COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Estonia Accompanying the document Proposal for a COUNCIL IMPLEMENTING DECISION on the approval of the assessment of the recovery and resilience plan for Estonia
Date: 2021-10-05
Institutions: European Commission, Secretariat-General
Subjects: EU aid, Estonia, coronavirus disease, economic and social cohesion, economic recovery, economic reform, epidemic, investment, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 5.10.2021  SWD(2021) 285 final  COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Estonia Accompanying the document Proposal for a COUNCIL IMPLEMENTING DECISION on the approval of the assessment of the recovery and resilience plan for Estonia {COM(2021) 625 final}  
 
 
Table of contents 
1. 

Executive summary ............................................................................................................................... 2 

2.  Recovery and resilience challenges: scene-setter ................................................................................ 6 

2.1.  Macroeconomic outlook and developments since the 2020 country report ............................... 6 

2.2. 
Challenges related to sustainable growth, cohesion, resilience and policies for the next 
generation ................................................................................................................................................. 8 

2.3. 

Challenges related to the green and digital transition ............................................................... 10 

2.3.1 Green dimension ........................................................................................................................ 10 

2.3.2 Digital dimension ....................................................................................................................... 14 

3.  Objectives, structure and governance of the plan.............................................................................. 18 

3.1.  Overall strategy of the plan ........................................................................................................ 18 

3.2. 

Implementation aspects of the plan ........................................................................................... 21 

4. 

Summary of the assessment of the plan ............................................................................................ 25 

4.1. 

Comprehensive and adequately balanced response to the economic and social situation ...... 25 

4.2. 

Link with country-specific recommendations and the European Semester ............................... 31 

4.3.  Growth potential, job creation, economic, institutional, and social resilience, European Pillar of 
Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence ...... 36 

4.4. 

The principle of ‘do no significant harm’ .................................................................................... 41 

4.5.  Green transition .......................................................................................................................... 42 

4.6. 

Digital transition .......................................................................................................................... 46 

4.7. 

Lasting impact of the plan ........................................................................................................... 49 

4.8.  Milestones, targets, monitoring and implementation................................................................ 50 

4.9. 

Costing ........................................................................................................................................ 52 

4.10.  Controls and audit ....................................................................................................................... 54 

4.11.  Coherence ................................................................................................................................... 56 

5.  Annex: Climate and Digital contribution of the measures of the Estonian Recovery and Resilience 
Plan   ............................................................................................................................................................ 59 

1 

 
 
 
 
 
1.  EXECUTIVE SUMMARY 

Estonia’s  economy  has  withstood  the  COVID-19  crisis  relatively  well  and  is  expected  to 
rebound strongly. Real GDP contracted by 2.9% in 2020, significantly less than the EU average 
(6.0%).  According  to  the  Commission  2021  summer  forecast,  economic  growth  is  expected  to 
rebound  to  4.9%  in  2021  and  3.8%  in  2022,  driven  by  dynamic  developments  in  private 
consumption and investments. Unemployment increased sizeably from 4.4% of the labour force 
in  2019 to  a projected 7.9% in  2021, due in particular  to  restrictions  related to  the COVID-19 
pandemic, but is expected to decrease following the economic recovery.  

Government support to households and businesses was prompt to counteract the impact of 
the pandemic. In April 2020, Estonia adopted a fiscal policy package of over 2.5% of GDP. A 
further 8.7% of GDP was allocated to liquidity schemes, but the uptake of these schemes turned 
out to be low. The budget deficit reached 4.9% of GDP in 2020 and Estonia plans to decrease it 
gradually to below 3% of GDP by 2024.  Estonia’s public debt has increased in the COVID-19 
crisis, but remains among the lowest in the Union and on a sustainable path. 

The  Estonian  recovery  and  resilience  plan  (RRP)  amounts  to  an  estimated  EUR  982 
million.  This  is  to  be  financed  in  large  part  through  non-repayable  financial  support  from  the 
Recovery and Resilience Facility (RRF)1, which allocates a maximum financial contribution of 
EUR 969 million  to Estonia. The country has not requested RRF loans. The plan is well-aligned 
with the overarching national strategy “Estonia 2035” and other sectoral strategic documents. A 
key  focus  of  the  plan  is  on  the  green  and  digital  transitions,  with  measures  to  improve  energy 
efficiency  and  develop  renewable  energy;  increase  the  sustainability  of  transport  and  mobility; 
support  companies  in  the  twin  transition,  in  particular  start-ups  and  small  and  medium-sized 
enterprises;  further  digitalise  public  services;  and  increase  the  labour  market  relevance  of  the 
education  and  training  system,  notably  as  regards  green  and  digital  skills.  The  RRP  contains 
measures  to  improve  the  accessibility  and  resilience  of  the  health  system  and  envisages  some 
improvements  to  the  social  safety  net  and  access  to  social  services.  Equal  opportunities  and 
social and territorial cohesion are important cross-cutting themes in the plan. 

The RRP includes adequate measures to help address the key challenges Estonia is facing. 
The  challenges  identified  in  the  most  recent  country-specific  recommendations  pertain  to  the 
following  broad  policy  areas:  the  green  transition  and  the  digital  transformation,  the  health 
system and the social safety net, education and training, and supporting innovation and hence the 
productivity  of  the  economy  and  the  competitiveness  of  Estonian  companies.  Estonia’s  RRP 
includes a set of mutually reinforcing reforms and investments that are expected to contribute to 
effectively  addressing  the  identified  challenges  to  varying  degrees.  The  plan  is  consistent  with 
the challenges and priorities identified in the most recent euro area recommendation.2 

1 Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the 
Recovery and Resilience Facility. 
2 Council Recommendation of 13 July 2021 on the economic policy of the euro area 2021/C 283/01 

2 

 
                                                           
The six pillars as set out in the RRF Regulation are expected to be addressed through the 
six  components  of  the  plan, with  each  of  the  components  addressing  one  or  more  pillars. 
The  measures  supporting  climate  and  digital  objectives  meet  the  minimum  thresholds, 
accounting  for  41.5%  and  21.5%  of  the  plan’s  total  allocation  respectively.  The  remaining 
challenges  are  addressed  with  a  number  of  reforms  and  investments,  thus  complying  with  the 
objectives of the RRF. 

The  measures  envisaged  in  the  Estonian  RRP  are  expected  to  have  a  sizeable  impact  on 
growth potential, job creation and economic, social and institutional resilience. Measures to 
promote  a  green  and  digital  business  sector  are  expected  to  have  a  positive  impact  on  growth 
potential  and  job  creation.  Through  the  development  of  green  and  digital  skills  and  support  to 
companies  and  sectors  to  adapt  to  and  drive  the  digital  transition,  as  well  as  green  technology 
development  programmes,  the  plan  is  expected  to  promote  the  economic  growth  potential  of 
Estonia.  Measures  aimed  at  supporting  youth  employment  and  the  uptake  of  skills  should 
contribute  to  job  creation,  while  the  further  digitalisation  of  the  public  administration  and  the 
strengthening  of  the  framework  to  fight  money  laundering  should  contribute  to  improved 
institutional resilience. Furthermore, each of the components in the plan is expected to contribute 
to social and/or territorial cohesion, thereby contributing to social resilience. 

The RRP proposes reforms in health care, in the social policy area and for the green and 
digital  transitions,  which  are  expected  to  contribute  to  Estonia’s  economic  and  social 
cohesion.  Social  cohesion  will  be  supported  by  measures  relating  to  health  care,  supporting 
youth  employment,  promoting  digital  and  green  skills,  and  to  some  extent  those  related  to 
reducing  the  gender  pay  gap  and  improving  the  social  safety  net,  including  access  to  social 
services.  Some  of  these  reforms  will  be  accompanied  by  investments  which  are  expected  to 
contribute  to  improving  the  hospital  infrastructure,  employability  of  young  people  and  skills 
development. 

The measures supporting climate objectives account for 41.5% of the plan’s total allocation 
calculated in accordance with the methodology of Annex VI to Regulation (EU) 2021/241. The 
contribution of Estonia’s plan to the green transition is built on three pillars: green transition in 
enterprises,  sustainable  energy  and  energy  efficiency,  and  sustainable 
transport.  For 
decarbonising the economy, the plan incentivises the uptake of renewable energy, development 
of  green  technologies  including  green  hydrogen,  modernisation  of  business  models,  resource 
efficiency and improved skills related to the green transition. Increased sustainability in transport 
should  be  achieved  through  creating  new  connections  between  various  modes  of  sustainable 
transport and mobility with a focus  on rail and active modes of transport such as cycling. The 
Estonian  plan  takes  into  account  circular  economy  considerations.  The  plan  contains  no 
measures having biodiversity as their objective, but by contributing to climate change mitigation, 
which  is  one  of  the  major  threats  to  biodiversity,  the  plan  may  also  be  beneficial  to  the 
preservation of biodiversity.  The plan supports Estonia’s decarbonisation  and energy transition 
objectives, as set out in  the National Energy and Climate Plan  and is expected to  contribute to 
reaching Estonia’s 2030 and 2050 climate and energy targets. 

3 

 
The measures supporting digital objectives account for 21.5% of the plan’s total allocation 
calculated in accordance with the methodology of Annex VII to Regulation (EU) 2021/241. The 
contribution of Estonia’s recovery and resilience plan to the digital transition focuses mainly on 
two  priorities:  the  digital  transformation  of  enterprises  and  the  further  modernisation  of  digital 
public  services.  The  implementation  of  the  plan  should  help  companies  from  all  sectors,  in 
particular  small  and  medium-sized  enterprises,  to  seize  the  opportunities  offered  by  digital 
technologies.  Building  on  Estonia’s  position  as  a  frontrunner  in  the  digitalisation  of  public 
services and drawing on the latest technologies, a series of measures of the plan are expected to 
make  the  delivery  of  public  services  even  more  efficient,  secure  and  transparent,  boost  the 
competitiveness  and  presence  of  Estonian  enterprises  in  foreign  markets  and  help  to  attract 
foreign investors. Other aspects of the digital transition are also addressed to varying extents in 
the  plan.  This  notably  includes  the  support  to  the  rollout  of  very  high-capacity  networks  in 
market failure areas to reduce the digital divide. 

Estonia’s RRP complies with the ‘do no significant harm’ principle. The assessment follows 
the methodology set out in the Commission’s Technical Guidance on the application of ‘do no 
significant  harm’  under  the  RRF  Regulation  (2021/C58/01)  and  the  six  corresponding 
environmental  objectives.  Where  necessary,  compliance  with  the  ‘do  no  significant  harm’ 
principle is ensured by milestones. 

The measures envisaged in the RRP are expected to have a lasting impact on the economy 
and institutions. In particular, the envisaged measures that aim at fostering the twin transitions 
are  expected  to  have  a  positive  impact  on  the  resilience,  growth  potential  and  economic 
transformation,  through  improved  efficiency  of  public  administration,  job  creation,  innovation 
and productivity growth. This notably includes investments aiming at deploying digital solutions 
in  the  construction  and  road  freight  transport  sectors,  investment  in  very  high-capacity 
broadband  networks,  as  well  as  reforms  fostering  digital  public  services.  Measures  promoting 
energy efficiency and fostering the development and uptake of innovative green technologies, as 
well as those reducing regulatory barriers  for investment  in  renewables  are  expected to  unlock 
private investments. In addition, measures related to skills are expected to bring structural change 
in the education and training policy, and support the twin transition. Measures to provide health 
and social care in an integrated way can be expected to improve the accessibility and quality of 
social services. However, there is no specific commitment in the RRP to implement the Action 
Plan on integrated care. 

The arrangements proposed in the RRP, including the envisaged timetable, milestones and 
targets,  and  the  related  indicators  are  expected  to  ensure  an  effective  monitoring  and 
implementation of the plan. The State Shared Service Center and the Ministry of Finance are 
tasked  with  implementing  and  monitoring  the  plan  overall,  whereas  line  ministries  and  other 
bodies are responsible for the implementation of individual measures. The milestones and targets 
are realistic and relevant, and the distribution of milestones and targets across time is rather even, 
albeit  with  the  biggest  investment  backloaded  towards  2026.  The  control  system  and 
arrangements proposed in the RRP are based on  the national  processes and structures used  for 
EU  structural  funds.  The  plan  identifies  actors  and  their  roles  and  responsibilities  for  the 

4 

 
performance of the internal  control tasks. The  control system  and other relevant  arrangements, 
including  for  the  collection  and  making  available  of  data  on  final  recipients,  are  adequate.  A 
dedicated  IT  tool  is  in  place  to  meet  the  specific  management  and  reporting  requirements 
described  in  the  plan.  It  should  ensure  the  necessary  audit  trail,  as  well  as  the  reporting  on 
milestones and targets. 

The  justification  Estonia  has  provided  on  the  amount  of  the  estimated  total  costs  of  the 
RRP is  broadly  reasonable and plausible.  Estonia has provided individual cost  estimates for 
all  investments  included  in  the  recovery  and  resilience  plan.  The  cost  estimates  have  been 
validated by an internal government body (Grant Management Unit of the Support Development 
Department of the State Shared Service Center). A large part of the measures concern demand-
driven schemes for which Estonia included milestones and targets that would only be met if the 
full  amount  is  spent.  The  assessment  of  the  cost  estimates  and  inherent  supporting  documents 
show  that  costs  are  justified  and  reasonable  to  a  medium  extent.  The  plan  contains  some 
recurrent  costs,  such  as  personnel  costs  and  maintenance  costs,  which  are  essential  for  the 
success of the reform or investment and which do not impose a significant burden on the national 
budget  (most  are  temporary  and  the  non-temporary  ones  lead  to  a  limited  cost  for  the  future), 
making  them  all  duly  justified  and  acceptable.  Some  of  the  cost  estimates  are  rather  high 
compared to past experience or comparable projects. Therefore, they are deemed as establishing 
the plausibility of the cost estimates to a medium extent. Finally, the estimated total cost of the 
recovery and resilience plan is in line with the principle of cost-efficiency and is commensurate 
to  the  expected  national  economic  and  social  impact.  Estonia  has  put  in  place  adequate  and 
sufficient arrangements to avoid double EU funding.  

The RRP is coherent to a medium extent. The RRP displays coherence within each component 
and shows thematic interlinkages and synergies between the different components, in particular 
those related to digital transformation and green transition. However, in some areas, coherence is 
not fully achieved. While the RRP includes substantial investments to foster the green and digital 
transition and support economic growth, more reforms to strengthen the social safety net, notably 
broadening the coverage of unemployment insurance benefits, could contribute cushion possible 
adverse effects on certain groups. The significant investments in health infrastructure could have 
been accompanied by measures leading to a greater increase in the health workforce to alleviate 
shortages.  Long-term  care  is  envisaged  to  be  addressed  with  several,  but  the  coherence  and 
interlinkage  between  these  measures  could  have  been  better  ensured  with  broader  reforms  to 
improve  the  access  to  and  quality  of  long-term  care.  The  measures  included  in  the  RRP  to 
address  the  decarbonisation  of  the  economy  are  mainly  related  to  investments,  while  concrete 
actions to phase out oil shale are expected to be set out in the National Development Plan of the 
Energy  Sector  only  at  the  end  of  2025  and  broader  reforms,  such  green  taxation,  are  not 
envisaged. Overall, the RRP is stronger on investment than on reforms. 

Table 1: Summary of the assessment of the Plan under the RRF criteria 

(1) 
Balanc
ed 

(2) 
CSRs 

(3)  
Growth
, jobs… 

(4) 
DNSH 

(5) 
Green 
target 

(6) 
Digital 
target 

(7) 
Lasting 
impact 

(8) 
M&T 

(9) 
Costing 

(10) 
Control 
System

(11) 
Cohere
nce 

5 

 
Respon
se 

A 

A 

A 

A 

A 

A 

A 

A 

B 

s 

A 

B 

2.  RECOVERY AND RESILIENCE CHALLENGES: SCENE-SETTER 

2.1. Macroeconomic outlook and developments since the 2020 country report 

The  Estonian  economy  contracted  by  2.9%  in  2020,  in  the  wake  of  the  COVID-19  crisis. 
The macroeconomic scenario contained in Estonia’s RRP expects a rebound of economic growth 
in  2021  to  2.5%.  According  to  the  plan,  growth  will  remain  strong  in  2022,  at  4.8%,  before 
falling  back  to  a  more  moderate  3.2%  in  2023  and  3.1%  in  2024.  Initially,  according  to  the 
scenario,  real  GDP  growth  is  driven  by  a  recovery  in  private  consumption.  In  the  outer  years, 
also investment is projected to pick up. According to the plan, inflation is set to remain contained 
and reach around 2% by 2025.  

The  RRP  macroeconomic  scenario  expects  unemployment  to  peak  at  8.0%  of  the  labour 
force  in  2021  before  falling  to  6.2%  in  2024.  Before  the  onset  of  the  COVID  crisis,  the 
Estonian  labour  market  was  tight,  with  very  high  employment  and  labour  force  participation 
rates and a low unemployment rate (4.4% in 2019). In 2020, unemployment increased to 6.8% of 
the  labour  force  mainly  due  to  restrictions  related  to  Covid-19  pandemic.  In  sectoral  terms, 
unemployment  rose  the  most  in  the  tourism  and  -related  sectors  of  hospitality  services 
(restaurants and hotels), which have relatively low wages, but other sectors also saw a decline in 
employment. The negative impact on employment was softened by a broad wage subsidy scheme 
over March-June 2020, and a more targeted scheme over December 2020-January 2021. The rise 
in  unemployment  could  widen  inequalities  because  it  may  take  longer  for  the  low-skilled  to 
return to the labour market. Women and youth are disproportionally affected as they tend to be 
over-represented  in  labour-intensive  accommodation  and  services  sectors.  Workforce  shortage 
persists, particular in industrial and IT sectors, but also agriculture, social, education and health 
sectors are still struggling to find the necessary workforce. Estonia continues to have one of the 
highest  gender  pay  gaps  in  the  EU  (21.7%  in  2019  vs  EU27  average  of  14.1%)  and  gender 
inequality  is  expected  to  have  widened  due  to  the  lockdown  and  economic  downturn.  Policy 
analysis3  shows  that  the  pandemic  has  led  to  significant  difficulties  for  women  in  reconciling 
work and family life, which has prompted some women to reduce or abandon paid work. Estonia 
has pronounced regional disparities that result in a wide gap in social and economic performance 
between  the  capital  region  and  the  rest  of  the  country.  Rapid  depopulation,  ageing  and  social 
exclusion  affect  areas  outside  Tallinn  and  Tartu,  putting  significant  pressure  on  the  education, 
health and social systems. 

3 “The socio-economic impact of the COVID-19 pandemic on gender equality” Praxis, June 2021 

6 

 
 
                                                           
The  budget  deficit  reached  4.9%  of  GDP  in  2020  and  the  RRP  expects  it  to  decrease 
gradually  and  no  longer  exceed  3%  of  GDP  by  2024.  In  April  2020,  Estonia  adopted  a 
relatively  sizeable  fiscal  policy  package  of  over  2.5%  of  GDP.  A  further  8.7%  of  GDP  was 
allocated  to  liquidity  schemes,  which  do  not  have  a  direct  budgetary  impact.  However,  only  a 
small part of the liquidity schemes was actually used. After an increase in the debt-to-GDP ratio 
to  18.2%  in  2020  due  to  the  combined  effect  of  shrinking  GDP  and  fiscal  stimulus,  debt  is 
expected  to  grow  to  28.0%  in  2024.  DG  ECFIN’s  Debt  Sustainability  Monitor  of  early  2021 
projects debt to reach 32.4% of GDP in 2030. Despite these increases, Estonia’s debt continues 
to be on a sustainable path. 

According  to  the  economic  forecast  underlying  the  Stability  Programme,  which  Estonia 
also used for its RRP, the country’s economic recovery prospects are relatively favourable. 
However,  the  macroeconomic  and  fiscal  outlook  continue  to  be  affected  by  high  uncertainty 
related  to  the  COVID-19  pandemic  and  its  economic  consequences.  A  number  of  risks  for  the 
macroeconomic scenario have been specified.  The downside risks  include  new virus outbreaks 
and a slower-than-expected pace of vaccination in Europe. The negative risk scenario developed 
in  the  Stability  Programme  takes  into  account  the  postponement  of  the  economic  recovery  by 
two  quarters  at  the  end  of  2021.  Under  this  scenario,  exports  of  travel  services  have  been 
hampered  throughout  the  year,  companies  delay  investment  decisions,  the  number  of 
bankruptcies  and  unemployment  will  increase.  In  addition,  due  to  a  period  of  uncertainty  and 
persistence  of  constraints,  service  consumption  is  constrained  and  savings  continue  to  grow. 
According to this risk scenario, the Estonian economy would grow only by 1.5% in 2021 (versus 
2.5 % in the base case). Given the outcome for the first half of 2021, the downside risk scenarios 
are rather unlikely to materialise. 

Table 2. Comparison of macroeconomic developments and forecast 

2020 

2019 
COM  COM  RRP  COM  RRP  COM  RRP 
4.8 
4.9 

2021 

2022 

-2.9 

-2.9 

2.5 

5.0 

2023 
RRP 
3.2 

2024 
RRP 
3.1 

4.4 

1.3 

6.8 

0.8 

1.7 

3.8 

6.8 

-0.9 

-0.8 

-2.7 

-2.2 

Real GDP (% change) 
Employment 
(% change) 
Unemployment rate 
(%) 
HICP inflation 
(% change) 
General government 
balance (% of GDP) 
Gross debt ratio 
(% of GDP) 
Sources: Commission Summer Forecast 2021 for real GDP and HICP inflation and Commission 
Spring Forecast 2021 for other variables (COM). Recovery and resilience plan (RRP). 

24.0 

18.2 

21.3 

28.0 

18.2 

21.4 

24.6 

27.4 

-3.3 

-0.6 

-4.9 

-2.2 

-0.6 

-4.9 

-5.6 

-6.0 

-3.8 

-3.2 

2.0 

2.4 

2.1 

2.0 

2.3 

0.1 

8.4 

0.6 

8.0 

6.3 

7.3 

6.6 

2.2 

1.9 

0.4 

7.9 

6.2 

Compared with the latest Commission forecast, the macroeconomic scenario underpinning 
the  RRP  is  more  pessimistic.  The  Commission  2021  summer  forecast  expects  real  GDP  in 
Estonia  to  grow  at  a  pace  of  4.9%  and  3.8%  in  2021  and  2022,  respectively.  Similarly  to  the 

7 

 
 
 
Estonian authorities, the Commission considers recovering consumption and exports as the main 
growth  engine  behind  the  recovery  in  2021.  Private  consumption  is  forecast  to  remain  a  main 
driver of growth in 2022, due to expected spending of accumulated household savings and recent 
changes  to  the  second  pillar  of  the  pension  system,  which  allows  savers  to  withdraw  their 
pension assets at any point in time. Favourable prospects for domestic and external demand, as 
well  as  the  implementation  of  the  recovery  and  resilience  plan  are  also  set  to  strengthen 
investment.  Labour  market  projections  and  inflation  are  similar,  although  the  Commission 
forecast  foresees  a  somewhat  higher  inflation  rate  over  the  horizon  covered,  and  a  lower 
unemployment  rate  for  2022  (Commission  2021  spring  forecast).  For  the  general  government 
deficit  and  debt,  the  Commission’s  2021  spring  forecast  projects  a  similar  development  to  the 
RRP until 2022. Years beyond 2022 are currently not covered by the Commission forecast. 

The macroeconomic scenario of the RRP is plausible.  The economic scenario is identical to 
the one contained in the 2021 Stability Programme and has been developed by the Ministry of 
Finance.  It  is  similar  to  projections  done  by  several  other  independent  government  agencies  at 
the time and in line with the Commission 2021 spring forecast (published in May 2021), which 
showed  real  GDP  growth  of  2.8%  in  2021  and  5.0%  in  2022.  Based  on  exceptionally  good 
outturn in the first half of 2021, the Ministry of Finance forecast for 2021 and 2022 was revised 
upwards in September 2021.  

2.2. Challenges  related  to  sustainable  growth,  cohesion,  resilience  and  policies  for  the 

next generation 

Estonia  has  improved  its  productivity  in  recent  years,  but  the  gap  with  the  EU  average 
remains. As in the case of other EU13 countries, Estonia enjoys fast productivity growth rates 
which  however  are  not  enough  in  the  convergence  process  with  the  EU  average  overall 
productivity  rate  (Adarov  et  al,  2020)4.  The  main  source  of  productivity  growth  in  Estonia  is 
capital deepening.5 Incomes have converged faster to the EU average than productivity. In 2019, 
the GDP per capita was 67% of the EU average6, while the gap in labour productivity per hour 
worked was almost 30%. This reflects the high activity and employment rates in Estonia. Still, 
since  the  financial  crisis,  total  factor  productivity  growth  has  moderated,  and  the  existing  gap 
with the EU average in terms of levels suggests that there is potential for more efficient use of 
resources  and  for  further  technological  upgrade.  While  Estonia  has  invested  in  research  and 
innovation, and especially in the digitalisation of the public sector, those investments have not, 
or  not  yet,  fully  delivered  expected  economy-wide  productivity  gains.  Estonia’s  overall 
innovation performance improved in 2019 and from 2021 the state plans to invest at least 1% of 

4 Adarov, A., Klenert, D., Marschinski, R. and Stehrer, R., Productivity Drivers: Empirical Evidence on the Role of 
Digital Capital, FDI and Integration, EUR 30398 EN, Publications Office of the European Union, Luxembourg, 
2020, ISBN 978-92-76-23029-8, doi:10.2760/740691, JRC122068. 
5 European Commission (2021). Productivity and competitiveness developments in the EU. Joint ECFIN-JRC 
Background and Policy Note. Internal Communication. 
6 GDP per Capita in current prices as a percentage of the EU average. 

8 

 
                                                           
GDP per year in research and innovation. To date, the level of research-based innovation in the 
business  sector  has  remained  relatively  low.  Stronger  productivity  growth  is  hampered  by  the 
limited cooperation between research institutions and businesses, which has been a long-standing 
issue  that  may  have  impeded  faster  catch-up  in  productivity.  The  transfer  of  knowledge  from 
universities to companies and the commercialisation of research results have been relatively low. 
Creating a robust technology transfer system would be essential to support industrial innovation 
and  the  green  and  digital  transitions.  Digitalisation  has  not  yet  transformed  some  important 
sectors, most notably manufacturing.  

The long-term challenges of the adequacy of the social safety net have been aggravated by 
the recent rise in unemployment. In 2019, 23.7% of population remained at risk of poverty or 
social exclusion (21.1% in EU27 in 2019). The impact of social transfers on poverty reduction 
(other than pensions) in Estonia was 28.1%, being slightly below the EU average (32.3% in the 
EU27)  in  2019.  Apart  from  low  unemployment  benefits,  there  are  gaps  in  the  coverage  of  the 
unemployment benefit system for those in non-standard forms of work and those with short work 
spells.  The  increase  in  unemployment  (6.9%  in  Q2  2021  compared  to  4.4%  in  Q2  2019), 
combined with the lack of adequate coverage of the benefits, have shed further light on the need 
to raise the adequacy of the social safety net. 

Developing  an  integrated  care  system  for  enhanced  service  delivery  would  contribute  to 
improving the effectiveness of the social safety net.  The organisation and financing of social 
services, including of long-term care, is fragmented between the social and health care sector and 
between  the  state  and  the  local  government.  The  crisis  has  aggravated  the  difficulties  in 
providing  affordable  and  available  social  services,  especially  for  the  elderly,  people  with 
disabilities and for low-income earners. The person’s own contribution for financing long-term 
care services  in  institutions has  steadily increased up to 78.3% over the years. The shortage of 
home care services and excessive financial burden in institutional care raises the poverty risk of 
family members. 

Regional disparities have been significant due to the widening gap in social and economic 
performance between the capital region and the rest of the country.  Regional disparities in 
Estonia  have  been  high  as  the  regions  of  Harju  and  Tartu  generated  more  than  74.2%  of  the 
country’s  GDP  in  2017  and  also  had  the  highest  level  of  income,  in  contrast  to  the  regions  of 
North-East and South-East Estonia. Continued depopulation and ageing have affected the areas 
outside  main  cities,  in  particular  as  regards  education,  workforce  shortages,  health  and  social 
systems and services provided by the local governments. Connectivity (transport and digital) is 
unevenly  provided  in  the  rural  and  urban  areas.  These  trends  have  had  a  negative  impact  on 
investment and job creation in the more remote territories. Estonia has not made prior plans to 
address those regional disparities. 

A high level of unmet needs for medical care, weak health outcomes and health workforce 
shortages have been long-standing challenges in Estonia. The number of healthy life years has 
been among the lowest in the EU, with large disparities by gender, region, education and income, 
which  has  negatively  impacted  the  size  and  quality  of  the  labour  force.  Healthcare  has  been 
relatively  underfinanced  in  Estonia  compared  to  the  EU  on  average  (general  government 

9 

 
expenditure by function on healthcare was 5.3% of GDP compared to 7.0% of EU average) and 
this may have been the main reason for the reportedly long waiting times and shortages of health 
professionals (especially nurses with 6.3 per 1 000 inhabitants compared to 8.2 in the EU). The 
first wave of COVID-19 exposed structural weaknesses in the Estonian health system, and some 
investments  have  been  made  to  improve  resilience,  in  particular  as  regards  provision  of  more 
financial, material and human resources to deliver the expected regular health services alongside 
the  care  for  patients  with  COVID-19  or  similar  infectious  diseases.  Nevertheless,  reforms  and 
further investments would be needed to boost the resilience, accessibility, efficiency and quality 
of the health system. In particular, reinforcement of primary care, disease prevention, integration 
of  health  and  social  care,  strengthening  of  the  health  ICT  governance  framework,  as  well  as 
addressing  healthcare  workforce  shortages  and  to  improve  workforce  skills  and  geographical 
availability of the service are essential. 

Bringing  knowledge  and  skills  levels  in  line  with  the  needs  of  the  labour  market  and 
structural changes in the economy has been a long-term challenge. While the education and 
training system performs well, it has faced structural challenges as regards early school leaving, 
insufficient  labour  market  relevance  of  higher  education  and  of  vocational  education  and 
training,  and  the  high  number  of  ageing  teachers.  The  specialised  education  of  bachelors  and 
master  degrees  in  fields  such  as  artificial  intelligence,  high  performance  computing, 
cybersecurity or data science is also rather low compared to other EU Member States (Righi et 
al, 2020)7. Furthermore, rapid reskilling has been necessary for employees of sectors which have 
suffered the most, and where the tasks and nature of work have changed. Significant shortages of 
highly skilled labour are projected in Estonia with an annual linear growth rate of -1.9% of new 
tertiary  graduates  during  the  period  2013-2016,  and  with  significant  skill  shortages  in  the  ICT 
field  (Biagi  et  al,  2020)8.  Re-designing  of  the  skills  forecasting  system  by  transferring  OSKA 
surveys to existing registry data relevant for the education and training system would help better 
anticipate  skill  needs.  High-technological  manufacturing  and  other  knowledge-intense  sectors 
need highly skilled information and communication technology specialists. Digital upskilling of 
employees should go hand in hand with measures supporting the digital innovation in companies. 
To  support  the  green  transition,  it  will  also  be  important  to  introduce  this  aspect  in  education 
programmes.  

The Estonian banking sector is sound overall, but money laundering risks remain. Estonian 
banks have been profitable thanks to high efficiency, good quality assets and low-cost funding. 
Banks operating in Estonia have become less dependent on their parent  banks and now largely 

7 Righi, R., López-Cobo, M., Alaveras, G., Samoili, S., Cardona, M.., Vázquez-Prada Baillet, M., Ziemba, L.W., and 
De Prato, G., Academic offer of advanced digital skills in 2019-20. International comparison. Focus on Artificial 
Intelligence, High Performance Computing, Cybersecurity and Data Science, EUR 30351 EN, Publications Office of 
the European Union, Luxembourg, 2020, ISBN 978-92-76-21451-9, doi:10.2760/225355, JRC121680. 
8 Biagi, F., Castaño Muñoz, J. and Di Pietro, G., Mismatch between Demand and Supply among higher education 
graduates in the EU, EUR 30121 EN, Publications Office of the European Union, Luxembourg, 2020, ISBN 978-92-
76-17155-3, doi:10.2760/003134, JRC120022 

10 

 
                                                           
fund  themselves  from  domestic  deposits  and  the  wholesale  funding  market.  At  the  same  time, 
Estonia has  updated its  assessment of money laundering and terrorist financing risk, following 
large-scale  money  laundering  cases.  While  supervisory  actions  have  been  taken  against  non-
compliant  banks  and  payment  institutions,  there  is  room  to  increase  the  intensity  of  on-site 
supervision and to provide the financial supervisor with adequate sanctioning powers. This also 
includes  the  capacity  for  the  Financial  Intelligence  Unit  to  systematically  access  data  for 
financial transactions. Proactive cooperation between the Financial Intelligence Unit and the law 
enforcement agencies could be improved. 

2.3. Challenges related to the green and digital transition 

2.3.1 Green dimension 

The recovery and resilience plan should contribute to the green transition and at least 37% 
of the financial allocation needs to contribute to climate objectives. The measures in the plan 
shall  contribute  to  achieving  the  2050  climate  neutrality  objective,  and  the  2030  energy  and 
climate  targets,  taking  into  account  Member  States’  national  energy  and  climate  plans.  They 
should also contribute to meeting environmental targets for waste, pollution control, sustainable 
mobility,  biodiversity  protection  and  restoration,  marine  and  water  resources,  and  support  the 
transition  to  sustainable  food  systems  as  well  as  to  a  circular  economy  as  appropriate,  while 
ensuring that nobody is left behind.  

Given  Estonia’s  high  energy  and  carbon  intensity,  fostering  the  green  transition  to  avoid 
carbon lock-in is key to ensuring competitiveness of the Estonian economy. Estonia is one of 
the most carbon  and energy  intensive  economies in  the  EU due to  its dependency  on oil shale 
and the high energy intensity of its transport and building sectors. Estonia needs a clear pathway 
for  phasing  out  oil  shale  in  electricity  production  and  replacing  it  with  low-  and  zero-carbon 
electricity sources such as renewables to achieve its greenhouse gas mitigation objectives in the 
near and longer term.  This  necessitates an increase in  financing for renewable energy projects, 
for  storage,  and  for  corresponding  investments  into  the  electricity  grid.  At  the  same  time,  it  is 
crucial that this phasing-out follows the model of a just transition, in particular for the poorer and 
heavily oil-shale industry dependent Ida-Virumaa region in the East of the country.  

The share of renewable energy in final energy consumption increased from 17% in 2005 to 
32%  in  2019.  Estonia  aims  to  contribute  to  the  EU’s  2030  target  for  renewable  energy  by 
reaching a share of 42% of renewables in  gross final consumption of energy. According to the 
International Energy Agency9, oil shale accounted for nearly 80% of Estonia’s total electricity in 
2018, but is gradually being replaced by other sources. This development has been driven by the 
Union’s Emission Trading System and national measures to incentivise the uptake of renewable 
energy.  These  improvements  have  laid  the  groundwork  for  an  accelerated  expansion  of  wind 

9 IEA (2019), Energy Policies of IEA Countries: Estonia 2019 Review, IEA, Paris 
https://www.iea.org/reports/energy-policies-of-iea-countries-estonia-2019-review  

11 

 
                                                           
energy,  which  is  the  second  largest  source  of  renewables  electricity  generation  after  solid 
biofuels. Estonia considers wind energy the renewable energy source with the biggest potential, 
thus  the  development  of  offshore  wind  parks  benefit  from  a  supportive  legislative  framework. 
However, challenges remain related to planning and permitting for new wind farms both onshore 
and  offshore.  Additional  challenges  concern  grid  infrastructure  that  would  benefit  from 
additional  investments  to  allow  for  a  larger  share  of  intermittent  renewables  (transport  of 
electricity,  storage,  etc.).  Estonia  is  also  lagging  behind  the  EU’s  10%  target  of  renewables  in 
transport, having reached 5% in 2019. 

Estonia’s contributions to the 2030 EU target for energy efficiency are of modest ambition 
for  primary  energy  consumption,  amounting  to  5.4  Mtoe,  and  of  very  low  ambition  for 
final  energy  consumption,  amounting  to  2.9  Mtoe10.  Estonia’s  Long  Term  Renovation 
Strategy estimates that 141 000 buildings, representing 54 million m², need renovation within 30 
years  and  aims  at  improving  the  living  and  working  conditions  of  80  %  of  the  Estonian 
population.  It  assesses  that  the  need  for  annual  reconstruction  funding  will  also  rise  almost  5 
times, from less than EUR 200 million per year to EUR 900 million per year. Estonia has set an 
objective to renovate 3% per year of the floor area of public buildings, altogether 170 000 m2 by 
2030 and to increase the energy efficiency of residential buildings and offices11. 

The  table  below  gives  an  overview  of  Estonia’s  objectives,  targets,  and  contributions  under 
Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 
on the Governance of the Energy Union and Climate Action. 

Table 3. Estonia’s national targets and contributions regarding energy and climate 

National targets and 
contributions  

Binding target for 
greenhouse gas 
emissions compared to 
2005 under the Effort 
Sharing Regulation (%) 

Latest 
available 
data 

2020 

2030 

Assessment of 
2030 
ambition 
level 

+17 

+11 

-13 

As in ESR 

10 Economidou, M., Ringel, M., Valentova, M., Zancanella, P., Tsemekidi Tzeiranak, S., Zangheri, P., Paci, D., 
Ribeiro Serrenho, T., Palermo, V. and Bertoldi, P., National Energy and Climate Plans for 2021-2030 under the EU 
Energy Union, EUR 30487 EN, Publications Office of the European Union, Luxembourg, 2020, JRC122862. 
11 Zangheri, P. et al., Progress of the Member States in implementing the Energy Performance of Building Directive, 
Publications Office of the European Union, Luxembourg, 2021, EUR 30469, JRC122347. For consistency with 
previous targets and ambitions see Castellazzi, L., Zangheri, P., Paci, D., Economidou, M., Labanca, N., Ribeiro 
Serrenho, T., Zancanella, P. and Broc, J., Assessment of second long-term renovation strategies under the Energy 
Efficiency Directive, EUR 29605 EN, 2019, JRC114200. 

12 

 
 
 
                                                           
National targets and 
contributions  

Latest 
available 
data 

2020 

2030 

32 

National 
target/contribution for 
renewable energy: Share 
of energy from 
renewable sources in 
gross final consumption 
of energy (%) 
National contribution for energy efficiency: 
Primary energy 
consumption (Mtoe) 
Final energy 
consumption (Mtoe) 

4.7 

2.9 

25 

42 

6.5 

2.8 

5.4 

2.9 

Modest 

Very low 

Assessment of 
2030 
ambition 
level 

Sufficiently 
ambitious (37 
% is the result 
of RES 
formula) 

Level of electricity 
interconnectivity (%) 

63 

>60 

>60 

N/A 

Source: Assessment of the final national energy and climate plan of Estonia, SWD (2020) 905 
final. 

Estonia’s  transport  infrastructure  and  policy  has  a  number  of  shortcomings  in  terms  of 
connectivity  and  sustainability.  Rail  and  intermodal  transport  remains  under-developed  and 
under-electrified. Greenhouse gas emissions from road transport have increased in recent years. 
Estonia has one of the most carbon-intense passenger car fleets in the EU. To support the green 
transition, the introduction of an appropriate vehicle tax based on a vehicle’s CO2 emissions and 
levied on passenger cars and light commercial vehicles, combined with  other measures, should 
be  envisaged.  Over  time,  such  measures  could  contribute  to  reduction  in  CO2  emissions  in 
Estonia by creating incentives for the purchase of less CO2 intensive vehicles. Development of 
rail transport, both as regards investments into the network, including Rail Baltica, and measures 
motivating increased use of rail passenger  transport and inter-modality would  contribute to  the 
greening  of  Estonia’s  transport  system.  Digitalisation  of  transport,  e.g.,  common  planning  and 
ticketing  systems  for  public  transport,  could  further  incentivise  and  increase  the  use  of  public 
transport.  Given  that  Estonia  is  sparsely  populated,  sustainable  road  transport  also  needs  to  be 
developed. 

Completing  key  cross-border  projects,  such  as  Rail  Baltica,  in  cooperation  with  the  other 
Baltic  countries,  and  synchronisation  of  the  electricity  grid  with  the  continental  European 
network by 2025 remain key challenges. There is also potential for cross-border development of 
offshore wind and a project between Estonia and Latvia has been initiated.  

Resource  efficiency  remains  a  challenge  as  high  levels  of  domestic  material  consumption 
and  waste  generation  drag  down  resource  productivity  and  hamper  competitiveness.  The 
circular material  usage rate (8.7%) is  below the  EU27 average (11.2%).  Estonia would  greatly 
benefit from a comprehensive national strategy and an action plan on circular economy targeting 
the entire life cycle of products. Since oil shale is Estonia’s largest source of hazardous and non-

13 

 
 
 
 
 
 
 
 
hazardous industrial  waste and key to  improve its  energy and resource efficiency as well as to 
reach  its  climate  goals,  the  transition  away  from  oil  shale  mining  and  use  is  by  far  the  most 
important in terms of the green transition. This would require termination of financing of new oil 
shale  infrastructure,  including  oil  shale  refineries.  The  government  has,  in  the  coalition 
agreement, agreed to phase out oil shale for power generation by 2035 and shale oil by 2040. For 
a  long-term  firm  commitment  and  predictability  of  the  investment  environment,  these  targets 
should  be  laid  down  in  strategic  documents  and  accompanied  by  concrete  steps  towards  the 
targets. 

In  terms  of  biodiversity,  Estonia  presents  a  mixed  picture.  On  the  one  hand,  Estonia  has 
extensive protected areas and a larger share of species and habitats in good status than in the rest 
of the EU; forests cover 58.4% of its territory and Estonia’s uptake of organic farming of 21% in 
2018 is not far from the EU 2030 target of 25%. On the other hand, some habitats and species are 
under  pressure,  notably  grassland  and  forest  areas.  Estonia  lacks  a  post-2020  Forest 
Development plan and the rate of wood harvesting has increased significantly in the recent years. 
The Estonian land use sector, which includes forestry, is switching from being a carbon sink to 
an emitter of carbon. The main contributor (94.5% in 2018) to energy production from biomass 
is the forestry sector, raising concerns about the unsustainable use of Estonian forests.  

Estonia is one of the few EU Member States in which  peatlands and peat-topped soils are 
strongly present – covering 20.2% of total national territory. Such areas can be large sinks 
for or sources of greenhouse gases, depending on their state. Therefore, it is important to ensure 
adequate  protection  of  Estonian  peatlands  including  rewetting  when  appropriate.  Not  all  water 
bodies have yet achieved a good status and nitrate concentrations are increasing in some of them, 
with agriculture identified as a significant contributing factor. The pressure on water availability 
in Estonia is very high due to demand from the oil shale mining sector. The pressures on water 
quality seem to be most acute in coastal waters: only 13% of these were reported as having good 
ecological  status,  compared  with  60%  of  rivers  and  67%  of  lakes.  Moreover,  the  most  recent 
figures on eutrophication in  coastal waters show a substantial  rise which reflects  a serious and 
more general problem of eutrophication in the Baltic Sea as a whole.  

2.3.2 Digital dimension 

The  recovery  and  resilience  plan  should  contribute  to  the  digital  transition  and  at  least 
20% of the financial allocation needs to contribute to digital objectives. The measures in the 
plan should, inter alia, contribute to the digital transformation of the economic and social sectors. 
The objective of the measures in the plan should be to improve not only the competitiveness, but 
also  the  resilience,  agility  and  security  of  companies  and  public  actors,  all  while  ensuring 
inclusiveness. 

Estonia scored the 7th highest ratings in DESI 2020 and is among the European leaders in 
digitalisation. The country is notably a front-runner in digital public services and performs very 
well  as  regards  digital  skills.  However,  Estonia  could  improve  on  connectivity  and  further 
support the integration of digital technologies by businesses. 

14 

 
Estonia ranks 14th in the EU in connectivity in 2020. 71% of its households are covered by 
very-high-capacity networks against an EU average of 59%. The country also performs well in 
the take-up of mobile broadband, covering 75% of individuals against and EU average of 71%. 
Furthermore,  Estonia  scores  overall  well  on  fixed  broadband  take-up,  reaching  83%  of 
households,  but  less  well  on  the  take-up  of  high  speed  (at  least  100  Mbps)  fixed  broadband, 
where,  despite  the  very  good  availability  of  very-high-capacity  networks  in  the  country,  it  lies 
well  below  the  EU  average,  with  only  19%  of  households  subscribing  to  such  speeds.  Fixed 
broadband prices in Estonia are higher than the EU average. The objectives of Estonia’s current 
national  broadband  plan,  the  2020  Digital  Agenda,  are  to  provide  all  residents  with  internet 
access  above 30 Mbps  and to  achieve at  least  60% of household  subscriptions  with  a speed of 
above 100 Mbps. Estonia’s new digital strategy for 2020+ has been in preparation since the end 
of 2019 and will align its connectivity targets to those of the Gigabit Society. Estonia continues 
to invest in the deployment of its broadband infrastructure and uses both public and private funds 
to do so. 

Estonia’s  ambition  on  5G  connectivity  is  to  cover  major  cities  by  2023  and  transport 
corridors  by  2025.  However,  Estonia  scores  0%  on  the  DESI  5G  readiness  indicator  and  the 
award of 5G pioneer bands is still pending. The country’s ambitious 5G goals will depend on the 
timely award of the pioneer bands.  

Estonia ranks 3rd in the EU in 2020 on digital skills but skills shortages remain an obstacle 
to investment.  62% of the population  have at  least  basic digital  skills  (and 37% above basic), 
both  above  the  EU  average  (56%  and  31%  respectively).  The  percentage  of  ICT  graduates 
(6.7%),  ICT  specialists  (6%)  and  female  ICT  specialists  (22%  of  the  total  ICT  specialists)  in 
Estonia are higher than the EU average. However, businesses have identified skills shortages as 
one  of  the  main  obstacles  to  investment  (84%  of  firms)  and  the  share  of  investment  in  human 
capital  and  skills  is  low12.  The  Estonian  education  system  generally  performs  well,  but  the 
reported skills shortages suggest the link with the labour market remains a challenge. Despite a 
high  percentage  of  ICT  specialists,  businesses  provide  only  limited  skills  training  to  meet  the 
ICT  needs  in  Estonia.  Only  17%  of  Estonian  enterprises  provide  ICT  training  to  their  staff 
(against 20% for the EU average). Further increasing the number of ICT specialists, maintaining 
a high number of ICT graduates and financing the upskilling of workers in the public and private 
sectors could help Estonia tap the full potential of the digital economy. 

Estonia  ranks  14th  in  the  EU  in  2020  and  scores  slightly  below  the  EU  average  on  the 
integration of digital technology by businesses. In 2020, 74% of Estonian SMEs have at least a 
basic  level  of  digital  intensity  (above  the  EU  average  of  60%).  Estonia  made  some  modest 
progress in a number of criteria, such as in use of social media by business (16% in 2019), share 
of SMEs selling online (16% in 2020) and share of businesses selling online across borders (9% 
in 2019). The share of high-growth firms planning to grow as a result of increased digitalisation 

12 This is particularly important, given that the digitisation of many industries and sectors will impact people 
unevenly, with vulnerable groups at higher risks. 

15 

 
                                                           
is  11%  (31%  EU  average),  while  the  share  of  firms  perceiving  the  need  for  advanced  digital 
technologies  or  starting  to  plan  their  adoption  is  26%  (39%  EU  average)  and  the  share  of 
growing  firms  with  a strategy or action plan to  digitalise is  8%, far from the 22% EU average 
figure  (Benedetti  et  al.,  2021)13.  To  boost  the  digital  transformation  of  its  economy,  Estonia 
needs  to  continue  its  efforts  to  better  integrate  digital  technologies,  particularly  in  SMEs.  This 
objective could be achieved through a cross-sectoral initiative, covering sectors that do not  yet 
use digital technologies very intensely and going beyond high-growth industries.  

On digital public services, Estonia is a leader in the EU. It has well-developed e-government 
and e-health systems, with all central government services being accessible online. The country 
also  has  one  of  the  highest  shares  (89%)  of  e-government  users  in  Europe.  Estonia’s  X-road 
system,  the  backbone  of  its  e-government,  is  a  digital  information  infrastructure  that  securely 
connects over 900 organisations daily. It is important for Estonia to keep ensuring that the full 
range of online public services is user-friendly and cost effective. Promoting the opening and the 
use  of  information  gateways,  including  the  Estonian  Open  Data  Portal,  would  help  Estonia 
achieving those goals.  

Most  R&D  in  Estonia  is  performed  in  the  public  sector.  The  main  strategy  document  for 
Estonia’s  R&D&I  policy  is  Knowledge-based  Estonia  2014–2020  —  the  third  strategy  on 
research  and  development  and  innovation.  Priority  setting  in  the  strategy  is  based  on  a 
methodology  of  smart  specialisation.  Estonia  aims  to  become  an  attractive  place  for  R&D,  to 
motivate more people to choose a career in research, to support R&D serving the interests of the 
Estonian  society  and  economy,  as  well  as  to  increase  the  knowledge-intensity  of  the  Estonian 
economy in general. The key policy in R&D is focused on public sector contribution with public 
sector financing of R&D reaching the target of 1% of the GDP in the 2021 budget.  Maximising 
the impact of the public investments in R&D will require boosting absorptive capacity of R&D 
results in businesses and improving linkages between public R&D sector, academic institutions 
and businesses, including by improving access to finance for companies.  

Estonia  signed  the  Declaration  on  cooperation  on  Artificial  Intelligence  (AI)  in  201814. 
Estonia’s national strategy on AI devotes significant attention to the uptake of AI solutions in the 
public  sector,  including  via  targeted  training;  technical  and  financial  support  for  AI  pilots  in 
various  agencies;  creating  reusable  AI  components  for  public  sector  AI  applications,  to 
accelerate their deployment; and developing guidelines for AI development, including for what 
concerns the responsible use of data. The national AI strategy set the goal of at least 50 live AI 
applications in Estonian public sector by the end of 2020 and there are currently over 80 different 
AI initiatives.  

13 Benedetti Fasil, C., Del Rio, J.C., Domnick, C., Fako, P., Flachenecker, F., Gavigan, J., Janiri, M., Stamenov, B. 
and Testa, G., High Growth Enterprises in the COVID-19 Crisis Context, EUR 30686 EN, Publications Office of the 
European Union, Luxembourg, 2021, ISBN 978-92-76-37269-1, doi:10.2760/63402, JRC124469 
14 https://ec.europa.eu/digital-single-market/en/news/eu-member-states-sign-cooperate-artificial-intelligence 

16 

 
                                                           
Estonia  could  benefit  from  more  sizeable  investments  in  energy  efficiency,  sustainable 
energy  production,  grid  connectivity,  sustainable  transport,  the  circular  economy  and 
other dimensions of the digital and green transformation. The reduction of the environmental 
footprint  of  the  ICT  sector itself also  needs  to  be  tackled.  In  September  2019,  33  Estonian 
technology companies signed a Green Pledge promising to take their operations to a completely 
environmentally sustainable basis by 2030. While the Estonian technology sector is prioritizing 
the environment as an integral part of business, more specific targets and action plans should be 
encouraged. 

Figure 1. DESI 2020 – Relative performance of Estonia by dimension 

Note: EU aggregate corresponds to EU28, based on 2020 DESI report. 

17 

 
 
Box 1: Progress towards the Sustainable Development Goals 

Overview table of the overlap between the Sustainable Development Goals and the four 
dimensions underpinning the recovery and resilience plans. 

This section outlines Estonia’s performance with respect to SDGs with particular relevance 
for  the  four  dimensions  underpinning  the  recovery  and  resilience  plans  (green  transition, 
fairness, digital transition and productivity, and macroeconomic stability), indicating possible 
areas where investments and reforms in line with the objectives of the Facility could further 
accelerate the progress on the SDGs. 

Green Transition 

Estonia  performs  relatively  well  overall  in  achieving  the  SDGs.  Over  the  past  5  years, 
Estonia has made progress in almost all areas, with the notable exception of environmental 
goals,  in  particular  SDG  12  responsible  consumption  and  production  and  SDG  13  climate 
action, where a number of indicators show deteriorating trends. The important issue to watch 
concerns  SDG  13  “Climate  Action”,  as  Estonia  is  still  dependent  on  oil  shale  for  power 
generation and continues to have the highest C02 emissions in the EU from new passenger 
cars.  A  promising  signal  is  the  increase  in  renewable  capacity  which  will  need  to  be 
accelerated for Estonia to complete its phasing out of oil shale for electricity production that 
it has announced for 2035 (2040 for shale oil). 

18 

 
 
 
Fairness 

Estonia  has  performed  particularly  well  with  respect  to  SDG  4  “Quality  of  education”, 
showing  progress  at  all  levels  of  education  except  the  most  recent  trend  for  early  leavers. 
While  in  social  areas  Estonia  has  performed  relatively  well,  including  in  SDG  1  “No 
poverty”, its performance has been persistently weak on SDG 3 ‘good health and wellbeing’, 
namely  in  the  areas  of  access  to  healthcare  and  the  share  of  people  with  good  health.  The 
gender pay gap in Estonia remains one of the highest in the EU. The gap was considerably 
higher  than  the  EU  average  in  2019,  21.7%  versus  14.1%,  indicating  that  Estonia  requires 
still some efforts to achieve SDG 5 ‘gender equality’.  

Digital transition and productivity 

Estonia  features  a  persistently  low  resource  productivity.  Performance  in  innovation  under 
SDG  9  ‘Industry,  innovation  and  infrastructure’  is  improving,  in  particular  what  concerns 
employment in technology companies and R&D personnel. 

Macroeconomic stability 

Estonia’s performance on SDG 8 ‘decent work and economic growth’ has been good overall 
with  lower-than-expected  impact  on  GDP  in  crisis.  Estonia  has  had  a  high  share  of 
investment relative to GDP and low unemployment. The latter increased significantly in the 
COVID-crisis to the EU average level. 

3.  OBJECTIVES, STRUCTURE AND GOVERNANCE OF THE PLAN 

3.1. Overall strategy of the plan 

Estonia’s RRP is linked to the national long-term strategy Estonia 2035 and contributes to 
addressing the challenges identified in the context of the European Semester. Estonia 2035 
is the umbrella strategy that provides a basis for reconciling the different national processes of 
planning and budgeting in relation to various funding sources, including the EU funds. The plan 
was prepared taking into account the whole set of actions and investments envisaged to achieve 
greater synergy between the different sources of funding and the respective strategies governing 
their  use.  The  Estonia  2035  strategy  identifies  the  key  development  challenges  as  follows:  (a) 
Population, health and life expectancy; (b) Business environment and learning opportunities; (c) 
Biodiversity  and  (living)  environment;  (d)  Governance.  The  RRP  is  designed  to  contribute  to 
addressing  those  challenges  and  stresses  the  importance  of  improving  cohesion  and  regional 
balance. The plan aims to help Estonia’s transition to a more resilient and sustainable economy, 
to contribute to the achievement of the UN Sustainable Development Goals, to support the green 
and  digital  transition  and  to  increase  growth  potential  and  competitiveness  by  investing  in 
innovation, skills and capital.  

The  RRP  is  connected  to  Estonia’s  National  Reform  Programme  approved  on  29  April 
2021, which is presented as an Action Plan under the Estonia 2035 strategy, and is broadly 
consistent  with  other  strategic  planning  documents,  such  as  the  SF21+  Operational 

19 

 
 
Programme  (in  negotiation)  and  the  Territorial  Plan  for  Just  Transition  (in  negotiation). 
Furthermore,  measures  included  in  the  plan  are  connected  to  the  National  Energy  and  Climate 
Plan and other strategies, as well as with the joint EU-level priorities and Estonia’s international 
commitments.  

According to the plan, to achieve the objectives specified in the Estonia 2035 strategy and 
in  the  country-specific  recommendations,  different  sources  of  funding  will  be  used 
comprising  both  EU  funds  and  national  revenues.  In  this  combination  of  funding,  the 
intention is to design and implement policy interventions in a way that consolidates resources to 
optimise policy impact and promotes synergies while reducing red tape and operational risks.  

Investments and reforms in Estonia’s plan amount to EUR 982 million and are divided into 
six components: (1) Digital transition in enterprises (12% of the estimated cost of the plan), (2) 
Green transition in enterprises (23%), (3) Digital State (12%), (4) Energy and energy efficiency 
(9%),  (5)  Sustainable  transport  (10%),  and  (6)  Health  and  social  protection  (34%).  The 
components broadly correspond to the six pillars of the RRF. Across the components, the plan 
contains  41  measures  in  total,  including  16  reforms  and  25  investments.  All  the  components 
contain both investments and reforms.  

Table 4. Components and associated costs 

Component 
I: Digital transformation of enterprises 
II: Accelerating the green transition in enterprises 
III: Digital State 
IV: Energy and energy efficiency 
V: Sustainable transport 
VI: Health and social protection 

Estimated costs (EUR million) 

116.2 
220.2 
121.7 
92.1 
96.1 
336.3 

to  foster 

the  digital 

transformation  of  Estonian  companies  and 

Digital transformation of enterprises. This component (with an estimated cost of EUR 116.2 
million)  aims 
their 
competitiveness, in particular, on export markets. The proposed measures will provide financial 
support  to  SMEs  and  microenterprises  of  all  sectors,  at  different  stages  of  their  digital 
transformation,  as  well  as  specific  contributions  to  the  adoption  and  deployment  of  digital 
solutions  in  the  construction  and  road  freight  transport  sectors  in  particular.  Moreover,  the 
component  is  expected  to  increase  digital  skills,  through  awareness-raising  of  SME  managers 
and  support  to  the  upskilling  and  retraining  of  specialists  in  information  and  communication 
technologies (ICT). 

Actions  aimed  at  supporting  the  identification  of  export  opportunities  and  the  promotion  of 
Estonian  companies  abroad  will  also  be  carried  out  in  this  component,  in  synergy  with  the 
activities of Enterprise Estonia. 

Green transition in enterprises. This component (with an estimated cost of EUR 220.2 million) 
aims  at  speeding  up  the  green  transition  in  the  business  sector  in  Estonia  and  to  seize  the 
business opportunities it represents. The proposed measures include support to the development 

20 

 
 
of green technologies, increasing green R&D and innovation capabilities and resource efficiency 
in companies, introduction of new business models and improving skills levels in areas related to 
the  green  transition.  Moreover,  the  component  foresees  deployment  and  piloting  of  green 
hydrogen integrated value chains in strategic areas. The measures under this component aim for 
a comprehensive approach to the green transition addressing key market failures and facilitating 
the technological and behavioural break-through to increase the competitiveness of the business 
sector. 

Digital State. This component (with an estimated cost of EUR 121.7 million) aims at increasing 
the  resilience  and  the  sustainability  of  digital  infrastructures  and  services  of  the  Estonian 
administration  (notably  in  light  of  the  growing  cybersecurity  threats),  as  well  as  increasing 
efficiency and user-friendliness of these services. The proposed measures are expected to enable 
Estonia  to  take  advantage  of  the  opportunities  offered  by  the  latest  technologies.  They  are 
expected  to  benefit  both  citizens  and  businesses.  Specific  actions  are  also  foreseen  in  order  to 
reinforce the country’s capacities to combat money laundering. Furthermore, the support to the 
deployment  of  very-high-capacity  networks  in  rural  areas  should  help  ensuring  wide  access  to 
online  services  and,  more  generally,  contribute  to  the  further  digital  transformation  of  the 
country. 

Sustainable  energy  and  energy  efficiency.  This  component  (with  an  estimated  cost  of  EUR 
92.1  million)  aims  at  addressing  the  challenge  of  decarbonising  the  energy  sector,  increasing 
energy efficiency and reducing the dependency on oil shale. This will be done by incentivising 
the uptake of renewable energy and improving the energy efficiency of buildings. The renewable 
energy  subcomponent  includes  a  reform  which  aims  at  contributing  to  decarbonising  the 
economy  through  including  the  targets  and  actions  to  phase  out  oil  shale  in  the  national 
Development  Plan  for  the  Energy  Sector  and  through  removing  administrative  barriers  to 
renewable  energy  installations.  The  reform  is  complemented  by  three  measures  which  aim  to 
strengthen  the  electricity  grid  to  increase  renewable  energy  production  capacity  and  adapt  to 
climate  change,  to  incentivise  renewable  energy  installations  in  industrial  areas  and  to  pilot 
possibilities  for  renewable  energy  storage.  The  subcomponent  of  energy  efficiency  will  target 
renovation  of  apartment  buildings  and  private  dwellings  by  providing  financial  support,  but  a 
reform  is  also  foreseen  to  remove  administrative  barriers  to  energy  efficient  renovations  by 
providing  advisory  services  and  digital  tools  on  legislation,  technical  aspects  and  financing  of 
renovations.  

Sustainable transport.  This  component (with  an estimated  cost  of EUR 96.1 million) aims  at 
reducing emissions from transport and incentivising the uptake of sustainable modes of transport. 
The new Transport  and  Mobility Development  Plan and the related  Implementation Plan to  be 
adopted, will include investments to develop interconnected and shared mobility in urban areas 
at the expense of private cars and promote a comprehensive framework of light mobility (on foot 
or  bicycle)  in  areas  outside  major  urban  centres.  As  part  of  the  Transport  and  Mobility 
Development Plan, within the timeline of the RRP, the Tallinn capital region common transport 
system  will  be  implemented  and  the  railway  between  the  two  biggest  towns  Tallinn  and  Tartu 
will  be  electrified.  The  investments  support  the  development  of  the  cross-border  Rail  Baltic 

21 

 
project,  connecting  the  three  Baltic  capitals  and  countries  with  Poland  and  the  rest  of  the  EU. 
The measures aim at connecting Rail Baltic with other national railways and other TEN-T hubs 
(Tallinn Airport and Old Port) and facilitating access to its local stops on foot or by bicycle. This 
will  be  done  by  constructing  the  Rail  Baltic  terminal  in  Tallinn,  a  section  of  the  Tallinn-
Rohuküla railway connecting Western Estonia with international TEN-T hubs, and the Old Port 
tramline in Tallinn connecting Tallinn Harbour, Tallinn Airport and the new Rail Baltic terminal. 
Finally,  the  measure  supporting  cycling  and  pedestrian  paths  will  ensure  safe  and  sustainable 
access to the Rail Baltic local stops. 

Health and social protection. This component (with an estimated cost of EUR 336.3 million) 
aims  at  improving  accessibility  and  resilience  of  the  health  care  system,  improving  access  to 
social services, reducing youth unemployment and reducing the gender pay gap. The reform on 
the reorganisation of the Estonian health system aims at addressing health workforce shortages 
and improving the hospital network. The reform is accompanied by two investments, notably the 
construction  of  the  Northern  Estonia  Medical  Campus  to  consolidate  hospital  resources  in 
Tallinn as well as to improve the access to medical care for two-thirds of the Estonian population 
and the enhancement of medical helicopter capabilities. The Strategic Framework for addressing 
health  workforce  is  expected  to  outline  the  measures  to  address  these  shortages.  Measures 
strengthening  primary  care  include  extending  the  list  of  medical  specialisations  accessible 
through  e-consultation  and  incentivising  health  professionals  to  work  in  remote  areas.  The 
update of  e-health  governance should strengthen  the coordination of e-health services to  better 
respond  to  the  needs  of  the  health  system,  and  the  development  of  digital  solutions  should 
support a sustainable health system in Estonia. The access to social services is envisaged to be 
improved  by  modernising  and  simplifying  the  support  system  for  children  with  higher  care 
needs, supporting independent living of people with lower care needs, and, by an action plan on 
the integration of social and health care services to establish an integrated care model throughout 
Estonia. The investment targeting youth unemployment aims at supporting young people to gain 
work  experience  and  improve  their  skills.  The  extension  of  the  duration  of  the  unemployment 
insurance benefits by 60 days in case of adverse labour market conditions, should contribute to 
some extent to strengthening the social safety net.  Measures to reduce the gender pay gap should 
be outlined in Estonia’s Welfare Development Plan 2023-2030. In addition, a digital gender pay 
gap  tool  should  enable  employers  to  easily  collect  information  on  the  gender  pay  gap  and  its 
possible reasons in their organisations.  

3.2. Implementation aspects of the plan 

Consistency with other programmes is ensured. Estonia’s RRP is broadly consistent with the 
National Reform Programme (Estonia 2035 Action Plan) and the National Climate and Energy 
Plan,  and  includes  measures  that  are  complementary  to  the  National  Just  Transition  Plan.  A 
disclaimer is added that the information in the RRP on the use of different EU funds should not 
be  considered  final,  as  negotiations  on  different  EU  funds  are  still  ongoing.  The  plan  makes 
appropriate  references  to  demarcation  and  complementarities  across  the  various  funding 
programmes.  In  general  terms,  Estonia  intends  to  use  the  RRF  funding  in  a  way  that  is 
complementary  to  other  funding  programmes  especially  in  addressing  the  country-specific 

22 

 
recommendations,  as  the  RRF  is  a  time-limited  instrument.  However,  in  certain  areas,  such  as 
Just  Transition,  broad  upskilling  and  reskilling,  youth,  education  content,  support  to  R&D  and 
innovation,  Estonia  has  made  a  choice  not  to  use  extensively  the  RRF,  but  to  rely  on  the  Just 
Transition Fund and Structural Funds linked to their thematic logic. Technical support  may be 
requested under the Technical Support Instrument, to build capacities to implement the RRP, and 
it could provide expertise   in a number of areas such as healthcare, education, green and digital 
transition, decarbonisation, energy, quality living space, anti-money laundering and others. 

The  RRP  is  broadly  consistent  with  the  challenges  and  priorities  identified  in  the  most 
recent euro area recommendations. The Council recommendation15 on the economic policy of 
the euro area recommended to euro area Member States to take action, including through their 
RRPs,  to,  inter  alia,  ensure  a  policy  stance  which  supports  the  recovery,  including  by 
strengthening  the  coverage,  adequacy  and  sustainability  of  the  health  system.  The  RRP 
contributes  to  EAR  1,  as  it  pursues  reforms  and  investments  to  support  the  provision  of 
integrated  and  human-centred  health  care,  raises  the  capacity  of  health  institutions  to  adapt  to 
crisis  situations  and  addresses  the  shortages  of  health  workforce  included  in  Component  6  on 
health. The Council also recommended euro area Member States to, inter alia, further improve 
convergence,  resilience  and  sustainable  and  inclusive  growth,  including  by  ensuring  effective 
active labour market policies and support to job transitions, notably towards the green and digital 
transition, as well as by improving the functioning of public administration. Components 1 and 2 
include  reforms  and  investments  to  improve  capacities  of  businesses  to  achieve  the  green  and 
digital transition and Components 4 and 5 promote the climate change adaptation and mitigation. 
Component  3  contributes  to  the  digital  transformation  focusing  on  public  services  and  public 
administration. Component 6 on social cohesion supports employment of young people and their 
labour market participation.  

The  plan  sets  out  a  clear  administrative  organisation  for  its  implementation.  The  State 
Shared Service Center is the managing authority (“SSSC”, coordinating authority for Structural 
Funds).  The  Ministry  of  Finance,  which  has  been  the  national  coordinator  for  the  RRP,  is  the 
lead ministry responsible for planning, monitoring and evaluation in cooperation with the State 
Shared Service Center. The State Shared Service Center and the Ministry of Finance will work 
closely  with  line  ministries,  the  State  Chancellery  and  other  institutions  in  order  to  ensure  and 
monitor the implementation of the plan. Complementarity between measures financed from the 
RRF,  other  EU  financial  instruments  and  own  financing  is  set  to  be  ensured  through  sector-
specific programmes allowing transparent monitoring under the national budgetary strategy and 
annual state budget laws, and also preventing double funding. 

Estonia is committed to take into account gender equality and equal opportunities during 
the implementation of the various measures.  The plan describes existing national challenges 
mainly in terms of gender equality and needs of persons with disabilities. The plan states that all 

15 Council Recommendation of 13 July 2021 on the economic policy of the euro area 2021/C 283/01 

23 

 
                                                           
reforms  and  investments  will  take  into  account  gender  equality  and  ensure  equal  rights  and 
opportunities  to  participate,  regardless  of  gender,  racial  or  ethnic  origin,  religion  or  belief, 
disability, age or sexual orientation. In the preparation and implementation of interventions, the 
potential  impact  of  activities  on  gender  equality,  inclusion  and  equal  treatment,  including 
accessibility, will be analysed and, where appropriate, measures will be implemented to reduce 
potential  risks  (including  by  reducing  barriers  preventing  underrepresented  groups  from 
participating  in  activities  or  receiving  the  benefits  generated).  Each  component  contains  a 
disclaimer  that  the  reforms  and  investments  shall  be  monitored  to  ensure  gender  equality  and 
equal rights and opportunities for all to participate in the reforms and investments and to benefit 
from their results. Furthermore, the RRP states that the promotion of the rights of persons with 
disabilities,  in  accordance  with  the  principles  of  the  UN  Convention  on  the  Rights  of  Persons 
with  Disabilities,  is  integrated  into  a  number  of  development  plans  and  strategies,  the  most 
important  of  which  are  the  current  Wellbeing  Development  Plan  2016-2023  and  the  future 
Wellbeing Development Plan 2023-2030. 

The plan contains some measures that are expected to help Estonia address the challenges 
posed by gender equality and equal opportunities for all. These include measures to reduce 
the  gender  pay  gap  and  address  the  needs  of  persons  with  disabilities,  such  as  facilitating  the 
accessibility of the living environment. The measure on digital skills is expected to contribute to 
an increase of the number of women in information and communication technology professions 
and  to  address  gender  segregation  in  the  labour  market.  The  investment  to  support  youth 
employment should help young people to get in employment and thus contributing to their social 
inclusion. Reforms and investments included in the plan should reduce existing social, economic 
and territorial disparities. The plan refers to legislative and policy initiatives that are expected to 
complement the reforms and investments included in the plan.  

The  RRP  was  the  subject  of  various  public  discussions  and  debates,  which  covered  the 
plan’s main elements. Several thematic public consultations, open to civil society organisations, 
social partners, local authorities and other stakeholders, were organised between December 2020 
and June 2021. Representatives from social partners, business organisations, local governments 
and  other  stakeholders  took  part  in  the  negotiation  process  between  the  Commission  and  the 
Estonian authorities. From 20 May to 4 June 2021, all interested parties had the opportunity to 
submit  their  views  and  comments  by  taking  part  in  the  public  consultation  on  the  draft  plan. 
Stakeholders’  engagement  in  the  implementation  is  planned  to  be  established  through  the 
management and control system. Estonia intends to use a similar system to that in place for the 
implementation of the Cohesion policy support where stakeholders’ representatives participate in 
the EU funds Monitoring Committee. 

The  RRP  does  not  include  a  security  self-assessment  for  investments  in  digital  capacities 
and  connectivity.  The  plan  does  provide  a  short  analysis  of  strategic  autonomy  and  security 
aspects in the descriptions of the two components supporting investments in digital technologies. 
Moreover,  the  component  aiming  at  reorganising  and  modernising  the  digital  services  and 
infrastructures  of  the  public  administration  includes  actions  specifically  aimed  at  reinforcing 
security  aspects.  The  implementation  of  the  recent  national  Regulation  on  the  security  of 

24 

 
communications  networks is  also  expected to  help  ensure the reliability  of the suppliers of the 
solutions to be deployed with the support of the measure on last mile connectivity.  

The Estonian RRP includes the following cross-border projects: 

  Construction of the Rail Baltic Tallinn terminal, the starting point of Rail Baltic, a cross-
border project connecting the three Baltic capitals and countries with Poland and the rest 
of the EU. 

  Cooperation  with  Finland  in  the  context  of  the  implementation  of  a  measure  aiming  at 

developing a virtual assistant to access digital public services. 

The  RRP  sets  out  Estonia’s  communication  plans.  The  objectives  of  the  communication 
strategy  are  in  line  with  the  RRF  Regulation  and  aim  to  raise  awareness  about  the  RRP’s 
contribution  to  the  Estonian  and  European  recovery  and  to  the  twin  transition.  The  purpose  of 
communication is also to be transparent about grant planning and distribution and to ensure the 
visibility  of  supported  and  funded  projects.  Partly,  the  RRP-related  communication  will  be 
integrated  in  the  overall  communication  strategy  of  EU  funds,  which  is  managed  by  the  EU 
Funds  Communication  Management  Group.  The  communication  process  will  have  a  stronger 
focus in 2021, 2024 and the end of 2026, around major events in the implementation of the plan. 
A  dedicated  communication  plan  will  be  set  out  including  media  briefings,  articles  on  major 
topics,  press  briefings  and  audience-based  activities  to  ensure  that  messages  reach  all  target 
groups. 

Estonia plans  to target four main groups: specific target  audiences (potential applicants  and 
final  recipients,  entities  participating  in  the  implementation  of  the  RRP,  social  partners  and 
NGOs),  politicians,  opinion-leaders  and  experts,  and  the  general  public  with  a  dedicated 
approach  towards  the  Russian-speaking  population.  A  wide  range  of  communication  channels 
will aim to provide objective and comprehensible information to all the above-mentioned target 
groups. A dedicated RRF homepage (online since spring 2021) provides access to all information 
and communication materials. It is expected that Estonia will ensure the necessary funding of all 
these measures.  

The  RRP  foresees  a  series  of  coordinated  communication  activities  with  the  European 
Commission,  including  joint  press  releases,  social  media  posts,  possible  events  with  the 
participation of Commissioners and members of the European Parliament. These would focus on 
key areas such as mitigating the social and economic impact of the crisis, development of green 
hydrogen  technology,  digital  transition,  green  transition  for  businesses,  energy  efficiency  and 
major infrastructure projects, namely the– Rail Baltic Ülemiste Joint Terminal, the Tallinn Old 
Port tramline, the Rohuküla railway and the Tallinn Hospital. 

An indicative amount of EUR 95 000 has been planned for communication activities. The 
Communications  Department  of  the  Ministry  of  Finance  and  the  Communications  Unit  of  the 
State  Support  Service  Centre  are  responsible  for  the  organisation  of  communication.  The 
communication  strategy  will  be  monitored  based  on  a  number  of  indicators  and  benchmarks 
specified in the communication strategy.  

25 

 
It is essential that the described communication plan is implemented. Coordination between 
the EU and national authorities is specified in the strategy and should be pursued to maximise the 
impact and effectiveness of communications. 

State  aid  and  competition  rules  fully  apply  to  the  measures  funded  by  the  Recovery  and 
Resilience Facility. Union funds channelled through the authorities of Member States, like the 
RRF funds, become State resources and can constitute State aid if all the other criteria of Article 
107(1)  TFEU  are  met.  When  this  is  the  case  and  State  aid  is  present,  these  measures  must  be 
notified and approved by the Commission before Member States can grant the aid, unless those 
measures are covered by an existing aid  scheme or comply  with  the applicable conditions  of a 
block  exemption  regulation,  in  particular  the  General  Block  Exemption  Regulation  (GBER) 
declaring certain categories of aid compatible with the internal market in application of Articles 
107 and 108 TFEU. When State aid  is  present  and it requires notification, it is  the duty of the 
Estonia to notify State aid measures to the Commission before granting them, in compliance with 
Article 108(3) TFEU. In this respect, the State aid analysis carried out by Estonia in the recovery 
and resilience plan cannot be deemed a state-aid notification. In as far as Estonia considers that a 
specific  measure  contained  in  the  recovery  and  resilience  plan  entails  de  minimis  aid  or  aid 
exempted  from  the  notification  requirement,  it  is  the  responsibility  of  Estonia  to  ensure  full 
compliance with the applicable rules. 

4.  SUMMARY OF THE ASSESSMENT OF THE PLAN 

4.1. Comprehensive  and  adequately  balanced  response  to  the  economic  and  social 

situation 

The  plan  includes  a  balanced  set  of  reforms  and  investments  contributing  to  the  Union’s 
economic,  social  and  territorial  cohesion  by  referring  to  the  six  pillars  of  Article  3  of  the 
Regulation (EU) 2021/241. Estonia’s plan consists of six components, covering a broad range of 
policy  areas:  1.  Digital  Transformation  of  Enterprises  2.  Accelerating  the  Green  Transition  in 
Enterprises 3. Digital State 4. Energy and Energy Efficiency 5. Sustainable Transport 6. Health 
and  Social  Protection.  Three  components  in  the  Estonian  plan  directly  contribute  to  the  green 
transition (pillar 1). Two components directly address the digital transformation (Pillar 2). Two 
components contribute directly towards smart, sustainable and inclusive growth (Pillar 3), with 
most  components  partially  addressing  the  aforementioned  pillars  as  well.  All  components 
directly  or  indirectly  contribute  towards  social  and  territorial  cohesion  (Pillar  4).  Two 
components  support  health,  economic,  social  and  institutional  resilience  (Pillar  5),  while  one 
component  promotes  policies  for  the  next  generation,  children  and  youth.  The  coverage  of  the 
Estonian plan towards the six pillars is summarised in Table 5 below.  

Table 5. Coverage of the six pillars of the Facility by the Estonian RRP components 

Green 
transition 

Digital 
transformation 

Smart, 
sustainable 
& inclusive 
growth 

Social 
and 
territorial 
cohesion 

Digital transformation of 

○ 

● 

● 

○ 

Health, and 
economic, 
social and 
institutional 
resilience 
○ 

Policies for 
the next 
generation 

○ 

26 

 
  
● 

● 

○ 

enterprises 
Accelerating the green 
transition in enterprises 
Digital State 
Energy and energy 
efficiency 
Sustainable transport 
Healthcare and social 
protection 
Key:  “●”  investments  and  reforms  of  the  component  significantly  contribute  to  the  pillar;  “○”  the  component 
partially contributes to the pillar 

○ 
● 

○ 
○ 

○ 
○ 

● 

○ 

● 

● 

● 

○ 

○ 

● 

● 

○ 

1st pillar: green transition 

Green challenges are addressed in the plan in particular under Components 2, 4 and 5 on 
accelerating  the  green  transition,  energy  and  energy  efficiency,  as  well  as  sustainable 
transport. Investments in Component 2 are expected to promote green skills, foster innovation 
and the development of green technologies, as well as support the change of business models in 
manufacturing  and  resource  efficiency  in  companies  and  the  deployment  of  resource-efficient 
green technologies. Additionally, through this component, Estonia intends to promote the uptake 
of green hydrogen technologies. Those measures are expected to contribute to the transition to a 
circular economy while mitigating climate change, reduce the carbon footprint of companies as 
well as improve productivity and competitiveness. Additionally, the component is also aimed at 
encouraging the introduction of sustainable production through improved recycling of waste and 
the use of bio-resources. 

Component 4 on energy and energy efficiency is expected to improve the energy efficiency 
of buildings, while promoting the deployment of clean and renewable energy. Through the 
renovation of multi-apartment  dwellings  and small  residential  buildings, Estonia is  expected to 
reduce its final energy consumption leading to heating, electricity and CO2 emission savings, as 
well  as  improving  the  living  conditions  of  residents  of  such  buildings.  Additionally,  Estonia 
intends to increase the capacity of production and storage of green energy, including through the 
deployment of a smart energy system. 

Component  5  on  sustainable  transport  is  expected  to  build  a  public  transport 
infrastructure  leading  to  long-term  greenhouse  gas  reduction.  Estonia  intends  to  construct 
(or rehabilitate) a rail link and related infrastructure, a new tramline, as well as new bicycle- and 
walk-ways, which is expected to contribute to the Estonian 2035 strategy, the Estonian National 
Energy  and  Climate  Plan  for  2030  and  the  sustainable  mobility  targets  set  out  in  the  ongoing 
Transport and Mobility Development Plan 2021-2035. As part of the latter, within the timeline of 
the  RRP,  the  Tallinn  capital  region  common  transport  system  will  be  implemented  and  the 
railway between the two biggest towns Tallinn and Tartu will be electrified. 

Other components indirectly contribute to the green transition. For instance, Component 1 
on the digital transformation of enterprises is expected to contribute to climate neutrality and the 

27 

 
 
 
 
 
 
 
 
 
 
 
 
 
circular  economy  through  the  deployment  of  digital  technologies  in  the  construction  and 
transport industries, manufacturing, as well as the service sector.  

Based  on  the  methodology  for  climate  tracking  set  out  in  Annex  VI  to  Regulation  (EU) 
2021/241,  the  quantitative  assessment  of  the  plan  in  relation  to  the  climate  target  finds  a 
contribution of 41.5% of the total allocation, thereby complying with the minimum threshold of 
37%.  

2nd pillar: digital transformation 

Digital  challenges  are  addressed  in  the  plan  mostly  under  Component  1  on  digital 
transformation of enterprises and Component 3 on the digital state.  The investments under 
Component 1 are expected to accelerate the digital transformation of business by putting in place 
appropriate strategies and promoting the uptake  of digital  technologies and providing financial 
support  to  SMEs  from  all  sectors  to  carry  out  investments  that  should  enhance  their  digital 
transformation.  In  addition,  it  aims  to  develop  an  e-construction  platform  and  related  public 
services, standards and data management and sharing tools, as well as support projects aiming at 
developing and prototyping innovative private services connected to the national e-construction 
platform.  Component  1  also  includes  a  measure  on  deployment  of  ICT  technologies  in  the 
transport and logistics sector. Under the skills  reform, the Estonian plan intends to  address  the 
shortage of ICT specialists and promote the inclusion of women in the field by ensuring that at 
least  35%  of  the  beneficiaries  of  the  supported  training  activities  are  women.  Additionally, 
Estonia  intends  to  increase  the  export  capacity  and  competitiveness  of  Estonian  companies, 
including  notably  those  of  the  ICT  sector  by  adapting  its  export  advice  to  digital  companies 
following the increase in consumption of digital goods due to COVID-19. 

Component  3  of  the  plan  on  the  digital  state  is  expected  to  drive  the  digitalisation  of  the 
public sector and services. Thus, it contributes to the second pillar through the development of 
an excellence centre for data management and open data, the development of cloud solutions in 
the  Estonian  public  sector,  further  development  of  digital  public  services  for  individuals  and 
businesses, as well as  a  virtual  assistance platform.  Combined, these measures aim to  improve 
the efficiency of the delivery of public services, reduce the administrative burden and whenever 
possible, enable a proactive delivery of information, in line with the once-only principle and thus 
contributing to the implementation of the single digital  gateway16. The plan is also expected to 
contribute  towards  bridging  the  digital  divide  between  rural  and  urban  areas  with  the 
construction  of  very  high-capacity  broadband  networks.  Furthermore,  the  plan  includes  a 
measure to strengthen the fight against money laundering through enhanced data use. 

Other  components  indirectly  contribute  to  the  digital  transformation.  Measures  in 
Component  2  on  accelerating  the  green  transition  are  expected  to  contribute  to  the  digital 

16 Regulation (EU) 2018/1724 of the European Parliament and of the Council of 2 October 2018 establishing a 
single digital gateway to provide access to information, to procedures and to assistance and problem-solving 
services and amending Regulation (EU) No 1024/2012 

28 

 
                                                           
transformation  through  digital  solutions  to  energy  and  resource  efficiency,  the  mobilisation  of 
green and digital technologies, enabling access to the environmental datasets for start-ups as well 
as the development of green skills fostering ICT solutions for climate neutrality. Component 6 
on health and social protection is expected to further integrate ICT solutions for better customer 
service management and information gathering, thus further improving the e-health system. 

Based on the methodology for digital tagging set out in Annex VII to Regulation (EU) 2021/241, 
the  quantitative  assessment  of  the  RRP  in  relation  to  the  digital  target  finds  a  contribution  of 
21.5% of the total allocation, therefore complying with the minimum threshold of 20%.  

3rd pillar: smart, sustainable and inclusive growth 

Components 1 and 2 on the digital transformation of enterprises and accelerating the green 
transition provide opportunities for job creation, economic competitiveness and sustainable 
long-term growth, to which a well-functioning internal market is key. Under Component 1 
on the digital transformation of businesses, Estonia is expected to promote growth through five 
sets  of  measures:  support  to  the  digital  transformation  of  enterprises;  development  of  e-
construction;  digital  skills;  support  to  the  competitiveness  of  enterprises  in  foreign  markets;  as 
well  as  the  digitalisation  of  the  freight  infrastructure.  Support  aimed  at  increasing  the  level  of 
research and investment, as well as the uptake of digital technologies in SMEs (first measure) is 
expected  to  help  transform  those  enterprises  and  improve  the  efficiency  of  their  processes. 
Investments  into the digitalisation and automation of the construction sector (second measure), 
which  accounts  for  10%  of  GDP  and  has  a  low  labour  productivity  (below  EU  average),  is 
expected to increase the overall productivity growth of the sector and the economy through spill-
overs.  Additionally,  reforms  on  digital  skills  (third  measure),  which  aim  at  improving  the 
education system, cyber-capacity and availability of specialists, are expected to support growth, 
sustainability  and  international  competitiveness  of  companies.  Moreover,  reforms  on  the 
competitiveness  of  exporting  businesses  (fourth  measure)  are  expected  to  increase  business 
innovation  and  R&D,  as  well  as  (e-)  exports  potential,  through  innovative  business  centres,  as 
well as country and regional strategies, thus strengthening the sustainable growth potential of the 
economy, including exporting SMEs. Moreover, the measure on development of digital waybills 
services aiming to digitalise the exchange of information in road freight transport (fifth measure) 
is  expected  to  contribute  to  a  smooth  functioning  of  the  internal  market.  As  demonstrated 
throughout the COVID-19 crisis and recalled in the updated EU industrial strategy17, the internal 
market together with innovation and competitiveness are key for the resilience of the EU. 

Component 2 on accelerating the green transition is expected to support entrepreneurship 
and economic growth. The plan includes measures which contribute to supporting the change of 
business  models  in  manufacturing,  green  technology  development  programmes  and  the 
deployment of resource-efficient  green technologies. The establishment of the Green Fund will 

17 Updating the 2020 New Industrial Strategy: Building a stronger Single Market for Europe’s recovery” 
(COM(2021) 350 final) 

29 

 
                                                           
improve  access  to  finance  and  should  therefore  contribute  to  the  development  of  green 
technologies  in  research-intensive  businesses,  as  well  as  the  start-up  sector.  These  measures 
should raise Estonia’s economic growth potential and increase its international competitiveness. 

Component 4 on energy and energy efficiency is  also  expected to contribute partly to the 
growth  potential  of  Estonia.  Sustainable  renovation  of  apartment  buildings  and  private 
dwellings  will  support  regional  employment  in  a  large  sector  of  the  Estonian  economy. 
Additionally,  strengthening  the  supply  of  green  energy  throughout  the  country  is  expected  to 
underpin the long-term sustainability, employment, and growth potential. 

Component  5  on  sustainable  transport  is  expected  to  partly  contribute  to  the  growth 
potential of Estonia through improved connectivity. The construction (or rehabilitation) of a 
rail  link  and  related  infrastructure,  as  well  as  a  new  tramline,  should  contribute  to  the 
connectivity between  regions,  thus  facilitating the outreach to  different  markets  for businesses, 
and better access to workplaces for the population. 

Component 6 on health and social protection contains measures supporting young people, 
which  should  raise  growth  potential  and  ensure  the  inclusiveness  of  growth.  In  particular, 
investments  into  labour  market  measures  for  young  people  will  contribute  to  improving  the 
employability of young people and raising the growth potential. 

4th pillar: Social and territorial cohesion  

The  plan  pledges  to  implement  all  measures  with  due  regard  to  the  principle  of  equal 
treatment providing equal opportunity to all people regardless of gender, racial or ethnic 
origin,  religion  or  belief,  disability,  age  or  sexual  orientation.  As  such,  all  components  are 
expected  to  partly  contribute  to  social  and  territorial  cohesion.  Moreover,  each  component 
includes  measures  that  aim  at  directly  or  indirectly  improving  social  inclusion  and  addressing 
regional disparities, thereby contributing to the fourth pillar.  

Component  6  on  health  and  social  protection  is  expected  to  promote  social  and  regional 
cohesion.  The  plan  is  expected  to  improve  the  provision  of  healthcare  across  Estonia  with  the 
adoption of the Hospital Development Plan in 2024 and the construction of the Northern Estonia 
Medical  Campus,  improving  e-consultations  and  investing  in  medical  helicopters  for  better 
access  to  healthcare  in  the  remote  areas.  The  measure  on  extending  the  duration  of  the 
unemployment insurance benefit in case of difficult labour conditions is expected to contribute to 
improving the safety net. The access to social services should partially be improved by measures 
on  long-term,  notably  those  modernising  and  simplifying  the  support  system  for  children  with 
higher care needs, supporting independent living of people with lower care needs, and the action 
plan on the integration of social and health care services. Measures reducing the gender pay gap 
and addressing youth unemployment should also contribute to improving social cohesion.  

Component  5  on  sustainable  transport  is  expected  to  indirectly  contribute  to  the 
convergence  between  regions  in  Estonia.  Measures  under  this  component  are  expected  to 
improve the connectivity between urban and rural areas, through an improved transport network. 

30 

 
This  should promote citizens’ access  to  education, employment  and public services, as well as 
business access to different markets. 

Component 1 on the digital transformation of enterprises and Component 3 on the digital 
state  are  expected  to  indirectly  contribute  to  social  and  territorial  cohesion.  Through  the 
digital skills measure, Component 1 aims at providing learning opportunities to different groups 
including  those  who  have  not  yet  had  access  to  adult  learning.  In  Component  3,  Estonia  is 
expected to improve the access to its public services throughout the country. Coupled with the 
construction of very-high-capacity broadband networks, it should also contribute to reducing the 
digital  divide  between  rural  and  urban  areas  and  ensure  equal  access  to  those  services  for 
individuals and businesses. These are expected to encourage business relocation and employment 
in different regions of Estonia. 

Component  4  on  energy  and  energy  efficiency  is  expected  to  partly  promote  regional  job 
creation. It is expected to sustainably contribute to regional employment through projects such 
as, the (green) renovation of multi-apartment dwellings and small residential buildings, as well 
as  the  increase  in  capacity  of  deployment  and  storage  of  green  energy,  with  the  inclusion  of  a 
smart energy system. The transition from a fossil fuel-based energy model to a renewable energy 
use  is  expected  to  foster  employment  locally  through  a  more  scattered  allocation  of  renewable 
energy. 

5th  pillar:  Health  and  economic,  social  and  institutional  resilience,  with  the  aim  of 
increasing crisis preparedness and crisis response capacity, among others  

The resilience of Estonia’s social, health and economic system is expected to improve as a 
result of the measures proposed in Component 6 on health and social protection.  The plan 
intends  to  invest  a  third  of  its  RRF  non-repayable  financial  support  in  the  construction  of  the 
Northern  Estonia  Medical  Campus  and  the  acquisition  of  multifunctional  medical  helicopters. 
Strengthening  of  primary  healthcare,  addressing  health  workforce  shortages,  as  well  as  the 
promotion  of  e-health  should  improve  the  access  and  resilience  of  the  health  care  system. 
Measures  related  to  extending  the  duration  of  the  unemployment  insurance  benefit  in  case  of 
difficult labour market conditions and the measures on long term care are expected to contribute 
to economic and social resilience.  

The digitalisation of the public sector and services (Component 3) is expected to contribute 
towards  the  institutional  resilience  of  Estonia.  The  development  of  an  excellence  centre  for 
data  management  and  open  data,  the  deployment  of  secured  cloud  solutions  in  the  Estonian 
public  sector,  as  well  as  a  virtual  assistance  platform  (‘Bürokratt’)  and  other  digital  channels 
should  ensure  a  better  outreach  of  public  services  to  citizens  and  businesses  across  Estonia. 
Furthermore,  the  measures  to  combat  money  laundering  should  increase  the  resilience  of  the 
financial sector and of the state.  

6th  pillar:  Policies  for  the  next  generation,  children  and  young  people,  such  as  education 
and skills  

31 

 
Measures aiming at ensuring the access to employment and social services for the Estonian 
youth  (Component 6)  contribute  directly  to  creating  better  prospects  for  the  next 
generation.  Through  an  upgraded  ‘My  First  Job’  (M1T)  scheme,  which  is  at  the  centre  of  the 
Estonian  enhanced  Youth  Guarantee  Action  Plan,  the  RRF  should  contribute  to  getting  young 
people  into  employment.  The  wage  subsidy  and  training  allowance  are  expected  to  nudge 
employers into hiring  young professionals  with  little experience, and in  turn help  them to  gain 
skills,  thereby  also  reducing  youth  unemployment.  Additionally,  the  digital  and  green  skills 
reforms,  under  Component  1  and  2  respectively,  are  intended  to  help  increase  the  uptake  of 
vocational skills, thus also indirectly improving skills of the next generation. Finally, reforming 
the support system for children with higher care needs contributes to better and quality access to 
services for children. 

Taking  into  consideration  all  reforms  and  investments  envisaged  by  Estonia,  its  recovery  and 
resilience plan represents, to a large extent a comprehensive and adequately balanced response 
to the economic and social situation, thereby contributing appropriately to all six pillars referred 
to in Article 3 of the RRF Regulation, taking the specific challenges and the financial allocation 
of Estonia into account. This would warrant a rating of A under the assessment criterion 2.1 in 
Annex V to the RRF Regulation. 

4.2. Link with country-specific recommendations and the European Semester 

In  2019  and  2020,  Estonia  received  country-specific  recommendations  to  improve  the 
adequacy  of  the  social  safety  net,  including  by  broadening  the  coverage  of  unemployment 
benefits, and access to affordable and integrated social services, and to take measures to reduce 
the  gender  pay  gap,  including  by  improving  wage  transparency.  It  was  also  recommended  to 
improve  the  accessibility  and  resilience  of  the  health  system,  including  by  addressing  the 
shortages of the health  workers, strengthening primary care and  ensuring the supply of critical 
medical products. Moreover, it was recommended that Estonia address skills shortages and foster 
innovation by improving the capacity and labour market relevance of the education and training 
system, as well as to support the innovation capacity of small and medium-sized enterprises and 
ensure  sufficient  access  to  finance.  In  addition,  it  was  recommended  that  Estonia  focus 
investment  on  the  green  and  digital  transition,  in  particular  on  digitalisation  of  companies, 
research  and 
innovation,  clean  and  efficient  production  and  use  of  energy,  energy 
interconnections,  resource  efficiency  and  sustainable  transport,  taking  into  account  regional 
disparities.  These  investments  are  meant  to  contribute  to  a  progressive  decarbonisation  of  the 
economy.  To  tackle  the  COVID-19  crisis,  Estonia  was  recommended  to  take  all  necessary 
measures  to  effectively  address  the  pandemic,  sustain  the  economy  and,  when  economic 
conditions  allow,  to  pursue  fiscal  policies  aimed  at  achieving  prudent  medium-term  fiscal 
positions  and  ensuring  debt  sustainability,  while  enhancing  investment.  Finally,  Estonia  was 
recommended  to  step  up  efforts  ensuring  effective  supervision  and  enforcement  of  the  anti-
money laundering framework.  

32 

 
 
Estonia’s recovery and resilience plan provides detailed information  on how the country-
specific recommendations (CSRs) are addressed through measures included in the plan or 
funded through other sources. Overall, the plan addresses most of the CSRs. However, in some 
cases,  the  measures  in  the  plan  alone  are  not  sufficient  to  ensure  that  the  CSRs  are  addressed 
adequately. This is notably the case of the CSR on strengthening the social safety net, including 
by  broadening  the  coverage  of  unemployment  benefits  and  on  access  to  social  services,  which 
would be addressed in a more substantial way by including a reform to broaden the coverage of 
unemployment  benefits  and  a  comprehensive  reform  of  the  long-term  care  system.  Measures 
addressing health workforce shortages are included in the RRP, but given the challenges in this 
area, it remains important  to  tackle them  with  more ambition in  the coming  years. More wage 
transparency should contribute to further reduce the gender pay gap. The CSR on decarbonising 
the  economy  is  partially  addressed,  as  the  targets  and  actions  for  phasing  out  oil  shale  will  be 
proposed in the upcoming renewed National Development Plan of the Energy Sector only at the 
end of 2025 and broader reforms to support the green transition, such as green taxation, are not 
envisaged. 

The plan contains some measures that contribute to improving the adequacy of the social 
safety net and access to social services (CSR 2, 2019 and 2020). Component 6 on health and 
social  protection  envisages  to  improve  the  quality  and  accessibility  of  social  services  by 
measures  on  long-term  care,  including  those  improving  the  support  system  for  children  with 
higher care needs, supporting independent living of people with lower care needs and an action 
plan on providing social and health services in an integrated manner. However, the RRP does not 
contain  a  comprehensive  reform  of  the  long-term  care  system.  The  measure  on  extending  the 
duration of the unemployment insurance benefit in periods of high unemployment is expected to 
help  the  unemployed  to  bridge  a  longer  period  of  unemployment  in  difficult  labour  market 
conditions. A broadening of the unemployment insurance benefit coverage is not included in the 
RRP. 

Some measures are taken to address the challenges related to reducing the gender pay gap, 
including  by  improving  wage  transparency  (CSR  2,  2019).  The  Welfare  Development  Plan 
2023-2030 should outline measures to narrow the gender pay gap, in particular by reducing the 
prevalence and negative impact of gender stereotypes on the lives and decisions of women and 
men,  including  concerning  educational  and  career  choices  and  carrying  the  care  burden,  and 
supporting a more effective implementation of the Gender Equality Act. The digital gender pay 
gap tool should make information available to employers concerning the gender pay gap and its 
possible reasons in their organisations. However, it is not envisaged to make the data available to 
public  authorities,  which  would  increase  wage  transparency.  The  measure  on  digital  skills  of 
Component 1 is also expected to contribute to increasing the number of women in information 
and communication technologies, and thus contributing to addressing gender segregation in the 
labour market. Moreover, all measures in the plan will be implemented taking into due account 
gender balance and equal opportunities.  

Estonia’s  plan  includes  measures  to  improve  the  accessibility  and  resilience  of  the  health 
system,  including  by  addressing  the  shortages  of  health  workers,  strengthening  primary 

33 

 
care and ensuring the supply of critical  medical products (CSR 1, 2020).  As the pandemic 
has  revealed  some  structural  vulnerabilities  of  the  health  system,  Component  6  on  health  and 
social  protection  includes  investments  and  reforms  aiming  at  improving  the  resilience  and 
accessibility  of  the  health  care  system.  The  measures  to  strengthen  primary  care  include 
incentivising  the  health  workforce  to  pursue  the  profession  and  to  work  in  remote  areas  and 
extending  the  scope  of  e-consultation  to  reduce  unmet  needs  for  specialised  care.  Measures 
addressing  health  workforce  shortages  envisage,  in  particular,  ensuring  the  availability  of 
personnel  in  the  different  health  sectors  and  increasing  the  number  of  health  practitioners  in 
certain specialisations. However, given the challenges as regards health workforce shortages, it 
remains important to tackle them with more ambition in the coming years. The governance of e-
health is envisaged to be updated to make it more patient-friendly. The investments to construct 
the  Northern  Estonia  Medical  Campus  and  improve  the  medical  helicopters  capabilities  are 
expected to increase access to health care, improve resource efficiency and provide high-quality 
care. 

Reforms  and  investments  to  address  skills  shortages  and  foster  innovation  aim  at 
improving the capacity and labour market relevance of the education and training system. 
(CSR 2, 2019). These are included in Components 1, 2 and 6. In order to ensure that the skills of 
the workforce support the green and digital transition, training curricula will be modernised and 
skills  upgrading  and  support  will  be  organised  through  flexible  reskilling  and  upskilling 
programmes.  To  support  continuous  employment  and  the  transition  to  higher-skilled  jobs  and 
sectors  with  high  or  stable  labour  needs,  reskilling  and  upskilling  opportunities  are  offered  to 
people  with  skills  that  are  outdated  or  in  low  demand.  The  plan  includes  a  reform  of  the 
qualifications system and measures to support the adult participation in education, development 
of  skills  and  enabling  of  better  quality  non-formal  training  system  and  flexible  learning 
pathways. 

The  measures  in  the  plan  contribute  to  the  green  transition  by  fostering  energy  and 
resource efficiency, sustainable transport, energy interconnections and promoting a clean 
and efficient energy production (CSR 3, 2019; CSR 3, 2020). Component 2 contains measures 
to speed up the green transition in the business sector in Estonia supporting the development and 
uptake  of  green  technologies,  increasing  green  R&D  and  innovation  capabilities  and  resource 
efficiency, introducing new business models and improving skills and expertise in fields related 
to the green transition as well as creating opportunities for the uptake of renewables-based green 
hydrogen  technologies.  Measures  included  in  Component  4  should  help  to  reduce  the 
dependency  on  oil  shale,  incentivise  the  uptake  of  renewable  energy  and  improve  the  energy 
efficiency of buildings. Measures in Component 5 focus on decarbonising the transport sector to 
reduce emissions and incentivise the uptake of sustainable modes of transport. They include the 
development  of  the  cross-border  Rail  Baltic  project,  connecting  the  three  Baltic  capitals  and 
countries  with  Poland  and  the  rest  of  the  Union.  The  measures  in  the  component  aim  at 
connecting the Rail Baltic with other national railways and other TEN-T hubs (Tallinn Airport 
and Old Port) and facilitating access to its local stops on foot or by bicycle. Within the timeline 
of  the  RRP,  the  Tallinn  capital  region  common  transport  system  will  be  implemented  and  the 
railway between the two biggest towns Tallinn and Tartu will be electrified. 

34 

 
Estonia’s plan promotes investment in the digital transition, in particular the coverage of 
very-high-capacity broadband, digital skills and the digitalisation of the economy (CSR 3, 
2020).  Component  1  includes  measures  to  foster  the  digital  transformation  of  Estonian 
companies and their competitiveness on export markets. Financial support is foreseen for SMEs 
and microenterprises of all sectors, at different stages of their digital transformation, as well as 
for the adoption and deployment of digital solutions in the construction and road freight transport 
sectors.  Moreover,  the  component  addresses  the  key  issue  of  digital  skills,  through  awareness-
raising  of  SME  managers  and  support  to  the  upskilling  and  retraining  of  specialists  in 
information and communication technologies (ICT). Component 3 includes measures to increase 
the  resilience  and  sustainability,  as  well  as  the  efficiency  and  user-friendliness  of  digital 
infrastructures and services (notably in light of the growing cybersecurity threats). The support to 
the deployment of very-high-capacity networks in rural areas should also ensure wider access to 
online  services  and,  more  generally,  contribute  to  the  further  digital  transformation  of  the 
country. 

The plan is expected to support the innovation capacity and competitiveness of small and 
medium-sized enterprises, and ensure sufficient access to finance (CSR 3, 2020). Measures 
proposed in  Components 1, 2, and 4  aim at  strengthening the competitiveness  of companies to 
adapt to the green and digital transition, including through investments and reforms in the area of 
skills.  The  Green  Fund  under  component  2  improves  access  to  finance  for  start-ups  and  small 
and  medium-size  companies  by  providing  equity  investments  for  companies  developing 
innovative green technologies.  

The  Estonian  plan  includes  a  measure  to  strengthen  the  anti-money  laundering  (AML) 
framework  (CSR  1,  2019  and  4,  2020).  Building  on  recently  adopted  changes  to  the  AML 
framework,  Estonia  envisages  to  upgrade  the  strategic  analysis  capability  in  AML  by 
establishing a Strategic Analysis Centre within the Financial  Intelligence Unit to assess money 
laundering and terrorist financing risks more systematically and operationally and strengthen the 
prevention of money laundering.  

The  RRP  represents  to  a  large  extent  a  comprehensive  and  adequate  response  to  the 
economic  and  social  situation  of  Estonia.  Continued  convergence  remains  of  significant 
importance  to  Estonia,  especially  in  terms  of  regional  and  social  disparities,  unemployment 
(including  youth  unemployment),  gender  pay  gap,  risks  of  poverty  and  social  exclusion,  skills 
(including  for  young  people),  as  well  as  healthcare  and  social  protection.  The  plan  includes 
reforms  and  investments  that  contribute  to  improving  the  accessibility  and  resilience  of  the 
healthcare system. The measure on providing a wage subsidy to the employer and reimbursing 
the  training  costs  of  a  young  person  are  expected  to  improve  the  employability  as  well  as  the 
green and digital skills of young people. The plan also includes measures that should help reduce 
the  gender  pay  gap.  Furthermore,  the  measures  in  the  plan  to  support  the  country’s  digital 
transformation  and  green transition  take into account  the significant  regional  disparities. While 
the plan provides a comprehensive response to the challenges faced by Estonia, in some areas a 
continued ambitious reform effort will be required to effectively address them. 

35 

 
Overall, the plan addresses Estonia’s main identified  challenges, stimulating the recovery 
from  the  Covid-19  crisis  and  laying  the  foundation  for  its  long-term  sustainable  growth. 
The challenges underlined in the most recent country-specific recommendation are related to the 
health  sector,  social  inclusion,  education  and  training,  supporting  competitiveness  of  the 
economy, as well as the twin transition. Measures envisaged in the plan are set to bring structural 
changes in these areas and incite the participation from private entities. Estonia’s plan proposes a 
balanced and adequate response to the economic and social situation. 

Taking  into  consideration  the  reforms  and  investments  envisaged  by  Estonia,  its  recovery  and 
resilience  plan  is  expected  to  contribute  to  effectively  addressing  to  varying  degrees  all  of  the 
challenges  identified  in  the  country-specific  recommendations,  or  challenges  in  other  relevant 
documents officially adopted by the Commission under the European Semester, and the recovery 
and  resilience  plan  represents  an  adequate  response  to  the  economic  and  social  situation  of 
Estonia. This would warrant a rating of A under the assessment criterion 2.2 in Annex V to the 
RRF Regulation. 

36 

 
 
 
Table 6. Mapping of country challenges identified in 2019-20 country-specific recommendations to 
the Estonian RRP components 

Country challenges 
(as identified in Section 2) 

Associated CSR 
(2019-2020) and 
European Semester 
recommendations 

n
o
i
t
a
m
r
o
f
s
n
a
r
t

s
e
s
i
r
p
r
e
t
n
e

f
o

l
a
t
i
g
i
D

e
h
t

g
n
i
t
a
r
e
l
e
c
c
A

n
o
i
t
i
s
n
a
r
t

n
e
e
r
g

s
e
s
i
r
p
r
e
t
n
e

n
i

● 

○ 
●  
○ 
○ 
○ 
● 

● 

Focus investment on the green and digital 
transition, in particular on digitalisation of 
companies 
Reducing energy intensity 
Resource efficiency 
Sustainable transport 
Research and innovation 
Energy infrastructure 
Support innovation capacity of small and medium-
sized enterprises 
Reducing regional disparities 

Strengthening anti-money laundering framework 
Ensure sufficient access to finance 

Improving adequacy of social safety net including 
by broadening the coverage of the unemployment 
benefits 
Improving access to affordable and integrated 
social services 
Reducing the gender pay gap, including by 
improving wage transparency 

Improve the accessibility and resilience of the 
health system, including by addressing the 
shortages of health workers, strengthening primary 
care 

Investment 

2019.3.1., 2020.3.3. 

● 

● 

● 

2019.3.1., 2020.3.5. 
2019.3.1., 2020.3.6. 
2019.3.1., 2020.3.7. 
2019.3.1., 2020.3.4. 
2019.3.1., 2020.3.1. 
2020.3.8. 

2019.3.1. 

Financial sector 
2019.1.2, 2020.4.  
2020.3.9. 
Social 

2019.2.2., 2020.2. 

2019.2.2. 

2019.2.3. 

Health  
2020.1.2. 

Education and skills 

l
a
i
c
o
s

d
n
a
h
t
l
a
e
H

n
o
i
t
c
e
t
o
r
p

○ 

e
l
b
a
n
i
a
t
s
u
S

t
r
o
p
s
n
a
r
t

y
c
n
e
i
c
i
f
f
e

● 

● 

● 

○ 

○ 

d
n
a
y
g
r
e
n
E

y
g
r
e
n
e

● 

○ 
● 

● 

○ 

e
t
a
t
S
l
a
t
i
g
i
D

● 

○ 

● 

○ 

○ 

○ 

● 

○ 

Addressing skills shortages by improving the 
capacity and labour-market relevance of the 
education and training system  
Key: “●” investments and reforms of the component significantly address the challenge; “○” the 
component partially addresses the challenge 

2019.2.1, 2020.3.3. 

○ 

○ 

37 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.3. Growth  potential,  job  creation,  economic,  institutional,  and  social  resilience, 
European Pillar of Social Rights, mitigating the impact of the crisis, and social 
territorial cohesion and convergence 

Fostering economic growth and jobs 

The plan’s estimated impact on GDP and employment is  plausible. The model simulations 
presented  in  the  plan  (combining  a  neo-classical  supply  side  with  Keynesian  demand  features) 
was developed by the Estonian Central  Bank and checked by the Fiscal Council. According to 
the model, the recovery plan is expected to have a significant positive impact on GDP compared 
to the baseline forecast. Over the 2021-2026 disbursement period, GDP would be on average 0.8 
pps higher per annum and the cumulative positive impact on GDP is estimated at 6.2 % of GDP 
over 10 years. According to the model, the impact on employment would be relatively immediate 
and  proportional  to  the  additional  stimulus  to  GDP.  For  instance,  the  Keynesian  effect  on 
employment would be on average 0.48% for the 2021-2024 period compared to a counterfactual 
scenario where the recovery plan had not been set up, and would reach a peak in 2025, as wages 
will  adjust  over  time  and  render  the  boost  to  employment  temporary.  On  the  one  hand,  these 
results partly rely on optimistic assumptions (including on the absence of crowding-out effects of 
domestic  investment  by  RRF  financing).  On  the  other  hand,  the  impact  of  reforms  is  not 
modelled. The estimated domestic impact on GDP in the disbursement  years is roughly in line 
with  the  Commission’s  QUEST  simulations  (see  Box  2  -  although  the  results  of  the  two 
simulations  cannot  be  directly  compared  due  to  the  differences  in  the  assumptions  and 
methodology).  As  a  whole,  it  remains  plausible  that  the  plan  should  have  a  sizeable  impact  in 
terms of GDP and in terms of employment over the disbursement period. 

Estonia’s  Stability  programme  for  2021  points  to  macro-additionality  of  Estonia’s  RRP. 
The  average  public  investment  level  in  the  three  years  before  the  crisis  was  5.3%  of  GDP. 
According  to  Estonia’s  Stability  Programme,  the  public  investment  level  is  expected  to  be 
significantly  above  the  pre-crisis  level  at  6.5%  of  GDP  on  average  over  2021  to  2024.  Total 
public expenditure reaching 44.1% of GDP for the years 2021 to 2024 is also forecast to exceed 
the pre-crisis level of 39,1% of GDP on average over 2017 to 2019. 

The measures envisaged in the plan are expected to support structural transformation and 
permanently contribute to jobs and growth. Overall, the plan boosts the growth potential of 
the economy and fosters job creation, by addressing weaknesses such as the lack of productivity 
and  energy  efficiency,  or  skills  mismatches.  In  particular,  as  a  whole,  measures  under 
Component  1  (digital  transformation  of  enterprises)  and  Component  2  (Accelerating  the  green 
transition in enterprises) are expected to have a positive impact on growth potential and the twin 
transition,  through  job  creation  and  productivity  growth.  Under  Component  1  (digital 
transformation  of  enterprises),  the  investments  aiming  at  deploying  digital  solutions  in  the 
construction and road freight transport sectors could accelerate the digital transformation of these 
two sectors (which are currently lagging behind for what concerns digitalisation). The envisaged 
support  for  skills  development  and  the  redesign  of  curricula  will  also  create  the  conditions  for 
long-term changes that are not limited to the period of implementation of the RRF. For instance, 
reforms  and  accompanying  investments  on  digital  skills  will  have  a  direct  and  long-term 

38 

 
contribution  to  digital  transition  in  companies  and  contribute  to  growth  and  jobs.  Concerning 
skills, some measures under Component 2 (Accelerating the green transition in enterprises) are 
also  expected  to  develop  skills  needed  to  foster  the  green  transition  (e.g.  the  development  of 
trainings  to  support  faster  uptake  of  green  technologies),  maintain  existing  and  create  new 
sustainable jobs, including in rural areas, and contribute to growth. Measures under Component 4 
(Energy  and energy efficiency)  are also  expected to  enhance energy efficiency, contributing to 
increase growth potential. 

Box 2. Stylised NGEU impact simulations with QUEST – Estonia 

Model  simulations  conducted  by  the  Commission  using  the  QUEST  model  show  that  the 
economic impact of the NGEU in Estonia could lead to an increase of GDP of between 0.8% and 
1.3% by 202618. After 20 years, GDP could be 0.4% higher. Spillovers account for a significant 
part of such impact.  
According  to  these  simulations,  this  would  translate  into  up  to  4000  additional  jobs.  Cross  border 
(GDP)  spillovers  account  for  0.5  pps in  2026,  showing  the  value  added  of  synchronised  expenditure 
across Member States (line 2). Even assuming that half of the expenditure is not productive still leads 
to a significant impact. (line 3)19. 

Table: QUEST simulation results (% deviation of real GDP level from non-NGEU case) 

Scenario 
Baseline 
  of which spillover 
Low productivity 

2021  2022  2023  2024  2025  2026  2027  2028  2029  2030  2040 

0.9 

0.5 

0.5 

1.2 

0.5 

0.8 

1.2 

0.5 

0.8 

1.2 

0.5 

0.8 

1.2 

0.5 

0.8 

1.3 

0.5 

0.8 

0.9 

0.5 

0.5 

0.6 

0.4 

0.2 

0.6 

0.3 

0.2 

0.6 

0.2 

0.2 

0.4 

0.1 

0.2 

This stylised scenario does not include the possible positive impact of structural reforms, which 
can be substantial. A model-based benchmarking exercise shows that undertaking structural reforms 
that  would  result  in  halving  the  gap  vis-à-vis  best  performers  in  terms  of  indicators  of  structural 
reforms could raise Estonia’s GDP by 8% in 20 years’ time20. 
Due  to  the  differences  in  the  assumptions  and  methodology,  the  results  of  this  stylised  assessment 
cannot be directly compared to the numbers reported in chapter 4 of Estonia’s RRP.  

18 RRF amounts to roughly 90% of NGEU, which also includes ReactEU, Horizon, InvestEU, JTF, Rural 
Development and RescEU. 
19 Technically, the low productivity scenario considers a significantly reduced output elasticity of public capital. 
20  Varga,  J,  in  't  Veld  J.  (2014),  “The  potential  growth  impact  of  structural  reforms  in  the  EU:  a  benchmarking 
exercise ", European Economy Economic Papers no. 541.  
http://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp541_en.pdf.  

39 

 
 
  
 
  
  
 
 
                                                           
Strengthening social cohesion 

The  RRP  measures  aimed  at  strengthening  social  cohesion  and  social  protection  are 
presented  in  the  components  on  health  care  and  social  protection  and  in  the  digital 
components.  The  plan  envisages,  inter  alia,  some  measures  that  contribute  top  improving  the 
social  safety  net  and  access  to  social  services.  To  accommodate  periods  with  high 
unemployment, Estonia is expected to reform its unemployment scheme by extending the period 
of coverage by 60 days. The plan also  envisages an action plan on the provision  of  health and 
social care in an integrated way, supporting independent living of people with lower care needs, 
and  improving  the  support  system  for  children  with  higher  care  needs.  The  measure  could 
contribute to the implementation of Principles 13 and 16 of the European Pillar of Social Right. 
If  implemented,  this  reform  would  have  a  positive  impact  on  the  Social  Scoreboard  indicators 
related to poverty and income inequality.  

The plan is expected to address youth unemployment through a support scheme covering 
training  and  wage  subsidies.  The  plan  envisages  to  upgrade  the  ‘My  First  Job’  scheme,  thus 
improving the hiring process  of  young people  with  little experience, and  help  them  gain  green 
and digital skills, thereby also reducing youth unemployment and improving the transition to the 
labour market. Additionally, the digital skills reform is intended to address the shortage of ICT 
specialists, promote the inclusion of women in the field, as well as increase the productivity of 
certain sectors through digital solutions. As such, measures towards these objectives should also 
promote  employment,  especially  in  the  younger  demographic  cohort.  These  measures  are 
expected to contribute to increasing employability thereby contributing to the implementation of 
Principle 4 of the European Pillar of Social Rights.  

The  plan  contains  some  measures  that  are  expected  to  contribute  to  addressing  the 
country’s challenges in the areas of gender equality and equal opportunities for all. Estonia 
states that all reforms and investments included in the plan should be designed and implemented 
with  due  regard  to  the  principle  of  equal  treatment  providing  equal  opportunity  to  all  people 
regardless  of  gender,  nationality,  age,  special  needs,  social  groups,  racial  or  ethnic  origin, 
religion or beliefs. The investment to support youth employment should help young people to get 
into employment and thus contributing to their social inclusion. There are measures that directly 
and  indirectly  aim  to  address  the  needs  of  persons  with  disabilities  such  as  facilitating 
accessibility to  living environment. The plan also contains measures which should help  reduce 
the gender pay gap.  

Reducing vulnerability and increasing resilience 

According  to  the  economic  forecast  underlying  the  Stability  Programme,  Estonia’s 
economic recovery prospects are  relatively favourable. Most sectors are foreseen to  recover 
to a pre-pandemic level by the end of 2021. However, the unemployment figures experienced a 
rapid  rise  following  the  pandemic  (reaching  almost  8%  in  the  second  half  of  2020),  indicating 
vulnerabilities  in  the  Estonian  economy.  Through  the  RRF,  Estonia  intends  to  address  those 
vulnerabilities and improve the resilience of its economy through measures aimed at improving 
labour  productivity,  supporting  access  to  employment  for  youth  and  extending  the  duration  of 

40 

 
unemployment  insurance  benefits  in  case  of  difficult  labour  market  conditions.  Measures 
addressing youth unemployment are expected to reduce vulnerability and increase resilience, in 
addition to strengthening social cohesion. 

Estonia aims at increasing the resilience of the healthcare system by investing in state-of-
the-art infrastructure and in competences of healthcare personnel. Taking into account the 
ageing  and  shrinking  population,  the  healthcare  system  is  expected  to  be  under  an  increasing 
amount of pressure in the long run. Coupled with a lack of health workforce, this may affect the 
overall  labour  market  participation  due  to  health  constraints.  Through  the  remodelling  of  the 
healthcare organisation, strengthening primary care, modernising e-health and the establishment 
of the Northern Estonia Medical Campus, the plan should ensure a more robust and accessible 
provision of healthcare.  

Estonia’s digitalisation of the public sector and strengthening of its anti-money laundering 
framework  is  expected  to  contribute  to  the  state’s  resilience.  The  public  administration  is 
expected to ensure consistent and knowledge-based policymaking that has an improved outreach 
to citizens and businesses through the digitalisation of its services. Through the development of 
an  excellence  centre  for  data  management  and  open  data,  cloud  solutions,  as  well  as  a  virtual 
assistance  platform  (‘Bürokratt’),  Estonia  should  ensure  a  robust  provision  of  public  services. 
Moreover, the establishment of a centre for strategic analysis to assess and mitigate the risks of 
money  laundering  and  terrorist  financing  is  expected  to  suppress  financial  related  crimes, 
through  monitoring  activities  and  targeted  procedures.  This  is  expected  to  prevent  the 
exploitation  of  the  economic  space  and  the  financial  system,  thus  contributing  to  the  state’s 
resilience. 

Cohesion and convergence 

Every component of the plan is expected to address to a certain extent the disparities across 
regions  in  Estonia.  The  plan  is  expected  to  support  the  sustainable  renovation  of  multi-
dwellings  and  small  residential  buildings,  outside  of  large  cities  and  in  rural  areas.  This  effort 
should contribute to  boost  regional employment  prospects  in  the  construction sector. Measures 
aimed at increasing the production and use of renewable energy should entail a decentralisation 
of the energy supply  and thus  generate new employment opportunities throughout  the  country. 
The  inclusion  of  high-capacity  broadband  investment  should  help  to  bridge  the  digital  divide 
between  rural  and  urban  areas  and  ensure  equal  access  to  e-services  for  individuals  and 
businesses.  Moreover,  in  the  transport  component,  Estonia  is  expected  to  increase  the 
connectivity  across  regions,  thus  enabling  greater  access  to  education,  employment  and  public 
services. Furthermore, through the digitalisation of the healthcare and the public sector, the plan 
is expected to improve the outreach of those services in rural areas. 

Taking  into  consideration  all  reforms  and  investments  envisaged  by  Estonia,  its  recovery  and 
resilience  plan  is  expected  to  have  a  high  impact  on  strengthening  the  growth  potential,  job 
creation, and economic, social and institutional resilience of the Member State, on contributing 
to the implementation of the European Pillar of Social Rights, including through the promotion 
of  policies  for  children  and  youth,  and  on  mitigating  the  economic  and  social  impact  of  the 

41 

 
COVID-19  crisis,  thereby  enhancing  the  economic,  social  and  territorial  cohesion  and 
convergence within the Union. This would warrant a rating of A under the assessment criterion 
2.3 of Annex V of the RRF Regulation. 

42 

 
Box 3: Employment and social challenges in light of the Social Scoreboard accompanying the 
European Pillar of Social Rights 

The  Social  Scoreboard  supporting  the  European 
Pillar  of  Social  Rights  points  to  a  number  of 
employment and social challenges in Estonia. The 
COVID-19  crisis  has  halted  the  positive  labour 
market  developments  observed  in  the  past  years, 
Employment  in  Estonia  nonetheless  remains  above 
the  EU  average  (78.8%  in  2020  vs  72.4%  for  the 
EU).  The  unemployment  rate  increased  slightly 
above  the  EU  average  from  its  low  pre-crisis  level. 
To mitigate the negative impact of the crisis, Estonia 
introduced  effective  short-time  work  schemes  that 
helped  minimise  unemployment  and  people  falling 
into poverty. Despite the crisis, Estonia has managed 
to keep long-term unemployment relatively low and 
strong  wage  growth  in  recent  years  has  made  the 
country  one  of  the  best  performers  in  GDHI  per 
capita  growth.  Despite  a  relatively  low  gender 
employment  gap,  Estonia  continues  to  have  one  of 
the highest gender pay gaps (21.7% in 2019) in the 
EU, though it has been reducing since 2017. Recent 
reforms of the parental leave and benefit system are 
helping women move back into work, but challenges 
remain.  Several  social  indicators  remain  to  be 
watched for Estonia, including the at-risk-of-poverty 
or  social  exclusion  rate  and  the  impact  of  social 
transfers  on  poverty  reduction.  Estonia  performs 
better than average on early leavers  from education 
and  training  and  individuals’  level  of  digital  skills, 
but the rate of youth not in employment, education or training (NEET) is deteriorating and needs to be monitored.  
While  poverty  has  been  gradually  decreasing  from  a  high  level,  the  pandemic  may  impact  this  trend.  In 
2019, with 23.7% the at-risk-of-poverty or social exclusion rate was among the highest in the EU (21.1% in EU27 
in  2019).  The  impact  of  social  transfers  on  poverty  reduction  (other  than  pensions was  28.1%  in  Estonia,  being 
slightly below the EU average (32.3% in the EU27) in 2019. 
The self-reported unmet needs for medical care remain one of the pressing challenges for Estonia. Though 
they  show  an  improving  trend,  the  level  remains  substantially  higher  than  the  rest  of  the  EU  (in  2019  15.5%  vs 
1.7% EU). In 2020 the indicator continued the positive dynamics  for Estonia  with  the further reduction to 13%. 
The high level was in particular due to long waiting times for both primary and specialist care. The resilience of the 
system has been undermined by shortages of health workers and the uneven access to primary care and availability 
of critical medical products.  
The  recovery  and  resilience  plan  submitted  by  Estonia  addresses  some  skills,  youth  unemployment  and 
health related challenges relevant for the implementation of the European Pillar of Social Rights. To foster 
equal  opportunities  and  access  to  the  labour  market,  as  well  as  dynamic  labour  markets  and  fair  working 
conditions,  reforms  and  investments  are  planned  to  support  digital  and  green  skills.  Measures  on  green  skills 
encourage  the  uptake  of  green  technologies  through  knowledge  transfer,  modernisation  of  the  content  and 
organisation  of  proficiency  training  programmes  in  higher  education  and  vocational  education  and  training,  and 

43 

 
upskilling and reskilling. The measures on the smarter digital transformation of companies will be designed on the 
basis of future business perspectives in different sectors. The digital reform addresses key challenges identified for 
Estonia, namely to improve the provision of digital skills and to bring vocational and higher education better in line 
with  labour  market  needs  and  increase  the  number  of  graduates  with  required  qualifications.  A  measure 
encouraging the recruitment of young people with little work experience is also planned.  
The  measures  on  social  protection  and  health  in  the  RRP  are  addressed  with  some  reforms  and 
investments.  Some measures are included in the RRP (although not financed under the RRF) in the social area: 
an action plan on integrated care to contribute to a more integrated and human-centred support system for people 
with special needs and elderly people with high needs, supporting independent living of people with lower care 
needs improving the support system for children with higher needs to provide better access to quality services for 
children  and  extending  the  duration  of  unemployment  benefits  when  unemployment  rises  considerably.  In  the 
health  area,  a  number  of  measures  are  envisaged  to  address  health  workforce  shortages,  strengthening  primary 
care  and  improve  access  to  health  care.  The  investments  in  infrastructure  (a  hospital  in  Tallinn)  and  the 
acquisition of medical helicopters have the potential to contribute to improving the accessibility and resilience of 
the  healthcare  system.  The  reforms  as  regards  healthcare  workforce,  primary  care  and  eHealth  are  expected  to 
reduce the unmet need for medical care. 

4.4. The principle of ‘do no significant harm’ 

Estonia’s  recovery  and  resilience  plan  assesses  compliance  with  the  ‘do  no  significant 
harm’ (DNSH) principle. The assessment follows the methodology set out in the Commission’s 
technical  guidance  on  the  application  of  ‘do  no  significant  harm’  under  the  Recovery  and 
Resilience Facility Regulation (2021/C 58/01). It covers the six environmental objectives within 
the meaning of Article 17 of Regulation (EU) No 2020/852, namely climate change mitigation, 
climate change adaptation, sustainable use and protection of water and marine resources, circular 
economy,  pollution  prevention  and  control,  and  protection  and  restoration  of  biodiversity  and 
ecosystems. The assessment is done systematically for each reform or investment.  

Each  ‘do  no  significant  harm’  assessment  follows  a  two-step  approach.  The  first  step 
assesses whether there is a risk that a measure could do significant harm to one or more of the 
environmental  objectives.  In  some  cases,  the  assessment  concludes  that  there  is  no  risk  of 
significant harm, in  which case the measure is  assessed as compliant with this objective of the 
RRF  Regulation.  In  cases  where  the  analysis  identifies  a  risk,  a  more  detailed  assessment  is 
performed in which Estonia demonstrates the absence of significant harm. 

A  more  detailed  DNSH  assessment  has  been  carried  out  for  the  investment  in  multi-
purpose  helicopters.  The  assessment  specifies  that  multi-purpose  helicopters,  which  are 
acquired  to  carry  out  tasks  such  as  medical  evacuations,  do  not  have  lower  GHG/renewable 
energy alternatives at this time. It is specified that according to the market information, the first 
feasible  electrified  or  hybridised  helicopters  of  this  type  will  not  be  available  in  the  2020s.  In 
addition, the helicopters proposed for purchase use the same engine type and fuel (gas turbines, 
kerosene)  as  the  already  existing  helicopters  belonging  to  the  police  and  boarder  Guard  in 
Estonia. Although helicopters are associated with much higher GHG emissions per km vis-a-vis 
ground  vehicles,  helicopters  are  used  less  frequently  and  only  used  to  transport  high  value 
equipment and personnel or carry out high value assignments such as medical transport. 

44 

 
 
The  largest  investment  in  the  plan,  the  construction  of  the  Northern  Estonia  Medical 
Campus,  has  also  been  subject  to  a  detailed  DNSH  assessment,  including  details  how  the 
circular economy principles will be followed. Waste and limestone found in excavation is to be 
separated, reused, recycled and disposed of in line with the Estonian Waste Law, which requires 
that at least 70 % of construction and demolition waste must be prioritised for re-use, recycling 
and  other  recovery.  The  hospital  building  will  be  built  mainly  of  prefabricated  reinforced 
concrete  elements  (post-beam  system),  which  ensure  maximum  flexibility  in  operation  for  the 
conversion of various units. The post-beam system also makes it possible to change the purpose 
of a building, partially or completely, without demolishing the main structures. As such, the post-
beam system is expected to support the circular economy by being easy to disassemble if needed. 

The assessment of Northern Estonia Medical Campus also specifies how biodiversity will be 
protected. 50% of the hospital area will be vegetated, with the native species replanted. Native 
fauna  should  be  protected  by  avoiding  works  during  nesting  season  and  favourable  living 
conditions  provided  as  part  of  the  landscape  project.  The  construction  activities  must  be 
coordinated with the Estonian Environmental Board.  

Where needed, the requirements of the DNSH assessment are enshrined in the design of a 
measure  and  specified  in  a  milestone  or  target  of  this  measure.  This  ensures  that  any 
disbursement  for  the  respective  measures  can  only  be  made  once  compliance  with  the  DNSH 
principle is ensured. For instance, for some measures where calls for projects or calls for interest 
are  necessary  to  select  specific  projects  in  the  future  or  for  measures  involving  financial 
instruments, such as the uptake of resource-efficient green technologies and the Green Fund, the 
DNSH  principle  is  complied  with  by  ensuring  that  the  terms  of  reference  and  other 
documentation prevent activities that could do significant harm to environmental objectives from 
being selected. This is also integrated in the milestones of the respective measures. 

Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  no  measure  for  the 
implementation  of  reforms  and  investments  projects  included  in  Estonia’s  recovery  and 
resilience  plan  is  expected  to  do  a  significant  harm  to  environmental  objectives  within  the 
meaning  of  Article  17  of  Regulation  (EU)  No  2020/852  (the  principle  of  ‘do  no  significant 
harm’). This would warrant a rating of A under the assessment criterion 2.4 of Annex V of the 
RRF Regulation. 

4.5. Green transition 

Climate target 

To  determine  the  contribution  of  the  proposed  measures  to  the  green  transition  and  the 
challenges resulting from it, the methodology laid down in Annex VI to the RRF Regulation has 
been applied. It should be noted that: 

  appropriate intervention fields have been selected for all measures,  
 

the plan does not propose to increase the climate coefficient for any measure. 

45 

 
Overall,  based  on  the  methodology,  the  contribution  to  climate  objectives  accounts  for 
EUR 403.3  million,  which  represents  41.5%  of  the  recovery  and  resilience  plan’s  total 
allocation  and  thus  exceeds  the  minimum  target  of  37%  set  by  the  Regulation.  The 
contribution to the green transition comes from three out of the six components of the plan, with 
19 measures addressing related priorities (out of a total of 41 for the whole plan). 

Component  2  on  accelerating  the  green  transition  in  enterprises  (Component  2  –  overall 
estimated  value:  EUR  220.2  million)  aims  at  speeding up  the  green  transition  in  the 
business  sector  in  Estonia.  It  includes  measures  on  change  of  business  models  and  uptake  of 
efficient  green  technologies  for  which  Estonia  has  provided  information  on  the  eligibility 
criteria. This component also includes a measure to test setting up and piloting integrated green 
hydrogen  value  chain  and  provides  assurances  that  if  hydrogen  is  produced  from  biomass, 
sustainability criteria defined in Article 29-31 of Directive 2018/2001 will apply. 

Component  4  on  energy  and  energy  efficiency  (Component  4  –  overall  estimated  value: 
EUR 92.1 million) aims at increasing the energy efficiency of buildings and decarbonising 
the energy sector. The description of the measures as well as the milestones specify that at least 
a medium depth renovation level, representing primary energy savings of at least 30%, must be 
achieved.  The  component  also  includes  investments  into  the  electricity  grid  and  electricity 
storage.  Decarbonising  the  energy  sector  and  reducing  the  dependency  on  oil  shale  will  be 
achieved  by  incentivising  the  uptake  of  renewable  energy  and  including  targets  and  actions  to 
phase out oil shale in the relevant national strategies. The measures in the recovery and resilience 
plan, such as investments into the electricity grid and electricity storage, should support reaching 
a share of 42% of renewables in gross final consumption of energy, Estonia’s EU target for 2030.  

Component  5  on  sustainable  transport  (Component  5  –  overall  estimated  value:  EUR  96 
million) aims at creating a more sustainable transport sector. It includes an investment in the 
Rail Baltic terminal, for which Estonia has provided assurances that 97.4% of the building’s net 
floor  area  is  destined  to  serve  passengers  and  for  personnel,  while  only  2.6%  will  be  for 
commercial  use.  The  component  also  includes  an  investment  in  the  Tallinn-Rohuküla  railway 
that will be electrified and built on an existing body of a former railway. Within the timeline of 
the  RRP,  the  Tallinn  capital  region  common  transport  system  will  be  implemented  and  the 
railway between the two biggest towns Tallinn and Tartu will be electrified.   

Table 7. Climate contribution per component 

Component 

Cost 
(EUR million) 

Digital transformation of enterprises 
Accelerating the green transition in enterprises 
Digital State 
Energy and energy efficiency 
Sustainable transport 
Healthcare and social protection 
Total 

116.2 
220.2 
121.7 
92.1 
96.0 
336.3 
982.5 

46 

Climate 
contribution 
(EUR million) 
- 
215.2 
- 
90.7 
96.0 
- 
401.9 

Climate 
contribution* 
(percentage) 
- 
22.2% 
- 
9.4% 
9.9% 
- 
41.5% 

 
*  The  climate  contribution  in  percentage  is  calculated  based  on  Estonia’s  total  allocations  in  non-repayable 
financial support (EUR 969.30 million). 

Green transition 

The support to the green transition in the business sector will stimulate innovation and new 
ideas  for  green  economic  models  and  promote  the  uptake  of  green  technologies,  circular 
economy  principles  and  valorisation  of  local  natural  resources,  supported  by  the 
development and upgrading of green skills. A Green Fund will be set up to finance innovative 
green  technologies  that  contribute  to  solving  environmental  problems  by  developing  new 
products, services or technologies that reduce or bind greenhouse gas emissions or are driven by 
eco-design  requirements.  Funds  will  also  be  allocated  to  test  and  pilot  the  uptake  of  green 
hydrogen and related technologies in the whole chain from producer to consumer. Furthermore, 
support will be granted to companies to improve resource efficiency through the uptake of green 
technologies and green energy and valorisation of bio-resources, promoting sustainability in the 
food chain. Skills needed for green transitions will be upgraded through upskilling and retraining 
programmes in higher and vocational education, as well as through the development and piloting 
of a flexible qualification system.  

Component 4 on sustainable energy and energy efficiency, which addresses the challenge of 
decarbonising  the  energy  sector,  will  contribute  to  reduce  the  dependency  on  oil  shale, 
incentivise  the  uptake  of  renewable  energy  and  help  improve  the  energy  efficiency  of 
buildings. Estonia’s economy is very energy-intensive and energy production dependent on oil 
shale. On the other hand, the share of oil shale as power source is declining rapidly and that of 
renewables is increasing. Wind energy has good potential in Estonia, but the strength of the grid 
is  unequal  regionally  and  prevents  increasing  its  capacity.  Renewable  energy  installations  are 
prevented  by  lengthy  processes  for  planning  and  permits  and  defence-related  restrictions  and 
lack of renewable energy storage solutions. Investments will aim to strengthen the electricity grid 
in  Western  Estonia,  stimulate  renewable  energy  production  in  industrial  areas  and  pilot 
renewable energy storage solutions. The National Development Plan of the Energy Sector will be 
updated  at  the  end  of  2025  to  include  targets  (in  dates  and  additional  renewable  energy 
produced)  and  actions  to  reduce  dependency  on  oil  shale  in  the  Estonian  energy  sector. 
Furthermore,  the  necessary  legislative  and  guiding  support  structure  for  the  green  transition 
(guidance material, legislative changes) will be provided. Investments in renovation of apartment 
and  small  residential  buildings  aim  to  increase  energy  efficiency,  reduce  energy  consumption 
and  improve  the  living  conditions  of  their  residents,  in  particular  in  areas  with  lower  property 
value where  access  to  finance  for  renovation is  more difficult.  The related reform  will remove 
the  administrative  barriers  to  energy  efficient  renovations  by  advising  apartment  associations, 
private  households  and  local  governments  on  legislation,  technical  aspects  and  financing  of 
renovations. 

Component 5 on sustainable transport will contribute to the reduction of the emissions of 
the sector and incentivise the uptake of sustainable modes of transport. Transport is a major 
polluter  in  Estonia  and  given  the  low  population  density,  a  combination  of  various  modes  of 
sustainable transport needs to be considered. 50% of Estonia’s mobility  happens in the Tallinn 

47 

 
capital  region,  thus  the  need  for  sustainable  connections  with  the  surrounding  regions  is  vital. 
Estonia’s national mobility strategy foresees tripling of train passengers from 8 million in 2019 
to 20 million by 2035. In areas outside Tallinn and other major centres, the objective is to reduce 
car  dependency  and  increase  sustainable  mobility,  where  the  financial  capacity  of  local 
municipalities  is  an  obstacle  for  the  development  of  safe  and  climate-friendly  bicycle  and 
pedestrian  corridors.  The  new  Transport  and  Mobility  Development  Plan  along  with  its 
implementation  plan  will  be  adopted  and  will  take  account  of  these  challenges.  Within  the 
timeline  of  the  RRP,  the  Tallinn  capital  region  common  transport  system  will  be  implemented 
and the railway between the two biggest towns Tallinn and Tartu will be electrified. Investments 
will  support  the  development  of  the  cross-border  Rail  Baltic  project  by  completing  the 
development  of  the  multimodal  terminal  in  Tallinn,  at  the  start  of  the  Rail  Baltic  railway, 
connecting  the  Baltic  States  and  capitals  with  Poland  and  the  rest  of  the  Union.  The  plan  also 
foresees connecting Rail Baltica with other national railways, other TEN-T hubs (Tallinn Airport 
and Old Port) and facilitating access to its local stops on foot or by bicycle. For that purpose, the 
plan supports the development of the Westbound Tallinn-Rohuküla railway, the Tallinn Old Port 
tramline and the cycling roads providing access to the local stops of the Rail Baltic.  

The  Estonian  recovery  and  resilience  plan  does  not  include  measures  directly  addressing 
biodiversity. On the one hand Estonia has a good status for many habitats and species but on the 
other hand, certain pressures are evident, e.g., for forests, in particular due to the large share of 
biomass in the renewable energy mix. Estonia explains in the recovery and resilience plan that 
the  following  measures  aimed  to  protect  and  restore  biodiversity  will  be  implemented  and 
financed  from  various  public  funds:  restoration  of  wetlands  and  water  bodies;  development  of 
environmental,  weather  and  support  systems  and  laboratory  capabilities;  protection  of  port 
waters  and  reconstruction  of  coastal  shipping  routes,  raising  awareness  of  the  risks  and 
opportunities  of  climate  change,  reducing  the  negative  impacts  of  climate  change  on  the  bio-
economy and enhancing urban biodiversity. For the reforms and investments in energy, Estonia 
has included assurances that if biomass is used as a source for energy (in hydrogen), this will be 
done according to the sustainability criteria defined in Art 29-31 of Directive 2018/2001. In all 
other  measures,  priority  will  be  given,  where  possible,  to  solutions  that  support  biodiversity 
conservation  and  nature-based  solutions  (greening,  green  areas,  reduction  of  air  and  noise 
pollution). 

The measures in the Estonian recovery and resilience plan have a strong circular economy 
angle.  This  is  particularly  the  case  in  Component  1  on  accelerating  the  green  transition  in 
enterprises, as well as for other measures (Tallinn Hospital, energy efficient renovations), where 
the plan specifies how circular economy principles will be adhered to during construction works.  

Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  the  recovery  and 
resilience  plan  is  expected,  to  a  large  extent,  to  make  a  significant  contribution  to  the  green 
transition or to address the challenges resulting from it and ensures that at least 37% of its total 
allocation contribute to the climate target. This would warrant a rating of A under criterion 2.5 
of Annex V of the RRF Regulation. 

48 

 
 
 
4.6. Digital transition 

Digital tagging 

To  determine  the  contribution  of  the  proposed  measures  to  the  digital  transition  and  the 
challenges resulting from it, the methodology laid down in Annex VII to the RRF Regulation has 
been applied. It should be noted that: 

  appropriate intervention fields have been selected for all measures, 
 

the plan does not propose to increase the digital coefficients for any measure. 

Overall, based on the methodology, the contribution to digital objectives accounts for EUR 
208  million,  which  represents  21.5%  of  the  recovery  and  resilience  plan’s  total  allocation 
and thus  meets  the  minimum target of 20% set by the Regulation.  The contribution  to  the 
digital  transition  comes  from  two  out  of  the  six  components  of  the  plan,  with  13  measures 
addressing digital priorities (out of a total of 41 for the whole plan). 

Component  1  on  digital  transformation  of  enterprises  (Component  1  –  overall  estimated 
value:  EUR  116.2  million)  aims  at  fostering  the  digital  transformation  of  Estonian 
companies  and  their  competitiveness  on  export  markets.  It  includes  a  measure  which  is 
expected  to  provide  financial  support  to  SMEs  and  microenterprises  from  all  sectors,  for 
activities  and  investments  relevant  to  their  digital  transformation.  Two  other  measures  of  this 
component  are  aimed  at  the  adoption  of  digital  solutions  in  two  specific  sectors  where  the 
potential of digitalisation appears insufficienctly exploited so far: construction and road freight 
transport. In complement to these investments, the component includes a reform addressing the 
issue  of  insufficient  digital  skills,  through  trainings  for  managers  in  companies,  the  upskilling 
and reskilling of ICT specialists, a revision of the content of the training of ICT experts, and the 
redesign  of  the  qualification  framework  for  ICT  specialists.  A  reform  aiming  at  increasing  the 
export capacity and competitiveness of Estonian companies, including notably those of the ICT 
sector,  should  also  take  adavantage  of  the  possibilities  offered  by  digital  tools  to  ensure  the 
promotion of Estonian products and services abroad and help attract foreign investors. 

Component 3 on digital state (Component 3 – overall estimated value: EUR 121.7 million) 
aims at increasing the efficiency of the delivery of public services, as well as the resilience 
and  sustainability  of  the  underlying  digital  infrastructures  and  systems.  The  proposed 
measures  include  the  reorganisation  of  the  management  of  IT  systems  and  services  of  public 
authorities, their migration to a cloud, a reform of the management of data by public institutions, 
the redesign of the delivery of a series of online services to citizens, the establishment of a digital 
gateway  for  the  delivery  of  public  services  to  businesses,  and  the  development  of  a  virtual 
assistant. Moreover, two measures will contribute to reinforcing the capacity to  combat money 
laundering with the help of a new IT system. An investment in the rollout of very high capacity 
broadband networks in rural areas is also proposed in this component. 

Table 8. Digital contribution per component 

Component 

Cost 
(EUR million) 

Digital 
contribution 

Digital 
contribution* 

49 

 
Digital transformation of enterprises 
Accelerating the green transition in enterprises 
Digital State 
Energy and energy efficiency 
Sustainable transport 
Healthcare and social protection 
Total 
*  The  digital  contribution  in  percentage  is  calculated  based  on  Estonia’s  total  allocations  in  non-repayable 
financial support (EUR 969.30 million). 

116.2 
220.2 
121.7 
92.1 
96 
336.3 
982.5 

(EUR million) 
86.3 
- 
121.7 
- 
- 
- 
208 

(percentage) 
8.9% 
- 
12.6% 
- 
- 
- 
21.5% 

Digital transition  

The contribution of Estonia’s recovery and resilience plan to the digital transition focuses 
mainly on two priorities: the digital transformation of enterprises and the modernisation of 
public services. 

Nevertheless,  overall  the  measures  of  the  plan  cover,  to  varying  extents,  six  of  the  seven 
categories identified in Annex VII to the RRF Regulation: 

the digitalisation of businesses, 

the digitalisation of public services, 

 
  connectivity, 
 
  digital-related investment in research and development, 
  human capital, and 
 

investments in digital capacities and advanced technologies. 

The  recovery  and  resilience  plan  of  Estonia  also  tackles  the  four  strategic  priorities 
identified at EU level and reaffirmed in the communication on Europe’s Digital Decade21: 
digital transformation of businesses, skills, digitalisation of public services, and infrastructures. 

SMEs from all sectors should benefit from the financial support foreseen in the Estonian’s 
plan  to  foster  their  digital  transformation.  While  Estonia  is  one  of  the  most  advanced 
countries as far as the use of digital solutions to access public services is concerned and it has a 
vibrant  IT  sector  comprising  numerous  successful  startups,  the  uptake  of  digital  solutions  by 
businesses still remains relatively limited. The support provided through the implementation of 
the  plan  will  be  directed  at  the  development  of  digital  strategies,  research  and  development 
activities or investments  in  digital  technologies.  Furthermore, the construction and road freight 
transport  sectors  will  benefit  from  the  two  specific  measures  which  are  aimed  at  helping  them 
seizing the opportunities offered by digital solutions. 

21 COM(2021) 118 - 2030 Digital Compass: the European way for the Digital Decade, 9 March 2021 

50 

 
 
 
                                                           
The  proposed  reform  addressing  digital  skills  is  expected  to  contribute  to  ensuring  the 
availability  of  sufficient  ICT  professionals  possessing  up-to-date  skills  and  knowledge,  as 
well  as  offering  new  career  opportunities  to  both  employed  and  unemployed  people.  The 
reform consists of the training of ICT experts and the qualification framework for digital skills, 
the  awareness-raising  of  SME  managers,  and  the  reskilling  and  upskilling  of  lower-skilled 
professionals.  These  actions  are  expected  complement  each  other  and  help  address  the  skills 
shortage faced by businesses in Estonia. They are also expected to foster the take-up of digital 
technologies in other areas than the ICT sector, thus reinforcing the other measures proposed in 
the  plan  for  what  concerns  the  digital  transformation  of  enterprises.  Moreover,  the  measure  is 
expected contribute to increasing the share of women in ICT training and professions. 

Building on the successful deployment of online public services in Estonia, the measures in 
Component 3 on digital state should support Estonia’s ambitions to remain a frontrunner 
in this area. The proposed reforms and investments will draw on the latest technologies to help 
increase the efficiency, the security and the transparency of governmental services further. 

The investment in very-high-capacity connectivity in market failure areas will contribute to 
the  effort  towards  the  EU  objective22  to  provide  access  to  all  households  to  Internet 
connectivity offering at least 100 Mbps. It is expected to help ensuring wide access to online 
services, reduce the digital divide between urban and rural areas, and, more generally, contribute 
to  the further digital  transformation  of the country in  complement to  the other measures of the 
plan. 

The proposed measures are aligned with the following three flagship initiatives identified in 
the Annual Sustainable Growth Strategy 202123: 

- 
- 
- 

‘Modernise’, 
‘Connect’ 
 ‘Reskill and Upskill’. 

These reforms and investments should enable long-lasting transformations, in particular for 
what concerns digital public services and the deployment of network infrastructures. 

Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  the  recovery  and 
resilience  plan  is  expected,  to  a  large  extent,  to  make  a  significant  contribution  to  the  digital 
transition or to address the challenges resulting from it and ensures that at least 20% of its total 
allocation  contribute  to  support  digital  objectives.  This  would  warrant  a  rating  of  A  under 
criterion 2.6 of Annex V of the RRF Regulation. 

22 See COM(2016) 587 - Connectivity for a Competitive Digital Single Market - Towards a European Gigabit 
Society 
23 COM(2020) 575 - Annual Sustainable Growth Strategy 2021, 17 September 2020 

51 

 
 
 
                                                           
4.7. Lasting impact of the plan 

The  measures  envisaged  in  the  plan  are  expected  to  have  lasting  positive  effects  on  the 
Estonian economy and boost its green and digital transition. Overall, the plan strengthens the 
growth  potential  of  the  economy  and  fosters  job  creation,  innovation  and  competitiveness  by 
addressing weaknesses such as weak productivity and energy efficiency, or skills mismatches. In 
particular, as a whole, fostering the twin transition in the business sector under Components 1 on 
the digital transformation of enterprises and Component 2 on accelerating the green transition in 
enterprises  is  expected  to  have  a  positive  impact  on  growth  potential,  through  improved 
efficiency  and  productivity.  Under  Component  1,  the  investments  aiming  at  deploying  digital 
solutions  in  the  construction  and  road  freight  transport  sectors  can  accelerate  the  digital 
transformation  of  these  two  sectors  (which  are  currently  lagging  behind  in  terms  of 
digitalisation). Measures to enhance energy efficiency under Component 4 are also expected to 
increase  the  growth  potential.  Overall,  according  to  the  economic  model presented  by  Estonia, 
the plan is expected to have a positive long-term impact on GDP estimated at +0.8% compared 
to  the  baseline  by  2026  (average  GDP  level  effect  over  2021-2026)  and  +0.36%  by  2030 
(average level effect over 2027-2030). The impact of reforms is not modelled. The estimates are 
roughly in line with the Commission’s QUEST simulations (see Box 2 - although the results of 
the two simulations cannot be directly compared due to the differences in  the assumptions and 
methodology). Overall, the estimated long-term impact of the plan in terms of GDP is plausible. 

In  addition,  some  measures  are  expected  to  have  a  lasting  positive  effect  on  Estonia’s 
inclusiveness and cohesion. This includes measures related to the construction of the Northern 
Estonia Medical Campus, and the measure aiming at obtaining relevant  working experience by 
the youth through the “My First Job” measure. The envisaged deployment of very-high-capacity 
broadband networks in market failure areas should also help to reduce the digital divide between 
urban and rural areas. 

Structural changes in administration and relevant institutions, as well as in policies, can be 
expected from the implementation of the plan. 

This  notably  concern  some  measures  in  the  energy  area.  The  reform  on  promoting  energy 
efficiency  and  integrated  renovation  can  potentially  bring  structural  change  by  tackling 
administrative  barriers  to  building  renovation  (the  current  processes  to  adopt  spatial  planning, 
obtain  permits  etc.  can  take  years).  Reforms  aiming  at  fostering  wind  power,  in  particular  by 
facilitating  the  acquisition  of  an  offshore  wind  park  building  permit,  can  also  bring  structural 
change in policies. Planned investments  in  the  electricity  grid, renewable energy  production in 
industrial  areas  and  energy  efficiency  in  buildings  are  also  expected  to  have  a  lasting  impact. 
These measures help to create a solid base for supply of renewable energy and using the energy 
in an efficient way. However, the concrete actions with long-term impact to phase out oil shale 
will only be set out in the National Development Plan of the Energy Sector at the end of 2025 
and broader reforms, such green taxation, are not envisaged.   

Some measures related to health and social protection are also expected to bring structural 
changes  in  policies  or  institutions.  In  particular,  the  Hospital  Development  Plan  will  outline 

52 

 
how  the  hospital  network  should  be  consolidated  and  hospital  infrastructure  improved.  The 
measures  addressing  health  workforce  shortages  and  strengthening  primary  care  is  expected  to 
improve the quality and access to healthcare. In the health area, measures aimed at improving e-
health governance is  also expected to bring efficiency gains. Improving the support system for 
children  with  higher  care  needs  should  reduce  the  care  burden  on  families  and  future,  more 
extensive, care needs in adulthood. The measures in the Welfare Development Plan 2023-2030 
are expected to help reduce the gender pay gap.  

Some  measures  related  to  skills  are  also  expected  to  bring  structural  change  in  the 
education and training policy, and support the twin transition. The envisaged revision of the 
content  and  organisation  of  the  training  of  ICT  experts,  and  a  pilot  for  the  redesign  of  the 
qualification  framework  for  ICT  specialists  are  expected  to  enhance  training  policy  and 
ultimately  contribute  to  the  digital  transition  in  companies.  The  development  of  trainings  to 
support faster uptake of green technologies is also expected to foster the green transition. 

Some  measures  fostering  digitalisation  in  the  public  sector  are  also  expected  to  bring 
structural changes in institutions. This concerns in particular the creation and development of 
a centre of excellence for data management and open data within Statistics Estonia to coordinate 
and support the development of data management in other public authorities, the reconfiguration 
of basic digital services and a safe transition to cloud infrastructure, as well as the creation of a 
Centre for Strategic Analysis within the Financial  Intelligence Unit to reinforce the capacity to 
fight money laundering and terrorist financing. 

Taking into consideration all reforms and investments envisaged by Estonia in its recovery and 
resilience  plan,  their  implementation  is  expected,  to  a  large  extent  to  bring  about  a  structural 
change  in  the  administration  or  in  relevant  institutions  and  in  relevant  policies  and  to  have  a 
lasting  impact.  This  would  warrant  a  rating  of  A  under  criterion  2.7  of  Annex  V  to  the  RRF 
Regulation. 

4.8. Milestones, targets, monitoring and implementation 

The  State  Shared  Service  Center  and  the  Ministry  of  Finance  will  be  assigned 
responsibilities  that  will  provide  an  adequate  structure  for  implementing  the  plan, 
monitoring progress and reporting. Estonia envisages to ensure the implementation process of 
the  plan  in  the  framework  of  the  existing  management  and  control  system  for  EU  Structural 
Funds. In this system, the State Shared Service Center (SSSC) is the Managing Authority, which 
will be the coordinating body responsible for the financial management of the plan and for the 
management  and  control  system,  including  validation  of  all  interim  and  final  milestones  and 
targets agreed in the plan (management verification) and drawing up the management declaration 
accompanying  the  payment  request.  To  this  end,  use  will  be  made  of  the  single  integrated 
information  system  (SFOS)  to  provide  the  data  set  out  in  Article  22  (2)  (d)  of  the  RRF 
Regulation. The SSSC can, where specified, also act as an implementing body. The State Budget 
Department of the Ministry of Finance will hold the responsibility for planning, monitoring and 
evaluation  in  cooperation  with  the  Managing  Authority.  The  monitoring  and  implementation 
arrangements  have  been  sufficiently  described  in  the  plan.  However,  the  enactment  of  the 

53 

 
regulation  establishing  the  legal  framework  regarding  the  monitoring  and  implementation 
arrangements including setting out the bodies involved, and their tasks is only planned for after 
the adoption of a positive Council Implementing Decision. A milestone has been included in the 
RRP in relation to the enactment, before the first payment request, of the regulation establishing 
the legal mandate of the involved bodies.  

The  necessary  administrative  resources  for  the  management  and  supervisory  function  of 
the  plan  will  be  provided  mostly  within  the  institutions’  existing  resources.  This  should 
ensure  the  proper  implementation  process  as  the  institutions  involved  possess  the  necessary 
knowledge and skills, while not creating a disproportionate administrative and financial burden. 
The  administrative  capacity  of  the  central  services  charged  with  implementation  and 
coordination of the RRP are sufficiently detailed in the RRP. The administrative capacity of the 
sectoral  ministries  and  authorities  under  their  control  in  charge  of  the  plan’s  reforms  and 
investments was briefly described in the plan. Additional funding for a total of 17 FTEs has been 
approved to support the implementation of the plan. These have been allocated to the Ministry of 
Finance (1 FTE), the managing authority (8 FTE) and sectoral ministries (8 FTE). Authorities are 
expected to ensure that staff is equipped with necessary skills.  

The  plan  describes  adequately  the  intended  monitoring  and  reporting  mechanisms.  The 
integrated  information  system,  the  existing  Structural  Funds  Operating  System  (SFOS),  will 
collect the necessary information to monitor the reforms and investments, including milestones, 
targets  and  results.  The  information  system  will  also  ensure  the  availability  of  information 
related to the investments and reforms of the RRP, including data on the final recipients of the 
measures  of  the  plan.  The  SFOS  has  been  linked  with  various  national  registers  such  as  the 
National  Business  Register  and  the  Public  Procurement  Register  to  cross-check  information. 
Functionality and user-friendliness of the SFOS and interactions with other registries are planned 
to be enhanced further. The SFOS will also record all the audits of projects and of management 
and control systems. The SFOS will be accessible to all actors of the administration, including 
access for audit purposes and supervision from the European Commission.  

The  plan  describes  the  institutional  actors  that  are  responsible  for  the  implementation  of 
the individual reforms and investments at component level. The various actors that will be in 
charge of the implementation of the measures, mainly sectoral  ministries  and authorities under 
their control, as well as government  agencies (e.g. KredEx), are indicated in  the description of 
the components of the plan. Close technical cooperation between the Ministry of Finance, SSSC, 
sectoral  ministries  and  other  institutional  units  will  be  critical  for  the  plan’s  implementation. 
More  broadly,  involving  the  national  Parliament,  local  authorities,  civil  society  and  social 
partners  will  be  key  to  ensure  the  successful  implementation  of  the  reforms  and  investments 
under the plan. 

The milestones and targets of the Estonian plan are broadly evenly distributed across the 
implementation  period,  although  they  are  backloaded  towards  2026  for  investment 
projects. The implementation of the 41 measures in the plan is tracked through 124 milestones 
and  targets.  The  milestones  and  targets  represent  the  key  elements  of  the  measures  and  are 
implementation.  The  verification  mechanisms,  data  collection  and 
relevant  for 

their 

54 

 
responsibilities described by the Estonian authorities appear sufficient to justify the disbursement 
requests  once  the  milestones  and  targets  are  completed.  In  most  cases,  sectoral  ministries  and 
authorities  under  their  control  will  be  responsible  for  achieving  milestones  and  targets  and 
ensuring  the  traceability  and  validity  of  the  related  data.  The  distribution  of  milestones  and 
targets  across  time  is  relatively  even,  although  there  is  a  back-loading  of  investment  towards 
2026, including for the biggest individual investment project – the construction of the Northern 
Estonia  Medical  Campus.  This  could  represent  a  risk  for  the  full  implementation  of  the  plan. 
However, the monitoring indicators are sufficiently clear to ensure that their completion can be 
traced and verified. They reflect adequately the overall level of ambition of the plan and appear 
realistic.  

The controls and audit arrangements are described in detail in Section 4.10. 

The  arrangements  proposed  by  Estonia  in  its  recovery  and  resilience  plan  are  expected  to  be 
adequate to ensure effective monitoring and implementation of the recovery and resilience plan, 
including the envisaged timetable, milestones and targets, and the related indicators. This would 
warrant a rating of A under the assessment criterion 2.8 of Annex V to the RRF Regulation. 

4.9. Costing 

Estonia has provided individual estimated costs for all investments and reforms that entail 
a cost in the recovery and resilience plan. 

The  cost  breakdown  is  generally  detailed  and  well-substantiated.  For  almost  all  cost 
estimates  the  assumptions  used  are  well  described  and  can  be  understood.  The  estimates  are 
mainly  based  on  comparisons  with  past  investments  of  similar  nature.  The  plan  contains  ten 
financial schemes which have been well-described and have been associated with milestones and 
targets.  The  tables  proposed  in  the  standard  template  were  duly  completed  and  presented.  The 
cost estimates have been validated by an internal government body (Grant Management Unit of 
the Support Development Department of the State Shared Service Center).  

The assessment of the cost estimates and inherent supporting documents shows that most 
of the costs are well justified, reasonable and plausible. 

Reasonable costs  

To  support  the  cost  estimates,  Estonia  provided  an  extensive  list  of  documents  to  justify 
and  explain  the  amounts  proposed  and  gave  explanations  on  how  those  amounts  were 
computed. For the most part, previous projects or other comparative cost data for the main cost 
drivers were presented to serve as a benchmark for the cost estimates. For some of the financial 
schemes  included  in  the  plan,  past  examples  were  described.  However,  for  others  this  was  not 
possible  due  to  the  novelty  of  the  projects  to  be  supported.  While  for  the  most  part  the 
calculations were clearly spelled out and it is possible to clearly identify the methodology used, 
for a limited number of investments the information provided was less clear. Nevertheless, there 
is no evidence that would allow doubting the costing estimates provided. 

55 

 
The plan contains several recurrent costs, such as personnel costs and maintenance costs. 
These  are  duly  justified  and  acceptable.  The  plan  provides  justifications  to  show  that  these 
costs are essential for the success of the reforms and investments to which they correspond and 
that  they  do  not  impose  a  significant  burden  on  the  national  budget.  Most  of  these  costs  are 
temporary and the non-temporary ones lead to a limited cost for the future.  

In this context, it is deemed that the reasonability of the cost estimates has been established to a 
medium extent. 

Plausible costs  

The amount of the estimated total  costs of the recovery and resilience plan is in line with 
the nature and type of the envisaged reforms and investments. Estonia provided a large set of 
documents  and  links  to  online  sources  to  substantiate  the  cost  estimates.  Explanations  were 
added  to  how  past  projects  relate  to  the  cost  estimates  of  the  new  investments  in  the  RRP, 
enabling a full assessment of the plausibility of the costs. About 40% of the costing was deemed 
relatively high compared to costs of similar investments, leading to a medium plausibility rating.  

Considering the limitations of an ex-ante assessment of cost estimates, the amounts proposed for 
financing were deemed appropriate and seen as establishing the plausibility of the cost estimates 
to a medium extent.  

No double EU financing  

The  individual  components  provide  clear  information  about  additional  investments  from 
other  Union  funds.  Projects  funded  by  other  Union  programmes  are  demarcated  in  time  and 
scope from the projects in the RRP. Furthermore, Estonia has put in place arrangements to avoid 
double EU funding both at the project and at the plan level (see also section 4.10). At plan level, 
checks  will  be  carried  out  in  the  programming  stage  to  identify  the  sector-specific  sources  of 
funding to ensure that the same activities will not be financed from multiple sources. At project 
level,  the  integrated  information  system  (SFOS,  see  below)  will  be  able  to  detect  duplicates 
based on invoices submitted twice. The SFOS information system has been linked with different 
information systems and is able to interact with  different registries, which will help to identify 
risks of overlap.  

The  2021-2027  Partnership  Agreement  and  Programme  are  currently  under  negotiation, 
and as such a completely developed delineation is not possible at this moment. However, the 
Commission  did  a  preliminary  check  to  reduce  the  risks  of  double  Union  financing,  and  no 
evidence of clear risks was identified.  

Commensurate and cost-efficient costs  

The recovery and resilience plan is expected to effectively help address a significant subset 
of  challenges  identified  in  the  country-specific  recommendations  (CSRs).  Moreover,  the 
recovery  and  resilience  plan  contains  measures  supporting  the  recovery  from  the  COVID-19 
crisis  and  laying  the  foundation  for  long-term  growth.  The  main  objectives  of  the  plan  are  to 
foster the twin transition, improve Estonia’s growth potential, job creation and economic, social 

56 

 
and  institutional  resilience,  thereby  reducing  vulnerability  to  shocks.  The  plan  contributes  to 
strengthening  social  cohesion  and social  protection and to  the implementation of the European 
Pillar  of  Social  Rights.  The  plan  enhances  the  economic,  social  and  territorial  cohesion  and 
convergence within the Union. The economic and social impact of the plan in combination with 
the positive cost assessment, indicates that the cost is in line with the principle of cost-efficiency. 

The justification Estonia provided on the amount of the estimated total costs of the recovery and 
resilience plan is, to a medium extent reasonable and plausible, in line with the principle of cost-
efficiency  and  commensurate  to  the  expected  national  economic  and  social  impact.  Estonia 
provided sufficient information and evidence that the amount of the estimated cost of the reforms 
and  investments  of  the  recovery  and  resilience  plan  to  be  financed  under  the  Facility  is  not 
covered  by  existing  or  planned  Union  financing.  This  would  warrant  a  rating  of  B  under  the 
assessment criterion 2.9 of Annex V to the RRF Regulation.  

4.10.  Controls and audit 

Robustness of internal control system and distribution of roles and responsibilities 

The monitoring, control and audit systems put in place for the implementation of the RRP 
are  based  on  the  existing  structures  for  structural  funds  (see  also  section  4.8).  The 
authorities responsible for planning, implementing and verifying the recovery and resilience plan 
are  part  of  the  management  and  control  system  for  structural  funds.  The  sectoral  ministries  in 
cooperation with  the Ministry of Finance as the  lead ministry, the State Shared Service Center 
and the audit authority, will ensure implementation of the RRP. The State Shared Service Center 
will  have  the  overall  coordination  for  the  implementation  and  financial  management  and  will 
hold the responsibility for submitting payment applications to the European Commission and for 
drawing up the management declaration. The state budget department in the Ministry of Finance 
in cooperation with the State Shared Service Center will carry out the tasks related to planning, 
monitoring  and  evaluation.  The  audit  authority,  an  independent  unit  within  the  Ministry  of 
Finance, will carry out regular audits of the management and control systems including sample 
testing.  It  also  prepares  a  summary  of  the  audits  carried  out  which  will  precede  the  payment 
requests. The audit authority will also host the Anti-Fraud Co-ordinating Service. In addition, in 
specific areas where implementation lies within sectoral ministries, internal audit is also involved 
in oversight. 

Adequacy of control systems and other relevant arrangements 

Robust audit arrangements have been put in place. The role of audit authority is assigned to 
the Financial Control Department of the Ministry of Finance, which is also the responsible body 
for auditing structural funds. The State Shared Service Center assesses risks but can also order 
audit  and  carry  out  on-the-spot  checks  if  necessary.  Audits  will  be  carried  out  on  the  basis  of 
internationally  accepted  standards.  The  audit  authority  will  prepare  the  audit  strategy  and  will 
carry out regular audits of the management and control systems and sample testing. In particular, 
the  audits  of  the  management  and  control  system  will  assess  that  the  monitoring  and 
implementation arrangements provide complete and reliable data on the indicators defined in the 
RRP and that the implementation system ensures that funds are managed in accordance with the 

57 

 
rules and capable of preventing, detecting and correcting fraud, conflict of interests, corruption 
and  double  financing.  Furthermore,  to  further  verify  the  adequacy  of  the  design  of  the 
management and control system for the funds of the RRF and to prevent the materialisation of 
risks,  the  audit  authority  plans  to  carry  out  a  conformity  assessment  of  the  system  before 
submitting the first payment application to the European Commission. 

All information related to the implementation and monitoring of the plan will be stored in 
a  single integrated  information  system  (SFOS)  already  in  place  (see  also  section  4.8).  The 
existing  integrated  information  system  SFOS  will  be  used  by  all  institutions  involved  in  the 
implementation  of  the  plan.  All  the  eligible  projects  under  the  plan  are  recorded  in  the  SFOS. 
Information  related  to  the  project  such  as  the  applicant’s  data,  general  project  data,  objective, 
budget,  sources  of  financing,  intermediate  and  final  milestones  and  targets,  information  on 
implementation,  payments,  non-compliance  procedures  (infringements)  should  be  recorded  in 
the SFOS. The SFOS should also record all the audits of projects and of management and control 
systems. Hence, the SFOS should support the necessary audit trail and reporting of the different 
measures including milestones and targets under the RRP. 

The  institutional  framework  and  processes  put  in  place  to  prevent,  detect  and  correct  fraud, 
corruption  and  conflict  of  interest  give  sufficient  assurances.  All  ministries  need  to  ensure  the 
implementation  of  national  anti-corruption  activities  and  staff  are  trained  to  prevent  fraud,  assess 
fraud  risks,  identify  potential  conflicts  of  interest  and  carry-out  cross-checks  in  SFOS  whether 
aid  has  been  paid  to  the  same  beneficiary  to  meet  the  same  objectives.  In  addition,  a  risk 
assessment is performed once a year, under the responsibility of the State Shared Service Center, 
involving  all  actors  involved  in  the  implementation  covering  both  risks  related  to  the 
management  and  control  systems  in  place  and  possible  risks  related  to  fraud.  Irregularities 
detected in the implementation of projects will be entered in the SFOS, which will be monitored 
by  the  State  Shared  Service  Center.  In  addition,  the  audit  authority  will  also  verify  that  the 
system  put  in  place  can  prevent,  detect  and  correct  cases  where  there  is  a  risk  of  conflict  of 
interest, corruption or fraud. 

Adequacy of arrangements to avoid double EU funding 

Adequate arrangements to avoid double EU funding are put in place.  Estonia has provided 
information  regarding  funding  including  indicative  amounts  from  other  sources,  such  as 
REACT-EU  and  the  EU  structural  funds,  supporting  the  implementation  of  certain  measures. 
Arrangements have been put in place to avoid double funding both at project and at plan level. 
At plan level, checks will be carried out in the programming stage to identify the sector-specific 
sources of funding to ensure that the same activities will not be financed from multiple sources. 
All national and external sources are budgeted together in sector-specific programmes allowing 
transparent monitoring of sectoral funding. Furthermore, at the project level, when preparing the 
grant agreements, the risk of double funding will be assessed. Furthermore, the SFOS should be 
able  to  detect  duplicates  based  on  invoices  submitted  twice.  The  SFOS  has  been  linked  with 
different  information  systems  and  should  be  able  to  interact  with  different  registries,  which 
should help identifying any possible overlap. 

58 

 
Legal empowerment and administrative capacity of control function 

The  RRP  provides  adequate  information  regarding  the  administrative  capacity  of 
coordinating and implementing bodies (see also  section 4.8).  The administrative capacity of 
the  central  services  charged  with  implementation  and  coordination  of  the  RRP  namely  the 
Ministry  of  Finance  and  State  Shared  Service  Center  are  sufficiently  detailed  in  the  RRP.  The 
administrative resources used for the implementation of the RRP will largely use the resources 
and experience knowledge already in place for the implementation and verification of EU funded 
projects.  Additional  funding  has  been  approved  for  the  years  2021  to  2026  for  17  Full  Time 
Equivalents  (FTEs)  to  ensure  sufficient  human  resources  to  implement  and  monitor  the  RRF. 
These  additional  resources  have  been  allocated  to  the  Ministry  of  Finance  (1  FTE),  the  State 
Shared Service center (8 FTEs) and the line ministries (8 FTEs). In the plan it is indicated that 
Estonia also sees a need of 2 additional FTEs to support the audit authority. In addition, if there 
is  need  for  additional  sector  specific  knowledge  there  is  the  possibility  to  call  on  external 
resources.  

The  enactment  of  the  regulation  setting  out  the  legal  mandate  of  the  different  bodies 
involved  in  the  implementation  of  the  Recovery  and  Resilience  Facility  is  planned  only 
after  the  adoption  of  the  Council  Implementing  Decision  for  Estonia.  This  is  considered  a 
shortcoming,  which  is  addressed  through  a  dedicated  milestone  to  be  achieved  before  the 
submission of the first payment request.  

The arrangements proposed by Estonia in the recovery and resilience plan to prevent, detect and 
correct  corruption,  fraud  and  conflicts  of  interest  when  using  the  funds  provided  under  the 
Facility, including the arrangements aimed to avoid double funding from the Facility and other 
Union  programmes,  are  assessed  to  be  adequate  subject  to  the  enactment  of  the  regulation 
setting out the legal mandate of the different bodies involved in the implementation of the plan 
before the first payment request. This would warrant a rating of A under the assessment criterion 
2.10 of Annex V of the RRF Regulation. 

4.11.  Coherence 

The Estonian recovery and resilience plan is coherent to a medium extent. The RRP displays 
coherence within each component and shows some thematic interlinkages and synergies between 
the  different  components,  in  particular  those  related  to  digital  transformation  and  green 
transition. The RRP is also consistent with the Estonia 2035 strategy. However, in some areas, 
coherence  is  not  fully  achieved.  While  the  RRP  includes  substantial  investments  to  foster  the 
green and digital transition and support economic growth, more reforms to strengthen the social 
safety net, notably  broadening the coverage unemployment insurance benefits, could contribute 
to  cushion  possible  adverse  effects  on  certain  groups.  The  significant  investments  in  health 
infrastructure  could  have  been  accompanied  by  measures    leading  to  a  greater  increase  in  the 
health workforce to alleviate shortages. Long-term care is envisaged to be addressed with several 
measures,  but  the  coherence  and  interlinkage  between  these  measures  could  have  been  better 
ensured  with  broader  reforms  to  improve  the  access  to  and  quality  of  long-term  care.  The 
measures included in the RRP to address the decarbonisation of the economy are mainly related 

59 

 
to  investments,  while  concrete  actions  to  phase  out  oil  shale  are  expected  to  be  set  out  in  the 
National Development Plan of the Energy Sector only at the end of 2025 and broader reforms, 
such  green  taxation,  are  not  envisaged.  Overall,  the  RRP  is  stronger  on  investment  than  on 
reforms. 

Component 1 on the digital transformation of enterprises and Component 3 on the digital 
state include complementary and mutually reinforcing measures which should help to ensure 
a wider use of digital technologies across Estonia’s economy and society. 

Component  2  on  accelerating  the  green  transition  in  enterprises  is  coherent  with  the 
objectives  of  supporting  entrepreneurship.  The  plan  includes  measures  which  contribute  to 
development and deployment of resource-efficient green technologies, and improving access to 
finance  via  the  establishment  of  a  green  fund.  This  should  contribute  to  the  uptake  of  green 
technologies in small and medium-size enterprises, as well as the start-up sector.  

The reform and investments on improving the energy efficiency of housing in Component 
4, energy efficiency of companies, green skills and development and deployment of energy 
and  resource  efficient  technologies  and  materials  in  Component  2,  and  the  investment  in 
development  of  e-construction  in  Component  1  are  mutually  supportive.  In  particular,  the 
focus  on  the  training  of  specialists  to  support  the  increase  of  renovation  of  multi-apartment 
buildings and the investment in the digitalisation of the construction sector will also contribute to 
the digital transition. However, the concrete actions to phase out oil shale are envisaged to be set 
out in the National Development Plan of the Energy Sector only at the end of 2025 and broader 
reforms to support the green transition, such as green taxation, are not envisaged. 

Component 5 on sustainable transport is coherent with the objective to reduce greenhouse 
gas emissions. The planned investment to construct a rail link and related infrastructure, a new 
tramline, as well as new bicycle- and walk-ways are expected to contribute to the reduction of 
greenhouse  gas  emissions.  These  measures  are  expected  to  contribute  to  the  Estonian  2035 
strategy, the Estonian National Energy and Climate Plan for 2030 and the sustainable mobility 
targets set out in the ongoing Transport and Mobility Development Plan 2021-2035. Within the 
timeline  of  the  RRP,  also  the  Tallinn  capital  region  common  transport  system  will  be 
implemented  and  the  railway  between  the  two  biggest  towns  Tallinn  and  Tartu  will  be 
electrified.  

The measures in Component 6 on health and social protection are coherent but are skewed 
towards  investments.  The  component  aims  to  improve  the  resilience  and  accessibility  of 
healthcare, improve the access to social services and support young people’s employability. The 
health  reforms  aim  at  strengthening  primary  care,  addressing  health  workforce  shortages  and 
improving e-health. Access to health care is envisaged to be supported by a major investment in 
constructing  the  Northern  Estonia  Medical  Campus  and  in  medical  helicopter  capabilities,  but 
could  have  been  accompanied  by  stronger  commitments  on  addressing  health  workforce 
shortages.  The  youth  employment  investment  will  support  the  acquisition  of  digital  and  green 
skills  by  young  people  and  thus  contribute  to  both  green  transformation  and  digital  transition, 
and  is  coherent  with  the  digital  skills  measure  in  the  digital  component.  To  accompany  the 

60 

 
significant investments to foster the green and digital transformation and economic growth, more 
reforms  to  strengthen  the  social  safety  net,  notably  broadening  the  coverage  of  the 
unemployment  insurance  benefit,  could  cushion  possible  adverse  effects  on  certain  groups. 
Long-term  care  is  envisaged  to  be  addressed  by  several  measures  which  should  contribute  to 
improve  the  access  to  services  across  the  country  but  the  coherence  and  interlinkage  between 
these  measures  could  have  been  better  ensured  with  broader  reforms    to  improve  its  overall 
quality and accessibility.  

Complementarity of measures 

The  recovery  and  resilience  plan  includes  measures  that  are  complementary  with  one 
another.  The  components  included  in  the  plan  form  a  single  framework  for  reforms  and 
investments, the core task of which is to (1) promote productivity, (2) green transition (3) digital 
transition  as  well  as  (4)  the  well-being  of  the  people.  The  six  components  are  mutually 
reinforcing and coherent in their aims. They do not have contradictory aims or possible negative 
effects on one another. 

The overall balance of the response is adequate in view of the main challenges, but the plan 
remains  stronger  on  investments  than  on  reforms.  Ensuring  sustainable  economic  growth, 
innovation  and  competitiveness,  and  decarbonising  Estonia’s  economy  while  coping  with  a 
decreasing  population  remain  the  main  challenges.  The  planned  investments  are  sizeable  for 
health infrastructure, sustainable transport, energy efficiency and digitalisation but more reforms 
in the social area, in particular as regards the coverage of the unemployment benefit  and long-
term care would help improve the adequacy of the social safety net and access to social services. 
In  order  to  promote  wider  coherence  across  instruments,  notably  with  the  European  cohesion 
policy funds, a balanced territorial allocation of resources is encouraged. 

Taking  into  consideration  the  qualitative  assessment  of  all  the  components  of  the  plan,  their 
individual weight (size, relevance, financial allocation) and their interactions, the plan contains 
measures for the implementation of reforms and public investments which, to a medium extent, 
represent coherent actions. This would warrant a rating of B under the assessment criterion 2.11 
of Annex V to the RRF Regulation. 

61 

 
 
 
5.  ANNEX:  CLIMATE  AND  DIGITAL  CONTRIBUTION  OF  THE  MEASURES  OF  THE  ESTONIAN 

RECOVERY AND RESILIENCE PLAN   

Note: While the total cost of the Estonian recovery and resilience plan exceeds the total allocation of non-repayable 
financial support to Estonia, Estonia will ensure that all spending related to the measures mentioned in this table as 
contributing to climate objectives are fully financed by the funds from the Recovery and Resilience Facility. 

Measure/ 
Sub-
Measure 
Name ID 

Measure/Sub-Measure Name 

Climate 

Digital 

Budget 
(EUR 
m) 

Int. 
Field 

Coeff. 
% 

Int. 
Field 

Coeff. 
% 

1.1 

1.2 

1.3 

1.4 

1.5.3 

2.2 

2.3 

2.4 

2.5 

2.6 

2.7 

3.1 

3.2 

Digital transformation in 
enterprises 

Development of e-construction 

Development of digital waybills 
services 
Skills reform for the digital 
transformation of businesses 
Global e-export impact groups 
and virtual stages 
Green skills to support the green 
transition of enterprises 
Green technologies development 
programme 
Modernisation of the business 
models in manufacturing 
companies 
Deployment of resource-efficient 
green technologies 

58 

9 

6 

10 

8,17 

15 

01 

100% 

8,38 

047 

40% 

9 

022 

100% 

37,80 

022 

100% 

Green fund 

100 

027 

100% 

Creating opportunities for the 
uptake of renewables-based green 
hydrogen technologies 
Creation and development of a 
centre of excellence for data 
management and open data 
Development of event services 
and proactive digital public 
services for individuals 

50 

032 

100% 

7,14 

12,28 

62 

010 

100% 

010 

100% 

010 

100% 

108 

100% 

015 

40% 

011 

100% 

011 

100% 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measure/ 
Sub-
Measure 
Name ID 

Measure/Sub-Measure Name 

Climate 

Digital 

Budget 
(EUR 
m) 

Int. 
Field 

Coeff. 
% 

Int. 
Field 

Coeff. 
% 

3.3 

3.4 

3.5 

3.6 

3.7 

3.8 

4.2 

4.3 

4.5 

4.6 

Development of event services 
and digital gateway for 
entrepreneurs 

20,80 

011 

100% 

#Bürokratt programme (national 
virtual assistant platform and 
ecosystem) 

Reconfiguration of basic digital 
services and safe transition to 
cloud infrastructure 

Establishing the strategic analysis 
of money laundering and terrorist 
financing in Estonia 

Information system for real-time 
strategic analysis of money 
laundering and terrorist financing 

Construction of very high 
capacity broadband networks 

Support for the renovation of 
apartment buildings 

Support for the renovation of 
small residential buildings 

Programme to strengthen the 
electricity grid to increase 
renewable energy production 
capacity and adapt to climate 
change (such as protection against 
storms) 

Programme to boost energy 
production in industrial areas 

63 

10,48 

011 

100% 

42,83 

011 

100% 

0,40 

3,50 

011 

100% 

011 

100% 

24,29 

053 

100% 

44,67 

025bis  100% 

2,40 

025 

40% 

30 

033 

100% 

7 

033 

100% 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measure/ 
Sub-
Measure 
Name ID 

Measure/Sub-Measure Name 

Climate 

Digital 

Budget 
(EUR 
m) 

Int. 
Field 

Coeff. 
% 

Int. 
Field 

Coeff. 
% 

4.7 

5.2 

5.3 

5.4 

5.5 

Pilot Energy Storage Programme 

8 

033 

100% 

Construction of a section of the 
westbound Tallinn-Rohuküla 
railway 
Construction of the Rail Baltic 
multimodal joint terminal in 
Tallinn 
Construction of the Tallinn Old 
Port tram line 
Municipalities’ investments in 
bike-and walkways 

34 

066bis  100% 

31,05 

064 

100% 

26 

5 

073 

100% 

075 

100% 

Int. Field = intervention field 
Coeff. = Coefficient for the calculation of support to climate change objectives and to digital transition, on the basis 
of Annex VI and Annex VII to the RRF Regulation 

64