Chapter 2: Estonia

2.1 Summary of Findings

During the period 1993-1996, environmental expenditures increased from USD 19 million in 1993 to USD 77.7 million in 1996. The share of environmental expenditures from enterprises has increased since 1993, while the share of expenditures made by local governments has decreased during the same period. In 1993, spending by enterprises contributed 70 percent, increasing to 86 percent in 1996. Local government expenditures decreased from 30 percent in 1993 to 14 percent in 1996. Estonia has been also been very successful in attracting foreign assistance, with some 35-40 percent of investments financed by international loans and grants. According to OECD statistics, Estonia is one of the largest recipients in Central and Eastern Europe of international environmental aid (grants and loans) (OECD, 1995).

Most environmental expenditures and investments have been in water and soil protection (67 percent in 1996). In 1996, the state budget allocated 65 percent of its total environmental expenditures to the construction of municipal wastewater treatment facilities and sewer systems, while in 1997 it was 52 percent. The Estonian Environmental Fund for Nature Protection and Rational Use of Natural Resources assigned USD 2.81 million (43 percent of its annual budget) to the water protection program in 1996.

The 10 most serious environmental issues in Estonia were listed and identified in the National Environmental Strategy (NES), adopted by the Parliament on March 12, 1997. These problems include: pollution of ambient and urban air; past pollution caused by industrial, agricultural and military activities; decreases in water quantity and quality; irrational use, pollution and eutrophication of surface water bodies and deterioration of fish stocks; inappropriate waste and hazardous waste management; threats to biological and landscape diversity; and poor consideration of environmental and public health issues within the built-up environment.

In recent years, the priority environmental issues have been water management, and the construction and renovation of municipal wastewater treatment plants, sewers and pumping houses. Air pollution reduction has also remained an important issue and as a full party to the U.N. Framework Convention on Climate Change from 1994, Estonia is now committed to reducing its CO₂ emissions to 1990 levels by the year 2010. It is an area that will most likely increase in importance during the coming years.

Overall demand for environmental technologies in Estonia is moderate. The greatest demand was indicated for wastewater and energy technologies. Moderate demand was identified for the air, water, and waste sectors.

Within the air sector, the highest demand was indicated for emission abatement/cleaner production technologies followed by instrumentation and process control/software. Demand is expected to grow in the areas of air sampling/laboratory analysis and air pollution/flue gas purification equipment.

Demand for water related technologies is concentrated on treatment processes and on water recycling and reuse. Demand is expected to grow for instrumentation/process control/software and for the construction of supply networks.

Demand for wastewater technologies is high in Estonia. The greatest demand was identified for pollution prevention/waste minimization technologies, followed by spill control and containment and physical, chemical and biological treatment processes. In the future, demand is expected to grow for inspection and the reconditioning of existing collection networks as well as instrumentation/process control/software.

Demand in the waste sector is concentrated on waste collection/transportation and storage as well as pollution prevention/waste minimization. Demand is expected to grow for sample analysis/waste characterization and recycling/resource recovery technologies.

Finally, relatively high demand was identified for new/efficient energy and heat generation systems and retrofitting/rehabilitation of existing systems in the energy sector. Technologies where demand is expected to rise include heat recovery and energy savings as well as process management and control.

The major end-users of environmental technologies and services in Estonia are municipalities, followed by industry and enterprises. Municipalities are generally the major end-users as they are responsible for potable water, wastewater, waste management and heating systems. Industry is becoming a more important end-user as companies are increasingly being forced to comply with emission regulations. Various other enterprises in Estonia are not significant purchasers of environmental technologies.

In the early 1990s, the Estonian environmental business sector focused on sales and technical engineering. This approach gradually broadened to incorporate consulting services from 1992-1993. The environmental services market in Estonia is developing rapidly and is driven by a number of factors, such as environmental impact legislation (EIA), the planning and construction market, economic incentives and the privatization process. A typical privatization contract states that it is the buyer's responsibility to assess the environmental damage that occurred before the purchase of the firm.

The primary sources of information available on environmental technologies, services and business opportunities are trade fairs and exhibitions. While a few publications and newspapers include environmental issues, the best opportunities lie in acquainting onself with products and company representatives at trade fairs.

The most important factors considered by local suppliers and end-users when purchasing domestic or foreign environmental technologies are product price and the quality of the product itself. The primary advantage of domestic technologies is the lower price. The advantages of foreign technologies are their high quality, good value for money, reliability and durability as well as user-friendliness and ease of operation.

Surprisingly, the major barriers to purchasing local technologies include the scarcity of information on the suppliers and the lack of reliable information on the products themselves. Foreign technologies are disadvantaged in that they are expensive, are not suited to local conditions and technical culture, and because of the high import restrictions and customs duties.

Most foreign technology providers in the Estonian market are Scandinavian, most commonly from Finland and Sweden. The domestic perception of foreign technologies is that they are quite good, this reflected by the fact that a number of joint-ventures with Estonian companies have been established in recent years.

The main information needs of consumers relate to new environmental technologies, while providers indicate the need for better information on domestic tenders for projects. In interviews, technology providers indicated that the project tendering processes needs to be more open and transparent than it currently is. The inadequacy of information on in-country environmental legislation is a further concern of both providers and consumers.

Both consumers and providers agree that access to credit and external financing is the main obstacle to the development of their business. While these limitations could be regarded as obvious, it is interesting to note the relatively small degree of importance accorded by survey respondents to environmental regulations. The restrictions placed by these, as well as the registration requirements or tax regulations, were also regarded as constraints to business development. The low market demand for products and services was considered a more important issue by technology providers.