The government of Estonia has decided to earmark €25 million of the proceeds from the auctioning of greenhouse gas emission allowances for ship conversion in Estonia in the coming years. This step will help boost Estonia’s competitiveness and turn the green transition into economic growth.

The Ministry of Climate is developing a support measure to encourage shipping companies to choose Estonia for making their ships more environment-friendly by offering partial financial return of investments made in Estonia. The measure is similar to the Film Estonia programme, where the state reimburses a percentage of the money spent in Estonia.

“With this measure, we want to attract passenger and cargo ships to Estonia, so that our companies can convert them here,” said Vladimir Svet, Minister of Infrastructure. “Estonia has both the necessary shore infrastructure and competent companies to compete internationally in this field. The measure is not a magic wand, but an important contribution to the maritime sector and highly anticipated by companies. We’re operating on a highly competitive global market, and this will help us sway the decision of major shipowners in favour of Estonia when it comes to the conversion of their fleet.”

The growing demand for decarbonisation of shipping is underpinned by the mandatory targets set by the International Maritime Organisation, the requirements of the European Union, the expectations of shipping customers for emission-free and sustainable transport, and pressure from the financial sector to reduce the footprint of companies. Many international organisations estimate that the global market for decarbonising shipping will be close to €3 trillion by 2050.

“This step will not only contribute to reducing carbon emissions in the maritime sector, but will also support growth and employment in the Estonian maritime industry,” said Svet. The Ministry of Climate has estimated that by distributing €25 million as a subsidy of about 10%, it would be possible to bring shipbuilding projects worth around €200 million to Estonia, and the amount of tax revenues received would be twice as big as the amount invested in the measure.

Maritime sector can convert 6-12 vessels annually

The measure will support ports, many of which are looking for new lines of business due to declining trade volumes, and the new industries contributing to the green transition are a good option. In addition, it will create even more opportunities for various pilot projects by Estonian universities and companies using the latest green technology solutions. It will also be possible to make maximum use of local industry products in the conversion of ships.

The Ministry of Climate plans to finalise the terms and conditions of the measure by the end of 2024, closely involving the maritime sector. At the same time, companies in the Estonian maritime industry and maritime cluster will be able to start sharing information themselves, already using this government resolution in negotiations.

The plan is to launch the completed measure officially in the first quarter of 2025. According to plans, the first ships would be in Estonia by the middle of 2025. In addition to the companies in the Estonian maritime industry and maritime cluster sharing the information themselves, a global marketing campaign by the sector in cooperation with the Ministry of Climate would contribute to the implementation of the plan.

Six to twelve vessels per year could be converted in Estonia at the current capacity, depending on whether the vessel is a cruise or cargo ship, for example, and how much work needs to be done.

The state budget must also be approved by the Riigikogu.

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