European Environment Agency point to about 500 premature deaths (or 5 600 years of life lost (YLL)) attributable to fine particulate matter concentrations , and 30 premature deaths (400 YLL) to ozone concentration .

The emissions of key air pollutants have decreased significantly in Estonia over the last years, while GDP growth continued (see graph). According to the latest projections required under Article 10(2) of the National Emission reduction Commitments Directive (NECD) . Estonia is forecast to reach emission reduction commitments for all air pollutants covered by the Directive for the period 2020 to 2029 and for 2030 onwards. The llatest inventory data submitted by Estonia, prior to review by the Commission, indicate that Estonia is in compliance with the emission reduction commitments for all pollutants in 2020. Estonia submitted its National Air Pollution Control Programme on 29 March 2019. Figure 18: Emission trends of main pollutants/ GDP in Estonia, 2005-2019 Figure 19: PM2.5 and NOx emissions by sector in Estonia, 2019 For the year 2020, no exceedances above the limit values established by the Ambient Air Quality Directive (AAQD) were registered. In 2019 Estonia received a priority action with regard to the National Air Pollution Control Programme (NAPCP). It is maintained given the need to ensure continued and full implementation. 2022 Priority actions ·Take, in the context of the NAPCP, actions towards reducing emissions from the main sources mentioned above. ·Ensure full compliance with the EU air quality standards and maintain downward emissions trends of air pollutants, to reduce adverse air pollution impacts on health and economy, with a view to reach WHO guideline values in the future. Industrial emissions The main objectives of EU policy on industrial emissions are to: (i) protect air, water and soil; (ii) prevent and manage waste; (iii) improve energy and resource efficiency; (iv) clean up contaminated sites.

To achieve this, the EU takes an integrated approach to prevention and control of routine and accidental industrial emissions. The cornerstone of the policy is the Industrial Emissions Directive (IED). As announced in the European Green Deal, the Commission undertook an impact assessment for the revision of the IED in 2021 with a view to tabling a proposal in 2022 . The revision seeks to enhance the directive’s contribution to the zero pollution objective, as well as its consistency with climate, energy and circular economy policies. The below overview of industrial activities regulated by IED is based on data reported to the EU Registry (2018). In Estonia, around 150 industrial installations are required to have a permit based on the IED. The distribution of installations is shown in the figure below. The industrial sectors in Estonia with the most IED installations in 2018 are the intensive rearing of poultry and pigs (35%), followed by the energy sector (16%), the waste management sector including landfills (15%), and the production of chemicals (7%). Figure 20: Number of IED industrial installations per sector in Estonia, 2018 The industrial sectors identified as contributing with the largest emissions to air were the energy sector (for sulphur oxides (SOx), nitrogen oxides (NOx), as well as for arsenic (As), cadmium (Cd), chromium (Cr), copper (Cu), mercury (Hg), nickel (Ni), lead (Pb), zinc (Zn), particulate matter (PM2.5) and dioxins). Other contributing activities were the intensive rearing of poultry or pigs, ammonia (NH3) and surface treatment and pulp, paper and wood products sector. The breakdown is shown in the following graph. Figure 21: Emissions to air from IED sectors and rest of national total air emissions in Estonia, 2018 In 2017, Estonia was the Member State with the highest damage costs aggregated over all pollutant groups normalised against GDP , principally due to emissions from the energy sector, notably oil shale burning. The environmental burdens for industrial emissions to water mainly result from the pulp, paper and wood sector as well as from the energy sector for heavy metals and total organic carbon. The breakdown, based on E-PRTR data, is presented in the figure below. Figure 22: Relative releases to water from industry in Estonia, 2018 The EU approach to enforcement under the IED creates strong rights forenables the public to have access to relevant information and to participate in the permitting process for potentially polluting installations. This empowers the public and NGOs to ensure that permits are appropriately granted and that the conditions of these permits are complied with. As part of environmental inspection, competent authorities undertake site visits at IED installations to take samples and to gather necessary information. According to Article 23(4) of the IED, site visits must be carried out between once a year and once every 3 years, depending on the environmental risks posed by the installations. In 2018, Estonia undertook 59 site visits, the majority of which were to the intensive rearing of poultry and pigs (25%), followed by the energy sector (24%) and waste management sector, including landfills (19%). Figure 23: Number of inspections in IED installations in Estonia in 2018 The development of best-available-technique (BAT) reference documents (BREFs) and BAT conclusions ensures good collaboration between stakeholders and enables better implementation of the IED . Since the last EIR report, the Commission adopted BAT conclusions for Estonia for: (i) waste incineration; (ii) the food, drink and dairy industries; and (iii) surface treatment using organic solvents including the preservation of wood and wood-products with chemicals. The Commission relies on the efforts of national competent authorities to implement the legally binding BAT conclusions and associated BAT emission levels in environmental permits. This should result in considerable and continuous reductions in pollution. In 2019, Estonia received priority actions to review permits to comply with newly adopted BAT conclusions and to strengthen control and enforcement to ensure compliance with BAT conclusions. These actions have been followed up by the Commission through the reporting by Estonia to the EU Registry. No non-compliant permits were reported in 2018. Estonia also received a priority action to address water and air pollution from the power sector and intensive rearing of poultry or pigs. The Commission follows up the latter aspect via the implementaton of the BAT conclusions for intensive rearing of poultry or pigs, which were to be reflected in permits by February 2021. As mentioned above, emissions from the energy sector needs to be addressed by the implementation of the BAT conclusions on large combustion plants by August 2021.

2022 priority action ·Continue addressing the emissions to air from the energy sector and the intensive rearing of poultry and pigs. Major industrial accidents prevention – SEVESO The main objectives of EU policy on the prevention of major industrial accidents are to: (i) control major accident hazards involving dangerous substances, especially chemicals; (ii) limit the consequences of such accidents for human health and the environment; (iii) continuously improve prevention, preparedness and response to major accidents. The cornerstone of the policy is Directive 2012/18/EU (the Seveso-III Directive) . The below overview of industrial plants regulated by Seveso-III Directive, (‘Seveso establishments’), is based on data reported to the eSPIRS database (2018) and the Estonia report on the implementation of the Seveso-III Directive for the period 2015-2018 . In Estonia, among the 62 Seveso establishments, 31 are categorised as lower-tier establishments (LTE) and 31 as upper-tier establishments (UTE) – based on the quantity of hazardous substances likely to be present. The UTE are subject to more stringent requirements. The development of the number of Seveso establishments is presented in Figure 24. Figure 24: Number of Seveso establishments in Estonia, 2011, 2014 and 2018 Many Seveso establishments are required to draw up external emergency plans (EEPs). These EEPs are essential to allow proper preparation and effective implementation of the necessary actions to protect the environment and the population should a major industrial accident occur at them. According to Estonia, the EEP is required for 26 UTE. In 2018, 27 UTE had an EEP and 13 of these EEP had been tested over the last three years. The summary is shown in Figure 25. The establishment of EEPs is essential to allow proper preparation and effective implementation of the necessary actions to protect the environment and the population should a major industrial accident nevertheless happen. Figure 25: Situation regarding EEP in Estonia, 2018 The information to the public referred to in Annex V of the Seveso-III Directive – especially about how the public concerned will be warned in the event of a major accident; the appropriate behaviour in the event of a major accident; and the date of the last site visit – are permanently available for 84% of the Seveso establishments in Estonia. The share of UTE for which information on safety measures and requisite behaviours were actively made available to the public over the last years are presented in Figure 26. This is an important provision of the Seveso-III Directive as public awarness of this information may reduce the consequences of a major industrial accident.

Figure 26: Share of UTE for which information on safety measures and requisite behaviours were actively made available to the public in Estonia, 2011, 2014 and 2018 Estonia has some issues related to transposition of the Seveso III Directive which are the subject og the infringement case. Estonia has incorrectly transposed everal provisions of the Directive, ranging from time limits for supplying information to key definitions. 2022 priority action ·Strengthen control and enforcement to ensure compliance with Seveso-III provisions, especially on information to the public and EEP. Noise The Environmental Noise Directive provides for a common approach to avoid, prevent and reduce the harmful effects of exposure to environmental noise, although it does not set noise limits as such. The main instruments it uses in this respect are strategic noise mapping and planning. A relevant 2030 zero pollution action plan target is a reduction by 30% of the share of people chronically disturbed by transport noise compared to 2017. Excessive noise from aircraft, railways and roads is one of the main causes of environmental health‐related issues in the EU. It can cause ischaemic heart disease, stroke, interrupted sleep, cognitive impairment and stress. In Estonia, based on a limited set of data , environmental noise is estimated to cause at least around 60 premature deaths and 200 cases of ischaemic heart disease annually. Moreover, some 11 000 people suffer from disturbed sleep. In Estonia, the overall noise exposure decreased by 3% between 2012 and 2017 based on reported data. On the basis of the latest full set of information that has been analysed, noise mapping of agglomerations, roads and railways is complete. Water quality and management EU legislation and policy requires that the impact of pressures on transitional, coastal and fresh waters (including surface and ground waters) be significantly reduced. Achieving, maintaining or enhancing a good status of water bodies as defined by the Water Framework Directive will ensure that EU citizens benefit from good quality and safe drinking and bathing water. It will further ensure that the nutrient cycle (nitrogen and phosphorus) is managed in a more sustainable and resource-efficient way . Water Framework Directive The Water Framework Directive (WFD) is the cornerstone of EU water policy in the 21st century. The WFD and other water-related directives, set the framework for sustainable and integrated water management, which aims at a high level of protection of water resources, prevention of further deterioration and restoration to good status. By March 2022, all Member States were requested to submit the third generation of River Basin Management Plans (RBMPs) under the WFD. Estonia has not yet adopted and reported the thirdrd RBMPs. When received, the Commission will assess the reported status and progress, checking how the findings identified in the assessment of the second RBMPs have been addressed. The Commission published in December 2021 the 6th Implementation Report, which assesses implementation of the WFD and the Floods Directive . This report includes an assessment of: (i) the implementation of the programmes of measures; and (ii) the new priority substances. The assessment report for Estonia showed that implementation of the measures set out in the programme of measures (PoM) have been implemented to a satisfactory level, especially for groundwater. Out ofthe existing total of 39 groundwater bodies, activities were conducted in 19 groundwater bodies, with 71% of the planned measures implemented and further 3% in process of being implemented. Out of the existing total of 750 surface water bodies, activities were conducted in 395 surface water bodies, with 56% of measures implemented and a further 10% of measures partially completed. For the remaining 34% of the surface water measures and 26% of groundwater measures, no information was available. In conclusion, the available data shows that the planned and implemented measures contribute significantly to reaching the objectives of the WFD in 2021 and 2027. Based on the second RBMPs reporting and data published in 2020 , in Estonia 60.1% of all surface water bodies reach good ecological status (with unknown status 0.1%) and only 9.7% have good chemical status (with unknown 88.3%). For groundwaters, 20.5 % failed to achieve good chemical status and 2.6% are in poor quantitative status. The figure below illustrates the proportion of surface water bodies in Estonia and other European countries that failed to achieve good ecological status. Figure 27: Proportion of surface water bodies (rivers, lakes, transitional and coastal waters) in less than good ecological status per River Basin District

The following figure presents the percentage of surface water bodies in Estonia and other European countries failing to achieve good chemical status. For Estonia the percentage is 2%, if water bodies failing due to substances behaving as ubiquitous PBTs (Persistent, Bio-accumulative, Toxic) are included. Without ubiquitous PBTs, 1% of surface water bodies are failing good chemical status (with unknown 88%). Figure 28: Percentage of surface water bodies not achieving good chemical status Under the IED framework, it should be stressed that Estonia showed a significant decrease over the last decade (15.4%) in industrial releases of heavy metals like Cd, Hg, Ni, Pb and 55.3% in TOC (Total Organic Carbon) to water . The total water abstracted annually (corresponding to the 2019 baseline) in Estonia from surface and groundwater sources is 2.479.89 hm3 (EEA, 2022). The percentage for water abstraction per sector is 0.20% for agriculture, 2.28% for public water supply, 27.58% for electricity cooling, 2.77% for manufacturing, 60.30% for manufacturing cooling and 6.87% for mining and quarrying, as illustrated in the following figure. In Estonia, water abstractions are not recorded in a separate register. Instead, the relevant data are kept in Keskkonnaregister (Environmental Registry). The registry is updated on the basis of annual self-reporting by the permit holders to the permitting authority. Small abstractions do not require permits in Estonia. Figure 29: Water abstraction per sector in Estonia Recent data are not available for water exploitation index plus in Estonia . It is worth to mention that in Estonia, the Cohesion Fund project ‘Restoration of habitats in Pärnu river basin’, removed seven dams from the river and its tributaries between 2015 and 2021, establishing a 3 000 km network of free‑flowing water. In particular, removing the Sindi dam, located close to the river mouth, made an important contribution to increasing spawning habitats (EEA, Dec 2019). According to 2021 information collected by Dam Removal Europe, the positive results of the removal of the Sindi dam seem to have included a significant improvement of the fish population and caused change in the perceptions of dam removal by being a source of inspiration for future projects in Estonia. Floods Directive As mentioned, the Commission published the sixthth implementation report in December 2021. It includes, amongst others, the review and update of the preliminary flood risk assessments during the second cycle (2016-2021). The assessment report showed that Estonia has developed a national spatial data portal that presents clear information on flood risk areas and receptors and allows the general public and other users to select and download information on a variety of scales. However, it is not clear how future floods have been assessed; a general statement is made that these are the same as past floods, regarding locations, area, significance and impacts. A more detailed description of the methodology applied would benefit the reliability of the assessment results. The descriptive evaluation could be more quantitative, as well. Estonia has not yet reported on the second generation of Flood Risk Management Plans (FRMPs) under the Floods Directive. The European Commission will assess the progress since the adoption of the first FRMPs and publish a new report, asin 2019. Drinking Water Directive On the Drinking Water Directive , no new assessment of the quality of Drinking Water is available since the 2019 EIR. The quality of drinking water in Estonia has not been indicated as an area of concern. The recast Drinking Water Directive entered into force on 12 January 2021, and Member States have until 12 January 2023 to transpose it into their national legal system. Estonia will have to comply with the reviewed quality standards. Bathing Water Directive Regarding the Bathing Water Directive, Figure 31 shows that in 2020, out of the 64 Estonian bathing waters sites, 62.5% were of excellent quality, . Detailed information on Estonian bathing waters is available from a national portal and via an interactive map viewer of the European Environment Agency . Figure 30: Bathing water quality in Europe in the 2020 season

Figure 31: Bathing water quality 2017-2020

Nitrates Directive The latest Commission report on the implementation of the Nitrates Directive , referring to the period 2016-2019 , warns that nitrates are still causing harmful pollution to water in the EU. Excessive nitrates in water are harmful to both human health and ecosystems, causing oxygen depletion and eutrophication. Where national authorities and farmers have cleaned up waters, it has had a positive impact on drinking water supply and biodiversity, and on the sectors such as fisheries and tourism that depend on them. Nevertheless, excessive fertilisation remains a problem in many parts of the EU. Compliance with the Nitrates Directive is a prerequisite for reaching the objective of reducing nutrient losses by at least 50% by 2030 enshrined in the EU Biodiversity and Farm to Fork Strategies. It calls for rapid action, which should start with the full enforcement of the related legislation. In Estonia, the surplus of nitrogen is low and there is a deficit of phosphorus. There is a well-developed network of monitoring stations and the groundwater quality is generally good. However, a high number of surface waters are eutrophic, in and outside nitrate vulnerable zones and for both inland and marine waters. Estonia is one of seven Member States that have hotspots where nitrates pollution should be urgently diminished. Urban Waste Water Treatment Directive In Estonia the compliance rate with the Urban Waste Water Treatment Directive (UWWTD) is 99% which is higher than the EU average in 2018. Estonia has met the targets for collection of urban waste water and biological treatment of urban waste water. Further efforts are needed to provide biological treatment with nitrogen and phosphorus removal to additional 0.01 million population equivalent (p.e.) of urban waste water (0.8%). According to a Commission’s report, in line with the UWWTD, Estonia is required to provide in urban areas: ·Collection of 1.5 million p.e. of waste water; ·Biological treatment to 1.4 million p.e. of waste water; ·Biological treatment with nitrogen removal to 1.3 million p.e. of waste water. Estonia reuses 91.9 % of waste water sludge in agriculture and landfills the remaining 8.1 %. The main pollution sources to coastal waters is diffuse pollution (agriculture, forestry, also cross-border influence from the open sea) and point sources. Discharges from storm water overflows are not reported as significant pressures. Figure 32: Proportion of urban waste water that meets all requirements of the UWWTD (collection, biological treatment, biological treatment with nitrogen and/or phosphorus removal) in compliant urban areas of the UWWTD (‘compliance rate’), 2018 Since the 2019 priority actions were not fully implemented, they are reproposed. An action stemming from the Estonia-specific annex to the above-mentioned Commission report on the implementation of the Nitrates Directive has been added. 2022 priority actions ·Assess new physical modifications of water bodies in line with Article 4(7) of the WFD. In these assessments, alternative options and adequate mitigation measures have to be considered.

·Continue current efforts to tackle agricultural and non-agricultural pollution in water bodies and continue efforts to establish ecological flows for all relevant water bodies. ·Improve the coordinated implementation between water, marine and nature policies. ·Complete implementation of the Urban Waste Water Treatment Directive for all agglomerations, by building up the necessary infrastructure. ·Revise the designation of nitrate vulnerable zones under the Nitrates Directive to include areas that drain into waters that are eutrophic and revise the action programme in particular to reduce and prevent eutrophication of inland and marine surface waters where the agricultural pressure is significant. Chemicals The EU seeks to ensure that chemicals are produced and used in a way that minimises any significant adverse effects on human health and the environment. In October 2020, the Commission published its chemicals strategy for sustainability – ‘Towards a Toxic-Free Environment’ , which led to some systemic changes in EU chemicals legislation. The strategy is part of the EU’s zero pollution ambition – a key commitment of the European Green Deal. The EU’s chemicals legislation provides baseline protection for human health and the environment. It also ensures stability and predictability for businesses operating within the internal market. Since 2007, the Commission has gathered information on the enforcement of the Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (‘the REACH Regulation’) and the Regulation on Classification, Labelling and Packaging (‘CLP Regulation’). In December 2020, the Commission assessed the Member States’ reports on the implementation and enforcement of these Regulations, in line with Article 117(1) of the REACH Regulation and Article 46(2) of the CLP Regulation. According to the latest available data, national enforcement structures have not changed much in recent years. However, it is apparent from this report that there are many disparities in the implementation of the REACH and CLP Regulations, notably in the area of law enforcement. Recorded compliance levels in Member States seem to be quite stable over time, but with a slight worsening trend, which is likely due to: (i) enforcement authorities being more effective in detecting non-compliant products/companies; and (ii) more non-compliant products being put on the EU market. In August 2021, the Commission published a measurable assessment of the enforcement of the two main EU Regulations on chemicals (the REACH Regulation and the CLP Regulation) using a set of indicators on different aspects of enforcement. Responsibility for checking compliance with REACH in Estonia lies with the following authorities: ·Health Board ·Environmental Board ·Estonian Rescue Board ·Consumer Protection and Technical Regulatory Authority ·Labour Inspectorate ·Tax and Customs Board Estonia has devised and partly implemented both REACH and CLP enforcement strategies . They include: ·risk-based prioritisation: focus on high-risk companies and reactive inspections and ·campaigns focused on new requirements and issues most frequently raised with the helpdesk. As a rule, all infringements of REACH are classed as serious or very serious environmental administrative offences. If the infringement is sufficiently serious, the competent authority may decide to impose further penalties in addition to a fine. That authority may also, where necessary, order the provisional seizure of assets and documents.

There were 2 040 REACH checks in Estonia in the reporting period. Most of them were proactive (inspections), rather than reactive/non-routine (i.e. investigations in response to complaints, accidents and referrals). It is worth emphasising that non-compliance cases formed a small percentage of the total number of checks . Figure 33: Percentage (%) of non-compliance cases out of the total number of REACH and CLP controls during 2019 per Member State and compared to the EU average 2022 priority actions ·Upgrade the implementation and enforcement of administrative capacities towards a zero tolerance to non-compliances. ·Fully implement the REACH and CLP enforcement strategies. 4. Climate Action In line with the Paris Agreement and as part of the European Green Deal, the European Climate Law sets the EU target of reaching climate neutrality by 2050 and reducing greenhouse gas (GHG) emissions by 55% by 2030 compared to 1990. The law also limits the contribution that carbon removals can make towards emission reductions in 2030 to ensure a sufficient mitigation effort. The EU and its Member States submitted updated nationally determined contribution (NDC) to the UNFCCC in December 2020. The EU is working across all sectors and policies to cut GHG emissions and make the transition to a climate-neutral and sustainable economy, as well as addressing the unavoidable consequences of climate change. EU climate legislation incentivises emissions reductions from power generation, industry, transport, the maritime sector and fluorinated gases (F-gases) used in products. For road transport, EU legislation requires the GHG intensity of vehicle fuels to be cut by 6% by 2020 compared to 2010142 and sets binding GHG emission standards for different vehicle categories143. Under the F-gas Regulation, the EU’s F-gas emissions will be cut by two thirds by 2030 compared with 2014 levels. From 2021, emissions and removals of GHGs from LULUCF have been included in the EU emission-reduction efforts. The EU adaptation policy is an integral part of the European Green Deal. From 2021, Member States are required to report on their national adaptation policies144, as the EU Climate Law recognises adaptation as a key component of the long-term global response to climate change. Member States will be required to adopt national strategies, and the EU will regularly assess progress as part of its overall governance on climate action. The updated EU adaptation strategy, published in February 2021, sets out how the EU can adapt to the unavoidable impacts of climate change and become climate resilient by 2050.

Key national climate policies and strategies Estonia has an integrated National Energy and Climate Plan (NECP) for the years 2021-2030. The work builds on long-term energy and climate plans, and is also consistent with the Low-Carbon Strategy until 2050. Estonia’she long-term target is to reduce the emission of greenhouse gases by 2050 by 80 % in comparison with the emission levels of 1990. As the country moves towards this target, emissions will be reduced by about 70 % by 2030 and by 72 % by 2040 in comparison with the 1990 emission levels. In May 2022, the government adopted the ’Estonia 2035’ strategy setting out five long-term strategic goals, including climate neutrality by 2050. Estonia remains a GHG-intensive economy due to its reliance on oil shale. It is on the right track towards a significant reduction in greenhouse gas emissions, whereas additional efforts are needed in specific sectors. In its RRP, Estonia allocates over 42% of the budget to climate measures, including investments in clean energy production, energy efficiency and, sustainable transport. The National Adaptation Strategy was adopted in April 2017 to increase the readiness and capacity of the state, the regional and local level to adapt to the effects of climate change. Between 1990 and 2020, economy wide greenhouse gas emissions in Estonia decreased by 65%. However, it is important to contribute to renewable energy solutions to cut greenhouse gas emissions. Figure 34: Total greenhouse gas emissions (incl. international aviation) in Estonia, 1990-2020 While declining, emissions in the energy sector account for the largest share of the greenhouse gas emissions in Estonia and are mostly covered by the EU ETS. Although the share of renewable energy sources has increased in recent years, energy and heat are still predominantly produced from fossil fuels; i.e. oil shale and gas. Consequently, Estonia remains one of the most carbon intensive economy in the EU. Effort sharing For emissions not covered by the EU’s emissions trading scheme (ETS), Member States have binding national targets under the Effort Sharing legislation. Under EU legislation, Estonia has a target not to increase greenhouse gas emissions in the non-ETS sectors (buildings, road and domestic maritime transport, agriculture, waste and small industries) by more than 11% by 2020 and reduce them by 13% by 2030, compared to 2005 (Figure 36). The country’s non-ETS emissions in 2020 were lower than its 2020 target. Over the last few years, emissions have decreased in industry, and the domestic transport sectors. In its National Energy and Climate Plan, Estonia intends to achieve higher reductions than its current non-ETS target for 2030 of -13%. Estonia will need to put in place more climate mitigation measures to reach the 2030 NECP target. Figure 35: Emissions and targets under the Effort Sharing Decision/ Effort Sharing Regulation in Estonia, 2020 and 2030 as percentage change from 2005 Figure 36: Emissions, annual emission allocations (AEAs) and accumulated surplus/ deficit of AEAs under the Effort Sharing Decision in Estonia, 2013-2020 Key sectoral developments In road transport, the GHG intensity of vehicle fuels in Estonia decreased by 1,8% from 2010 to 2019. The country needs to act swiftly to meet the current reduction target by 6%. There are several types of action that Member States can take in this regard, for example, further expanding the use of electricity in road transport, supporting the use of biofuels, in particular advanced biofuels, incentivizing the development and deployment of renewable fuels of non-biological origin and reducing upstream emissions before refining processes. Road transport in Estonia represented 17% of the total greenhouse gas emissions in 2020. Emissions have increased by 9% compared to 2005. To reach the climate targets, the building stock needs to be renovated.

Emissions from agriculture, have increased. Figure 37: Greenhouse gas emissions by sector in Estonia – historical emissions 1990-2020, projections 2021-2030 The Land Use, Land Use Change and Forestry (LULUCF) sector, reported decreasing net removals over recent years and has switched from net removals in 2019 to net emissions in 2020. Furthermore, Estonia projects a further decrease of net removals by 2030 due to the existing age structure of its forests and extensive forest cover. A six-fold decrease of the LULUCF carbon sink has been forecasted by 2030, as announced in the Estonian National Energy and Climate Plan. Improvements are needed in this regard as removals by sinks in the LULUCF sector have decreased from 2013 to 2019 (Fig. 38). Special attention should be brought to this sector to allow a sustainable use of biomass and ensure the functioning of the forest sink. Figure 38: Reported and accounted emissions and removals from LULUCF in Estonia Use of revenues from the auctioning of EU ETS allowances The total revenues from the auctioning of emission allowances under the EU ETS over the years 2012-2021 were nearly EUR 784 million. In 2020, 100 % of the auctioning revenues were spent on climate and energy purposes. In Estonia, 50% of auctioning revenues are earmarked and directed through the four-year State Budget Strategy and spent on climate and energy projects and measures, which may take multiple years. Unspent revenues are carried over to later years and always used for climate and energy projects. Around 48% of the auctioning revenues earmarked for these measures have been covered with sub-decisions for more concrete climate and energy actions. The remaining 50% go to the general budget, which, among others, goes to climate and energy investments. 2022 priority actions ·Further reduce energy consumption, particularly in buildings and transport. ·Prepare transitioning on climate-neutral energy system (energy efficiency, continued phasing out of oil shale activities, generation of climate-neutral electricity, heating and cooling). ·Increase uptake of renewable energy. Estonia has great potential for offshore wind farms in the Nordic-Baltic region, and is exploring the development of green hydrogen production. ·Ensure sustainable use of biomass. This would improve the functioning of the LULUCF sink. Part II: Enabling Framework: Implementation Tools 5. Financing Environmental investment needs in the European Union

Financing environmental measures is essential for their success. Although most financing comes from national sources, various EU funds contribute significantly, helping to close the financing gaps. Post-2020, environmental implementation will also be supported by the EU’s COVID-19 Recovery Fund (via the RRF) and the ‘do no significant harm’ principle which runs across the EU budget. The renewed commitments made at COP26 (Glasgow, October-November 2021) and the Biodiversity Convention (April-May 2022)152 will also be reflected in the EU budget. Overall environmental investment gaps (EU-27) The EU’s investment needs for the green transition cover a range of interlinked areas. The additional investment needs over the baselines (i.e. the gap between what is needed and what is forecast to be invested if no additional action is taken) for climate, energy and transport were estimated in 2021 at EUR 390 billion a year (EU-27 with a further EUR 130 billion a year to deliver the EU's core environmental objectives . The costs of climate-change adaptation can also be significant, and are estimated to reach a total of EUR 35-62 billion (narrower scope) or EUR 158-518 billion (wider scope) per year . Those investment needs reflect the implementation objectives to 2020 and to 2030 (except for climate-change adaptation, the costs of which are expected to last over a longer time horizon). A preliminary update of the EU’s core environmental investment gap is provided in Table 1 . Almost 40% of the environmental-investment needs relate to dealing with pollution, which accounts for nearly two thirds of the total gap if combined with water management. The investment gap in circular economy and waste is estimated to be between EUR 13-28 billion a year, depending on levels of circularity implemented. The annual biodiversity financing gap is estimated at around EUR 20 billion. Table 1: Estimated breakdown of the EU’s environmental investment gaps, by environmental objective, 2021-2030 per year Environmental objective Estimated investment gap (EU-27, p.a.) EUR % Pollution prevention & control 42.8 39% Water management & industries 26.6 24% Circular economy & waste 13.0 12% Biodiversity & ecosystems 21.5 20% R & D & I and other 6.2 6% Total 110.1 100% Environmental investment needs in Estonia Investments in the circular economy is a priority in Estonia, followed by sustainable water services and nature and biodiversity investments. The following environmental investment needs have been identified by sector. Pollution prevention & control The EU’s First Clean Air Outlook under the Clean Air Programme estimated that the total air pollution control costs for Estonia to reach the NECD emission reduction requirements (ERRs) by 2030 amount to EUR 220 million per year, including, EUR 117 million for capital investment (assuming the 2030 climate and energy targets are achieved). The second EU’s Clean Air Outlook that the EU would largely achieve the reductions of air pollutant emissions that correspond to the obligations under the NEC Directive for 2030 if: (i) all relevant legislation adopted up to 2018 is implemented (including all air-pollution legislation and the 2030 climate and energy targets set in 2018); and (ii) Member States also implemented the measures announced in their national air-pollution-control programmes. The only exception is for ammonia for 15 Member States, including Estonia. Water management According to the OECD study on Financing a Water Secure Future (2022), the remain gaps in public water supply and sewerage treatment, despite large investments over the past decade. Wastewater is still not collected in the required quantities and its treatment does not always meet requirements, especially in rural areas. According to Estonia’s current plan, after 2023, water companies serving larger communities will need to be financially self-sustainable and cover the investment needs with water tariffs and loans. The government is supporting this process with improved financing support for regional companies. EU funding has provided a significant share of past public funding over the past decade. Up to 2030, the additional cumulative investment need for Estonia over the baseline levels was estimated at EUR 361 million (around 36 million per year), with around 90% of that relating to wastewater . Further, pre-treatment standards for industrial wastewater discharges into municipal sewerage systems are outdated and do not cover many important hazardous substances. Whilst Estonia reported some measures as part of the River Basin Management Plan under the Water Framework Directive completed for all river basin districts , the firstt programme of measures has not been fully implemented. A lack of adequate finance is likely to continue to hinder the implementation of the second (2015-2021) and the thirds (2021-2027) programme of measures. In Estonia, the "Water Infrastructure Investment Plan" in 2019 estimated that 1.1 billion Euro should be invested in the water management infrastructure in the next 12 years. In order to maintain or achieve compliance with the requirements of the UWWD and DWD, around EUR 893 million will be required, out of which EUR 434 million in the next four years and EUR 459 million in the next 5-12 years. Moreover, the recent 6th Water Framework Directive and Floods Directive Implementation Report and the financial - economic study accompanying it, are also a relevant source of information in this domain. Waste & circular economy According to a Commission study, to meet the recycling targets for municipal waste and packaging waste, Estonia still needs to invest an additional EUR 64 million (around 9 million per year) over the baselines between 2021-2027 in collection, recycling reprocessors, biowaste treatment, waste sorting facilities and digitalising waste registries. In addition, the cost of replacing biowaste treatment facilities is estimated at EUR 2.3 million between 2021 and 2027 (EUR 0.3 million per year). This does not include investment necessary for other key waste streams (plastics, textiles, furniture) or to unlock a higher uptake of circularity and waste prevention across the economy. Biodiversity & ecosystems

Prioritised action frameworks (PAFs) adopted by the Member States according to Article 8 of the Habitats Directive present: (i) the conservation priorities for the Natura 2000 network and its supporting green infrastructure; (ii) the costs of these conservation priorities; and (iii) planned funding sources for biodiversity and ecosystems in the period corresponding to the current multiannual financial framework (MFF) for 2021-2027. The recently submitted PAF for Estonia shows that nature protection costs (including Natura 2000) in 2021-2027 are EUR 304.5 million. This represents an annual cost of about EUR 43.5 million, of which EUR 26.2 million are one off costs. More efforts may be necessary to cover the increased ambitions of the EU Biodiversity Strategy 2030 and any relevant financing gaps on protection and restoration. EU environmental funding 2014-2020 The MFF for 2014-2020 allocated almost EUR 960 billion (in commitments, 2011 prices) for the EU to spend over this period. The commitment in this 2014-2020 MMF to the green transition included a 20% climate spending target. It also included funding opportunities for the environment, in particular under the European Structural and Investment (ESI) Funds . The 2014-2020 MFF budget was subsequently topped up with over EUR 50 billion (in current prices) from the REACT-EU programme for cohesion-policy action against COVID-19 . Estonia received EUR 4.9 billion from the ESI Funds over 2014-2020 to invest in job creation and a sustainable and healthy European economy and environment. The planned direct environmental investment amounted to EUR 349.8 million with a further EUR 243.6 million identified as indirect environmental investment value, totalling EUR 593.5 million. Figure 40 shows an overview of (planned) individual ESI Funds earmarked for Estonia (EU amounts, without national amounts). Figure 39: ESI Funds allocated to Estonia, including environmental investments, 2014-2020 Table 2: Direct and indirect environmental investments under the ESI Funds in Estonia, 2014-2020 Instrument Allocations for the environment (EUR million) Under Cohesion policy (ERDF + CF) Direct environmental investments water biodiversity and nature land rehabilitation climate and risk management Indirect environmental investments renewable energy energy efficiency other energy sustainable transport sustainable tourism business development, R&I 558.5 321.4 129.8 53.2 50.2 88.1 237.1 4.1 76.9 24.2 95.4 3.0 33.6 Under EAFRD/rural development Direct environmental investments water climate and risk management Indirect environmental investments renewable energy energy efficiency 11.7 5.2 0.6 4.6 6.4 3.7 2.8 Under EMFF Direct environmental investments Environment protection & resource efficiency Direct environmental investments business development, R&I 23.3 23.2 23.2 0.1 0.1 Under ESI Funds total Direct environmental investments Indirect environmental investments 593.5 349.8 243.6 Funding for the environment from the ESI Funds has also been supplemented by other EU funding programmes available to all Member States such as the LIFE programme, Horizon 2020, or loans from the European Investment Bank (EIB). The LIFE programme is entirely dedicated to environmental and climate objectives. It finances best-practice actions for green solutions to be deployed. They add up to an estimated total of EUR 636 million of EU environmental financing for Estonia in 2014-2020. In the period 2014-2020, Estonia received EU support for seven LIFE projects (for nature and environment), with EUR 32.0 million from the LIFE programme (out of 1 028 EU27 LIFE projects with a total EU contribution of EUR 1.74 billion). In 2014-2020, about EUR 10.5 million were allocated to Estonia under Horizon 2020 for the environment (in particular for earth observation, reseach and innovation), with 3.8% for the environment out of Estonia’s total allocation. From the European Fund for Strategic Investments (EFSI) Estonia received a total of EUR 58.0 million in financing, without projects dedicated to the environment. Estonia did not receive any EIB loans for the environment, despite the overall EUR 1.4 billion EIB lending to Estonia in the period. The country ranks24th by size of total EIB lending. In 2020, the EIB provided EUR 24.2 billion in funding across Europe to fight climate change, 37% of its total financing. It also provided EUR 1.8 billion (3% of its financing) for broader environmental lending . EU environmental funding 2021-2027 The 2020 European Green Deal investment plan calls for EUR 1 trillion in green investments (public and private) to be made across the EU by 2030. The 2021-2027 MFF and the NextGenerationEU spending programme will mobilise EUR 2.018 trillion (in current prices) to support the recovery from COVID-19 and the EU’s long-term priorities, including environmental protection . Following the EU Green Deal’s pledge to ‘do no harm’ and the Interinstitutional Agreement on the 2021-2027 MFF , 30% of the EU budget in 2021-2027 will support climate efforts, while biodiversity will receive 7.5% of the EU budget as of 2024 and 10% as of 2026. Sustainable finance significantly increases transparency on environmental sustainability (a goal promoted by the EU Taxonomy) . It also strengthens non-financial reporting requirements and facilitates the issuance of green bonds (by developing the EU Green Bond Standard) . Reinforced by the renewed sustainable-finance strategy (2020) , sustainable finance will increase investment flows to climate and the environment. The new strategy on adaptation to climate change can help to address many risks from uninsured climate-related events . The EIB will align 50% of its lending for climate and environment projects by 2025 , with an EUR 250 billion contribution to the Green Deal investment plan by 2027. Table 3 makes an overview of the EU funds earmarked specifically to Estonia for the 2021-2027 period. The funds allocated for individual countries are also supplemented by other EU funding available to all Member States. Table 3: Key EU funds allocated to Estonia (current prices), 2021-2027 Instrument Country funding allocation (million EUR) Cohesion policy ERDF CF ESF+ ETC (ERDF) Total: 1 692.6 820.2 502.6 58.1 Just Transition Fund 353.9 EAFRD/rural development under CAP Strategic Plans 2023-2027 440.1 European Maritime, Fisheries and Aquaculture Fund (EMFAF) 97.4 RRF 2021 – 2026 969.3 (grants)

In Estonia, the programming for the majority of EU funds (cohesion policy funds, EAFRD and EMFAF) is ongoing. However, the negotiations have been concluded under the RRF. Estonia’s recovery and resilience plan consists of 25 investments and 16 reforms. They will be supported by EUR 969.3 million in grants. 41.5 % of the plan will support climate objectives. The plan has a focus on circular economy, especially on its business angle, but lacks other environmental investments, notably biodiversity measures. The plan is well aligned with the overarching national strategy “Estonia 2035”. The main investments in the recovery plan are linked to the green and digital transitions. The plan will support a total of EUR 220 million in the green transition of businesses through a dedicated Green Fund, the deployment of innovative and resource-efficient green technologies, the valorisation of bio-resources, the uptake of integrated hydrogen technologies, the development of green skills and significant investments in transport decarbonisation, notably supporting the shift to rail transport. It includes circular economy reform; one of the milestones is the adoption of the circular economy action plan . Figure 40: Climate expenditure in RRP, 2021-2026 Under NextGenerationEU, the Commission will issue up to EUR 250 billion of EU green bonds (one third of all bonds issued under NextGenerationEU) until 2026 that will comply with the general spirit of the ‘do no significant harm’ principle. However, this EUR 250 billion in green bonds will not be subject to the currently developed delegated acts related to the EU Taxonomy and will not fully align with the proposed EU standard for green bonds. In addition to EU funds earmarked specifically for Estonia in the 2021-2027 period, there are also funding programmes that can been accessed at the EU level which are open to all Member States. These include the LIFE programme (EUR 5.4 billion), Horizon Europe (EUR 95.5 billion) , the Connecting Europe Facility (EUR 33.7 billion) or the funds to be mobilised via the InvestEU programme. These other sources of funding will also support the green transition, including research and innovation activities for environmental protection (Horizon Europe) , clean transport and energy (the Connecting Europe Facility) or sustainable infrastructure (InvestEU) . National environmental protection expenditure Total national environmental protection expenditure (including all relevant current and capital expenditure) in the EU-27 was EUR 272.6 billion in 2020, representing 2% of the EU27 GDP . This percentage has remained quite stable over time. Although the largest absolute amounts of expenditure are concentrated in a few countries, most countries spend 1-2% of their GDP on environmental protection, with Belgium and Austria spending the greatest share (both direct more than 3% of their GDP on environmental expenditure). Of this spending, the EU-27’s capital expenditure on environmental protection (i.e. investment) amounted to EUR 54.5 billion in 2020, representing around 0.4% of EU-27 GDP. Most Member States invested 0.2-0.5% of their GDP in environmental protection, whereas Estonia dedicated 0.7%. In 2014-2020, this amounted to around EUR 376 billion of environmental investment in the EU27, and to EUR 1.23 billion in Estonia. Figure 41: Environmental protection investments in the EU-27 (EUR million and % of GDP), 2018

By institutional sector, around a quarter of Estonia’s environmental protection investments (capital expenditure) came fromgeneral government, while a further 41% came from specialist producers (of environmental protection services, e.g. waste and water companies) and 35% from traditional industry (or business) sector that normally pursue environmental activities as ancillary to their main activities. At EU level, 37% comes from governments, 33% from specialist producers and 30% from industry (business). Figure 42: EU-27 Member States' environmental protection investments (Capex) by institutional sectors (Total economy = 100%), 2018

The breakdown of investment by environmental topic is only partially available, at the level of institutional sectors (rather than at the level of economy), due to different reporting standards. At Estonia’s general government level, 78% of the environmental protection investments went to the protection of water and soil, with 17% to R&D and 9% to biodiversity. With regard to the country’s specialist producers, 39% of the relevant investments were in wastewater, 23% in waste mangement and 23% in biodiversity, 10% in water and soil protection and 4% in air protection. As regards the business sector, three quarters of the relevant investments went to the protection of air, followed by wastewater and waste management with 10% each. In 2020, the total annual issuance of European green bonds (including some non-EU countries) was EUR 137 billion , up from EUR 105 billion in 2019. Looking only at EU-27 Member States, green-bond issuance in 2020 was EUR 124 billion. In 2014-2020, 83% of the green bonds issued by European countries served objectives in energy, buildings or transport, while 8% supported water and waste, with a further 6% supporting sustainable land use, with links to ecosystem conservation and restoration. These data are based on the climate-bonds taxonomy, which is broadly similar to the EU Taxonomy .

Figure 43: Annual EU green bond issuance in 2020 (EUR billion) Green budget tools Green taxation and tax reform Estonia’s revenue from environmentally-related taxes in 2020 was EUR 657.4 million, as shown in Figure 44, slightly above the EU-average. Within this, energy taxation represents the highest share with 91.5% in 2020. Pollution/resources tax is high, 6.8%, almost double the EU average. On the other hand, transport tax is extremely low, only 1.7%, compared to 19% at EU level, which may not provide real incentivisation for greener vehicules. Figure 44: Environmental taxes in the EU27, 2020 The 2019 European Green Deal underlines that well-designed tax reforms can boost economic growth and resilience, foster a fairer society, and promote a just transition. Tax reforms can contribute to this by sending the right price signals and incentives to economic actors. The Green Deal creates the context for broad-based tax reforms, the removal of fossil-fuel subsidies, and a shift in the tax burden from labour to pollution, while simultaneously taking account of social considerations. The Green Deal promotes the ‘polluter pays principle’, which stipulates that polluters should bear the cost of measures to prevent,