Policies in Estonia

Estonia has set targets to reduce primary energy consumption to 45.72 TWh by 2030. The country is implementing measures to improve energy efficiency in buildings, industry, and transport through energy audits, labelling, and standards. Estonia's Energy Sector Organization Act stipulates requirements for improving energy efficiency in both the public and private sectors.

Estonia has set an ambitious target to cover 100% of its electricity consumption with renewable electricity by 2030 and increase the share of renewable energy in gross final energy consumption to at least 65% by 2030. The country promotes the use of various renewable energy sources, including wind, solar, biomass, and geothermal energy. The government has introduced technology-neutral renewable energy tenders and premium tariffs to support the construction and operation of renewable energy projects.

The country is focusing on developing renewable energy in areas previously used for agriculture, industry, or energy production, where good electricity and road infrastructure already exist.

Estonia is preparing new spatial plans to address energy security and adaptation to climate change, including the development of energy infrastructure.

The relevant legislation in Estonia in the energy sector is:

• Electricity Market Act: governs the generation, storage, transmission, sale, export, import and transit of electricity and the economic and technical management of the power system. This Act prescribes the principles of the functioning of the electricity market.
• Grid Code: lays down technical requirements applicable to power-generating installations by virtue of the security of supply of the electricity system.
• Network Code, Atmospheric Air Protection Act, The Act on the General Part of the Environmental Code, Energy Sector Organisation Act
• Network Code on the Operation of the Electricity lays down: the requirements and rules regarding the changing of the seller, the data exchange between market participants, the balance obligation, the determination of fixed and variable guarantees for balance providers, the sale of electricity in the case of interruptions in the chain of open supply.
• Atmospheric Air Protection Act stipulates that the Modernisation Fund is a fund established under Article 10d of Directive 2003/87/EC of the European Parliament and of the Council through which projects for modernising of the energy systems and improvement of energy efficiency are funded.
• The Act on the General Part of the Environmental Code stipulates the obligation to use raw materials, natural resources and energy economically.
• Energy Sector Organisation Act provides the measures for achieving the national target of energy efficiency, the principles for promoting renewable energy, the requirements for improving energy efficiency and the parties to whom obligations are imposed in the public as well as in the private sector.

National Energy and Climate Plan

Climate Resilient Economy Act (Draft):

• Introduced in August 2024, this draft law establishes the foundation for a climate-resilient economy by setting greenhouse gas emission targets, promoting the adoption of clean technologies, and enhancing the value of resources. It does not specifically mention islands.

The Estonian Energy Policy Development Plan (ENMAK) outlines Estonia's objectives for increasing the share of renewable energy sources (RES). It aims for RES to constitute 50% of total domestic electricity consumption. 80% of the heat produced in Estonia is expected to be based on renewable energy sources. It doesn’t specify anything about islands specifically.

• The Estonian Energy Policy Development Plan (ENMAK)
• Climate Resilient Economy Act (Draft)

Estonia’s energy efficiency measures aim to reduce energy consumption, lower carbon emissions, and improve sustainability across all sectors. These policies align with EU energy directives and national energy targets, ensuring a transition towards a more energy-efficient and climate-neutral economy by 2030.

Estonia has incorporated the European Union’s Energy Efficiency Directive into its national legislation through the Energy Sector Organization Act and related regulations. Domestically, Estonia's Energy Sector Development Plan 2030 targets final energy consumption of 32-33 TWh per year and a 14% reduction in primary energy use compared to recent peaks (~60 TWh/a).

To achieve these goals, Estonia has adopted concrete energy-saving policies in key sectors. In the housing sector, renovation subsidies support apartment buildings and single-family homes, alongside tax incentives and minimum energy performance standards (MEPS) for rented and sold properties. The service sector benefits from state support for public and commercial building renovations, CO₂ taxation, and energy-efficient real estate incentives. The industrial sector promotes voluntary agreements, resource-efficient technologies, and investment support for energy-intensive businesses. In transport, Estonia prioritizes electric and biogas vehicles, charging infrastructure, and modernized public transport. These measures align with Estonia’s commitment to the EU’s Renovation Wave and climate neutrality objectives, ensuring a more sustainable and energy-efficient future.

Measures include renovation incentives, taxation policies, and infrastructure improvements to drive energy savings. 

Key initiatives include renovation subsidies for homes, public buildings, and commercial properties, alongside mandatory energy performance standards (MEPS) for buildings. Tax incentives and CO₂ taxes encourage energy-efficient investments. In transport, Estonia prioritizes electric and biogas vehicle infrastructure, improved public transport, and congestion charges. The industrial sector benefits from resource-efficient technology funding and voluntary energy-saving agreements.

Housing Sector

Primary energy consumption in residential buildings must be reduced by at least 16%. By 2035, this reduction target increases to 20–22%, with the ultimate goal of achieving a climate-neutral building stock by 2050. To guide this transition, Estonia will develop a National Renovation Plan by the end of 2026. Additionally, a Renovation Passport is being developed to help building owners plan upgrades step by step, leading to zero-emission buildings. From 2030 onward, all newly built structures must be zero-emission buildings.

Service Sector

Estonia promotes energy efficiency in the public and commercial sectors through renovation subsidies for government and municipal buildings, as well as investment grants for private businesses to improve insulation, heating, and lighting. CO₂ taxes on commercial properties encourage businesses to cut energy waste, while minimum energy performance standards mandate efficiency improvements in non-residential buildings. Additionally, property tax incentives are offered for energy-efficient commercial properties, further driving the transition to a more sustainable built environment. By 2030, 16% of the least energy-efficient non-residential buildings must be renovated.

Industrial Sector

The industrial sector benefits from voluntary agreements where companies commit to energy savings in exchange for government incentives. Businesses investing in green technologies and resource-efficient equipment receive financial support, and energy-intensive industries get targeted aid to reduce consumption and improve sustainability. Specific measures also include investment support for food industry energy security, helping critical production facilities transition to more efficient and low-carbon energy sources.

Transport Sector

Energy efficiency in transport focuses on electrification, alternative fuels, and public transport improvements. Government fleets must adopt energy-efficient vehicles, while subsidies promote public transport and micromobility options like cycling. Investments in EV charging infrastructure, biomethane, and hydrogen fueling stations support cleaner transportation. Higher taxes for polluting vehicles and congestion charges in major cities encourage greener choices, while rail electrification, new tram and bus routes, and biofuel incentives modernize Estonia’s transport network for a low-carbon future.

• Ministry of Climate 

• Ministry of Economic Affairs and Communications

• Estonian Development Fund

• Local municipalities

   

Estonia's electricity support schemes, managed by Elering (TSO), focus on accelerating renewable energy adoption and decarbonizing the power sector. Key measures include the Renewable Energy Subsidy, which provides financial incentives for electricity generated from wind, solar, hydro, and biomass, and Reverse Auctions for Renewable Energy, where producers competitively bid for support contracts to ensure cost-effective energy production. Additionally, the Support for Efficient Cogeneration promotes high-efficiency combined heat and power plants, while the Offshore Wind Energy Support Scheme, launched in 2024 with a €2.6 billion budget, aims to scale up offshore wind projects. These initiatives align with Estonia’s goal of increasing renewable energy’s share in electricity consumption, cutting greenhouse gas emissions, and advancing towards a climate-neutral economy.

Estonia's electricity support system, managed by Elering (TSO), is designed to accelerate the transition to renewable energy and decarbonise the power sector through financial incentives, competitive tenders, and efficiency-based subsidies. The system consists of the following key measures:

• Renewable Energy Subsidy – Provides fixed financial support per megawatt-hour (MWh) for electricity produced from wind, solar, hydro, and biomass sources. Eligible producers receive support for up to 12 years to promote long-term renewable energy investment.
• Reverse Auctions for Renewable Energy – A competitive bidding system where renewable energy producers submit bids for subsidies, ensuring cost-efficient renewable electricity generation. The lowest bids win, reducing the overall burden on public funding while securing long-term contracts.
• Support for Efficient Cogeneration – Financial incentives for combined heat and power (CHP) plants using high-efficiency cogeneration technologies to improve energy efficiency and reduce emissions. In 2024, approximately 2.8 million euros were allocated to support 88 GWh of efficient cogeneration electricity production.
• Offshore Wind Energy Support Scheme – A €2.6 billion funding program introduced in 2024 to accelerate the development of offshore wind energy, supporting large-scale projects crucial for meeting Estonia’s renewable energy targets.

These support mechanisms play a vital role in Estonia’s National Energy and Climate Plan (NECP), helping the country increase renewable energy's share in electricity production, reduce greenhouse gas emissions, and advance toward a climate-neutral economy by 2050.

• Ministry of Climate
• Elering (TSO)
• Estonian Competition Authority

Most of the heating production in Estonia is consumed by residential buildings. The current heating system in Estonia is mainly based on solid bioenergy, though also still greatly dependent on fossil fuels. 

Estonia's transition to a carbon-neutral heating and cooling sector by 2050 is supported by a range of government-backed support mechanisms and action plans. Estonia has several plans which guide future H&C policy, namely the 2017 National Development Plan of the Energy Sector until 2030, the National Energy and Climate Plan, the Recovery and Resilience Plans and the Long-term Renovation Strategy. 

The various plans include high-level targets for the sector as well as investment programmes.

• Increasing renewable energy use in district heating and cooling systems.
• Upgrading infrastructure.
• Promoting energy efficiency measures. 

Specific transition scenarios and action plans have been developed to ensure a systematic shift towards carbon neutrality, focusing on the integration of geothermal, aerothermal, solar thermal, biomass, and biogas technologies.

To facilitate this transition, government incentives support renovating heating infrastructure, improving energy efficiency, and ensuring the sustainable use of biomass. Financial support mechanisms focus on modernizing district heating networks, integrating renewable energy, and reducing dependence on fossil fuels. Estonia is also updating sustainability criteria for biomass use to align with EU climate goals and ensuring that new heating and cooling investments contribute to long-term carbon neutrality.

• Ministry of Climate
• Environmental Investment Centre
• Enterprise and Innovation Foundation
• Consumer Protection and Technical Regulatory Authority
• Transmission System Operator (Elering)
• Local municipalities

The transport sector is a high-impact sector in terms of climate impact in Estonia. The final energy consumption of the transport sector accounts for 29% of Estonia's total final energy consumption, and the sector's greenhouse gas (GHG) emissions make up approximately ¼ of total emissions.

The Transport and Mobility Development Plan 2021-2035 sets a goal to reduce energy consumption in the transport sector by 12% by 2035.

Estonia’s national renewable energy target aligns with the EU Renewable Energy Directive - by 2030, at least 14% of the energy used in road and rail transport must come from renewable sources. By 2035, Estonia aims to increase renewable energy use in transport to 24%.

• Purchase subsidies to encourage the adoption of electric and hydrogen vehicles, providing direct financial support to buyers.
• Use of biomethane in public transport and heavy-duty vehicles through targeted funding to promote alternative fuels.
• Hydrogen pilot projects receive financial backing to explore its potential in the transport sector.

For public transport and infrastructure:

• Tram network expansion in Tallinn, electrifying railway lines, and modernising ferry services to transition them to low-emission fuels.
• Urban mobility initiatives, including street reorganisation and car-use reduction projects, to support sustainable transport solutions.

To further drive decarbonisation: 

• Road toll system for heavy-duty vehicles to encourage fuel efficiency and lower emissions.
• Funding for biogas and hydrogen production for transport.
• Support for charging and refueling infrastructure. 

• Ministry of Climate of Estonia
• Estonian Ministry of Economic Affairs and Communications
• Local governments
• Estonian Environmental Research Centre (EKUK)
• Estonian Transport Administration
• Tallinn Transport Department
• State Shared Service Centre
• Elering AS (TSO)