OECD Economic Surveys: Estonia 2026

3. Closing the gaps: faster decarbonisation and climate adaptation across sectors

Vaiva Šečkutė

Zuzana Smidova

Abstract

Estonia has reduced GHG emissions by 44% from the 2018 peak, largely via the decline of oil shale in power generation, yet it remains among the most carbon-intensive OECD economies. Emissions reductions in transport and agriculture have lagged, while land use and forestry (LULUCF) have shifted from sink to source, jeopardising Estonia’s compliance with its targets. Energy security has generally improved, but rapid electrification and expansion of renewables will require further grid reinforcement and further increase of storage capacity. Expansion of wind generation faces planning, permitting, data and grid bottlenecks, and uncertainty about support for offshore capacity. The introduction of a new CO₂-based car tax is welcome and should remain in place, but EV charging infrastructure is uneven. Climate risks, primarily river flooding are moderate but call for early action to strengthen resilience in infrastructure and ecosystems and to tighten land-use regulation and building standards. Stronger insurance coverage, enhanced municipal capacity, targeted financial support and robust progress tracking are needed to manage rising climate risks effectively.

3.1. From oil shale to renewables: climate mitigation progress and remaining challenges

3.1.1. Progress on lowering GHG emissions has been uneven

Greenhouse gas emissions (GHG) fell by 44% from its peak in 2018 and emissions per unit of GDP reached a record low in 2023. Yet, the Estonian economy remains one of the most carbon-intensive in the OECD (Figure 3.1. Panel B) and the climate transition provides an opportunity to improve energy resilience, including in the face of the surge in energy prices in early 2026. In the energy sector, which accounts for 47% of total emissions, emissions have declined significantly, reflecting a structural decline in the use of oil shale and shale oil for electricity and heat generation. By contrast, transport emissions have not declined, while agricultural emissions increased by 4% compared to 2018 (Figure 3.1. Panel C). Land use, land-use change and forestry (LULUCF) sector shifted from being a net carbon sink to a net source of emissions in the mid-2010s although its emissions declined since 2018.

Figure 3.1. Despite progress Estonia remains among the most carbon-intensive

Note: *Data available for 2022. ** WEM (with existing measures) - include the impact of all implemented policies at the time the projections are compiled. *** WOM (without measures) - no policies in the future “business as usual”. ****ESR – Effort Sharing Regulation.

Source: Estonian National Energy, Climate Plan (NECP) and OECD, Air emissions - Greenhouse gas emissions Inventories database.

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Estonia relies mainly on the EU ETS (EU Emissions Trading System) and fuel excise duties to price carbon emissions. In 2023, around 72% of GHG emissions were subject to a net effective carbon rate, with 43% of emissions covered by the EU ETS, 33% by fuel excise and 5% by the national carbon tax. The net effective carbon tax rate increased from EUR 35 per tonne of CO₂-eq. in 2018 to EUR 80 in 2023 mostly due to a rising ETS price (Figure 3.2). Nevertheless, carbon prices vary substantially across instruments and sectors. In 2023, the average carbon tax was EUR 0.1 per tonne of CO₂-eq., compared with EUR 36 per tonne of CO₂-eq. under the ETS and EUR 45 per tonne of CO₂-eq. from fuel excise taxes. Road transport, which accounts for 18% of the country's total GHG emissions, faces the highest net effective carbon rates. By contrast, buildings, agriculture and LULUCF depend more on regulation, renovation policy and other non-price measures. EU ETS carbon pricing will be extended to transport, buildings and small industry in 2028. Rising ETS prices have sharply reduced the competitiveness of oil shale generation. As carbon costs comprise a significant share of production costs, oil shale generation is now loss-making unless electricity prices increase substantially. For example, during the energy crisis in 2022, high electricity prices led to a temporary rebound in oil shale generation.

Figure 3.2. Carbon prices are above the OECD average

Source: OECD (2024), Pricing Greenhouse Gas Emissions 2024: Gearing Up to Bring Emissions Down, OECD Series on Carbon Pricing and Energy Taxation, OECD Publishing, Paris, https://doi.org/10.1787/b44c74e6-en.

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A revised National Energy and Climate Plan (NECP) foresees a 11% decrease in GHG emissions by 2030 compared with 2023. However, under existing measures Estonia is unlikely to achieve climate neutrality by 2050 or sectoral targets for Effort Sharing Regulation (ESR) covering transport, buildings, agriculture, small industry and waste – sectors that are currently not covered by the ETS – or its LULUCF targets (Ministry of Climate, 2024_[1]). Existing measures are insufficient to meet the 2030 targets for LULUCF and for sectors covered by the EU ESR. Projections based on existing policies in the updated NECP fall short of the policy targets: under existing measures, LULUCF emissions are expected to reach 2.2 Mt CO₂ equivalent and ESR - 5.1 Mt CO₂-eq. compared to targets of 1.7 Mt CO₂ and 4.7 Mt CO₂ respectively (Figure 3.1. Panel A). Estonia does not provide projections for an ‘additional measures (WAM) scenario’, which other EU countries publish, as these will depend on a pending Climate Law (Climate-Resilient Economy Act).

The proposed Climate Law would provide an overall framework for reducing emissions. The development process for the law was launched in September 2023, and was submitted to the Parliament in May 2026. The law is accompanied by sectoral roadmaps setting out emissions-reduction measures to achieve the climate objectives. Estonia should swiftly adopt and implement the Climate Law with binding sectoral targets, allocating responsibilities for implementation and monitoring of progress and additional measures in transport and LULUCF progress toward climate neutrality and to ensure compliance with EU obligations. Adopting the Climate Law would also improve policy clarity, helping to harness private sector investment into the transition. Modelling suggests that policy uncertainty can impose substantial costs by delaying the low-carbon transition and discouraging investment and innovation (Basaglia et al., 2025_[2]). In the absence of the Climate Law, adopting the sectoral roadmaps at ministerial or government level would strengthen policy certainty, guide implementation and facilitate access to financing through the state budget and EU support.

Table 3.1. Progress on past recommendations on decarbonisation

2024 Survey recommendations	Action taken since the last Survey
Increase effective carbon prices by restoring taxes on fossil fuels to their pre-pandemic levels faster and by removing exemptions. Tax carbon content more consistently across fossil fuels.	Carbon prices increased driven by higher ETS prices. The share of the economy covered by carbon prices has remained unchanged from 2021 to 2023.
Consider including an explicit target in the Climate Law to phase out oil shale from energy production by 2040.	Climate Law has not yet been adopted.
Ensure adequate administrative resources to effectively implement the Just Transition Plan for the Ida-Viru region and develop a comprehensive long-term plan. Extend special ALMPs for oil shale workers to specific workers in other sectors who may be at high risk of losing their jobs during the green transition.	Estonia is one of the frontrunners in Just Transition Fund implementation within the EU, having already distributed EUR 173 million of the total EUR 354 million allocated.

3.1.2. The transition to renewable energy faces bottlenecks

Estonia plans to scale up renewables generation rapidly to further decarbonise electricity generation and meet rising demand, including for home energy use. In 2024, renewables accounted for more than half of electricity supply, as the use of shale fell sharply. The share of renewable energy in gross final energy consumption reached 42%: 39% in electricity and 68% in heating and cooling. The EU targets an increase in the share of renewables to 42.5% by 2030, with Estonia’s required contribution set at 50%. The national targets in the NECP are more ambitious: they aim to raise the share of renewables in final energy consumption in Estonia to 66% by 2030, which includes 100% in electricity generation, 25% in transport, and 70% in heating (see Figure 3.3 Panel B). This requires faster growth of renewables in electricity and transport. However, the authorities recognise that achieving the very ambitious 100% renewable electricity by 2030 is unlikely and not economically rational. The ambition to achieve 100% target is maintained, however on a market basis: it will be achieved if and when technologies become competitive without operational support (Ministry of Climate, 2025_[5]). While solar capacity is growing rapidly, expansion of wind capacity has progressed more slowly. The solar expansion is on track with additional capacity expected primarily from panels installed on building rooftops and facades (Ministry of Climate, 2025_[3]).

Estonia faces challenges in expanding wind capacity. Installed capacity of wind generation reached 693 MW in 2024, around a quarter of the targeted onshore wind capacity to meet NECP targets by 2030 when wind generation would need to amount to more than 70% of total renewable electricity production, with offshore wind contributing significantly after 2030 (Figure 3.1. Panel A) (Ministry of Climate, 2025_[3]). The rate of abandonment of wind projects is one of the highest among European countries, amounting to more than 60% of capacity in the project pipeline. Such high rates of project abandonment can indicate structural barriers to renewable energy deployment, including regulatory, financial, and grid-related challenges (OECD, 2025_[38]). Estonia should ensure predictable support and effectively implement reforms to remove bottlenecks in planning, permitting and environmental impact assessment, thereby reducing wind project abandonment rates.

Figure 3.3. The share of renewables in energy generation is rising

Note: Dotted lines in graphs represent national targets as set in NECP. * 100% renewables share target for electricity production has no target date and is planned to be achieved if and when technologies become competitiveness without operational support.

Source: Eurostat, NECP.

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Recent reforms have eased some constraints— offshore wind projects now require a single integrated permit instead of three separate ones (Ministry of Climate, 2025_[3]). Planning has been streamlined by removing some requirements, potentially shortening procedures from 4–5 years to 2–3 years (National Audit Office of Estonia, 2024_[4]). The reforms also establish a single-entry point for all renewable energy permit applications (Ministry of Climate, 2025_[3]). These measures reduce procedural bottlenecks and may mitigate some of the additional costs and risks created by lengthy permitting, thereby helping to reduce the rate of abandonment of wind projects in the future. To sustain momentum in renewable energy deployment, policy makers should prioritise the effective implementation of these changes (National Audit Office of Estonia, 2024_[4]).

A persistent obstacle to the development of new projects is lengthy environmental impact assessments resulting from the absence of high-quality, up-to-date environmental data. With no central overview of existing studies, each assessment requires extensive new research resulting in inefficient use of resources and preventing harmonisation of assessment methodologies (National Audit Office of Estonia, 2024_[4]). Recent measures to accelerate environmental impact assessments (EIA) include shorter EIA options for onshore wind farms, lowering qualification requirements for experts to address shortages, and shortening strategic EIA by 1–2 months. However, lack of consensus among authorities on acceptable environmental impacts still causes major delays. To accelerate assessments further, the government and other relevant stakeholders need to set acceptable environmental impacts and assessment methodologies and centralise existing studies and monitoring data (National Audit Office of Estonia, 2024_[4]).

Policy uncertainty can further undermine investment (Blyth et al., 2007_[25]). The government cancelled a bid for a EUR 2.6 billion support scheme for offshore wind funding in February 2025, citing a short implementation window and insufficient data on cost-effectiveness. The cancellation has created uncertainty that may deter investors. Offshore wind farms and large-scale storage facilities are now expected to be supported via a loan guarantee instrument of the Estonian Business and Innovation Agency (EIS). Terms of the guarantee scheme are still to be determined. Restoring confidence and further investments in wind capacity will require a clear long-term policy framework, effective implementation of planning and permitting reforms, and grid upgrades capable of integrating variable generation.

3.1.3. Further measures are needed to ensure stable electricity supply and secure the grid

Power grids must expand their capacity to accommodate rising electricity demand and improve flexibility amid increasing shares of renewable generation, which will increase the variability of supply. Grid connection is currently a barrier for wind energy expansion, as limited capacity means new projects require costly reinforcements (National Audit Office of Estonia, 2024_[4]). Replacing oil shale capacity will require alternative domestic generation including adequate dispatchable capacity and, where necessary, imports through improved interconnections. Increasing storage capacity and effective demand response will reduce the need for dispatchable capacity and will be important to ensure stability of the grid and of prices.

Elering, Estonia’s national electricity and gas transmission system operator, estimates that the country will require 2100 MW of dispatchable capacity in 2035, highlighting the scale of replacement needs as oil shale plants reach the end of their lives and become uncompetitive. In 2024, most dispatchable capacity in Estonia was generated from direct combustion of oil shale, and much of the oil shale generation capacity is 50 years or older (Ministry of Climate, 2025_[5]). Over the next decade, around 1000 MW of new generating capacity will be needed to ensure adequate dispatchable capacity. Estonia plans to meet dispatchable capacity needs through bioenergy-based cogeneration, the newer Auvere oil shale power plant co-firing biomass, oil shale retort gas, and gas-fired plants capable of using locally produced biomethane. By 2040 60% of dispatchable capacity would operate on fossil fuels and the rest on renewables and possibly nuclear capacity.

Estonia’s electricity grid faces a growing financing gap, as rising investment needs in both distribution and transmission networks increasingly exceed what can be covered by network tariffs and connection fees. Elektrilevi, the largest distribution network operator, increased its investment in security of supply and network connections from 132 million euros in 2024 to 200 million euros in 2025. Annual investments of around EUR 160 million over the next decade will be needed to accommodate new connections, distributed generation (rooftop solar, local wind) and ensure security of supply. However, only about 40 million euros of investment is currently financed through network charges, requiring additional financing sources. Until now, investment has been financed through loans and withheld dividends. State funds allocation for grid reinforcement works during 2022–26 to enable new renewable connections and improve climate resilience amount to 38 million euros (Ministry of Climate, 2025_[3]). Investments by Elering in 2023-24 focused on synchronization and a programme for strengthening connections, in addition to conventional investments for replacing depreciated components of the electricity networks. Network connection fees were expected to cover half of the 700 million euros investment during 2024-28. The rest of the investments are financed through EU funds, borrowing and congestion income.

Estonia synchronised its grid with the continental European network in early 2025, removing all linkages with Russia, strengthening integration with the regional energy market and providing an opportunity to upgrade the grid. The Energy Sector Development Plan 2035 identifies strengthening security of the electricity system as a key challenge, including improving physical and cyber resilience of the grid, protecting submarine electricity infrastructure, reducing dependence on equipment from third countries, and preparing for and responding to hybrid threats. Risks to undersea infrastructure have risen significantly since the start of Russia’s war of aggression against Ukraine in 2022. The recent undersea power cable cut on EstLink 2, between Estonia and Finland, constrained access to Nordic electricity and contributed to price fluctuations in 2025. The EU’s Connecting Europe Facility (CEF) Digital work programme allocated funding for strategic submarine cable projects enhancing the EU's cable repair capacity and introducing smart monitoring capabilities (European Commission, 2026_[6]). Estonia should stay actively engaged in Baltic Sea and EU co-operation to help ensure effective surveillance, timely prevention, and faster repair of any damage to critical undersea infrastructure.

Batteries can provide fast short-term balancing, while pumped hydro storage covers longer low-renewables output periods. The most recent NECP foresees 1000 MW of storage by 2030, compared with peak electricity demand (peak load) of around 1 600 MW in recent years (Ministry of Climate, 2025_[3]). Analysis suggests combining batteries with pumped hydro storage is the most cost-effective way to reduce price volatility (Ministry of Climate, 2025_[7]). Electricity storage capacity exceeded 30 MW by early 2025 and heat storage is also expanding, including a 30 MW heat storage tank opened in Tartu in 2023. A 500 MW pumped storage facility at Paldiski is planned to be operational by around 2030 and others are planned.

Demand responses to manage intermittency, shifting electricity use away from high-price or system-stress periods, remain limited due to weak financial incentives and could be used more extensively (Foresight Centre, 2024_[8]). Since 2017, all electricity consumers have smart meters. However, consumers with fixed electricity prices, comprising around one third of total consumption, lack incentives to reduce consumption during price peaks. This could include rewarding consumers who cut their usage when prices spike or who shift additional consumption to periods of very low prices. Unlike other consumer groups, the public sector actually increases its electricity use during price spikes.

Table 3.2. Progress on past recommendations on electricity grid and permitting

2024 Survey recommendations	Action taken since the last Survey
Further increase investments to strengthen the electricity grid.	Elektrilevi has been increasing its investment in security of supply and network connections in recent years. Elering investments in 2023-24 focused on synchronization and intensive programme for strengthening connections has been for several years now.
Provide more detailed information on grid connection costs and investment plans. Ensure the transmission service operator allocates more resources to and expands grid connections in a timely manner. Establish a one-stop-shop for regulatory permits for wind and solar energy.	Under the new connection conditions from mid-2025, grid users will pay standardised connection fees based on Elering’s price list, giving clearer and more predictable costs for investment planning. At the same time, Elering will start reinforcing the grid in advance, enabling new generation to connect more quickly without waiting for grid upgrades to be completed. A single-entry point for all renewable energy permit applications was established.

3.1.4. Accelerating the low-carbon transition in transport

Transport emissions remain broadly similar to their 2018 levels. Road transport accounts for nearly 90% of total transport emissions. Estonia’s car fleet is relatively old and polluting (Figure 3.4 Panel B), while the use of public transport remains low as almost 60% of Estonians travel to work by car. The introduction of a CO₂-based car tax in 2025 is a welcome step to incentivise cleaner vehicles and moves Estonia more in line with best practices in other OECD countries. The tax includes a registration fee and an annual charge, which are determined by several parameters, including a basic component, a CO₂ component and the vehicle’s maximum mass. Only fully electric vehicles are exempt from the CO₂ component. Since the tax was introduced, purchasing has moved more rapidly than before towards cars emitting fewer emissions. The share of first-time registrations of electric vehicles (EV) in Estonia rose from about 5% in 2024 to 9% in 2025 and the share of hybrid vehicles grew from 31% to 37% (Figure 3.4 Panel A). However, age-related reductions weaken incentives for the fleet renewal.

Over 70% of the country’s vehicles are more than ten years old (Figure 3.4 Panel B), yet the ‘age multiplier’ element of the tax reduces the tax burden on older cars. For example, passenger cars aged 20 years or more are subject only to the basic component of the annual tax, irrespective of their CO₂ emissions. Similarly, the registration fee, though linked to CO₂ emissions, is also reduced with vehicle age. While this aims to make it more affordable for those on low incomes who tend to have old cars, it undermines incentives to switch to more efficient cars. In addition, families with children benefit from a motor vehicle tax reduction of up to EUR 100 per child per year (for children under 18). Estonia should maintain the existing car tax and consider strengthening incentives for fleet renewal by phasing out age-related tax reductions and use part of the revenues for a scrappage scheme targeted at low-income households. Scrappage schemes can effectively lower emissions if they are well designed and targeted. Estonia should consider targeting only very old vehicles that are still in use conditioning the subsidy on cleaner replacement (OECD/ITF, 2011_[9]).

Support for EVs has been inconsistent and charging infrastructure is uneven. Estonian national purchase subsidies via the ETS revenue-financed KIK scheme were in place between 2023 and 2025. At the beginning of last year, the scheme became much more popular once it allowed a purchase of vehicles up to five years old and provided an additional subsidy for scrapping an old vehicle that had failed its inspection. Currently, there are no plans to extend it, although some municipalities, such as Tallinn and Tartu, offer local support measures. Despite recent rapid growth, the share of electric and hybrid vehicle is only 1% of total fleet in the country, mainly due to low affordability. The development of the second-hand EV market is likely to be key to local demand. In France, a social leasing scheme for lower-income households has been available since 2024, whereby via subsidised long-term EV rental contracts, they can lease an EV at a price of 100-150 euros per month for up to six years per household (Montout and Robinet, 2024_[10]). Most public chargers are concentrated in Harju and Tartu counties. Developers face high grid-connection costs (45–65% of project costs) and delays of 300–500 days (Estonian Competition Authority, 2025_[11]), limiting investment and leaving low-demand regions underserved.

Figure 3.4. Estonia’s car fleet is old and polluting

Source: Eurostat and Estonian Transport Administration.

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Public procurement rules support reducing transport emissions. By 2030 two-thirds of urban public transport is expected to run on alternative fuels and full zero emissions operation is expected by 2040. Policymakers should speed up grid-connection procedures, and provide targeted support to low-demand regions to ensure a well-balanced charging network and accelerate adoption. The choice of other support instruments should be informed by rigorous cost-benefit analysis. Priority should be given to measures that achieve emissions reductions at the lowest abatement cost, taking into account both fiscal costs and distributional objectives.

Rail transport has the potential to reduce emissions by encouraging shifts away from road transport for both passengers and freight. Full electrification of the network, combined with a shift in transport modes and the replacement of old trains, would contribute around 15% of Estonia’s total reduction target for the whole economy for 2019–35 (Estonian Railways, 2024_[12]). But progress has been slow. Only 11% of the 2 124 km rail network was electrified in 2024, one of the lowest shares in Europe. The electrification of the Tallinn-Tartu railway line has been delayed to 2026, while the Tapa-Narva line project is expected to finish in mid-2027. These projects will triple the length of electrified rail. Rail Baltica could further shift transport away from roads, connecting Tallinn to Warsaw via Riga and Vilnius.

Table 3.3. Progress on past recommendations on reducing emissions in transport

2024 Survey recommendations	Action taken since the last Survey
Implement new motor vehicle taxes in 2025. Consider a car scrappage scheme for those on low incomes. Increase the availability of public transport and accelerate decarbonisation of the rail and bus networks. Increase EV incentives and target them better. Prioritise densification in spatial planning, particularly around public transport. Relax limits on land taxes to boost more efficient land use.	New motor vehicles tax was implemented in 2025. Progress on rail electrification has been slow. National EV purchase subsidies ended in 2025. New national special plan 2050 is under preparation and should be adopted in 2026. The draft prioritizes high-quality living environment: spatially compact development and public transport accessibility.

3.1.5. The energy transition puts higher pressure on low-income households

Higher carbon taxes disproportionately affect low-income households. Energy accounts for over 10% of spending for the lowest income quintile, versus 4% for the highest (Figure 3.5). Between 2025 and 2027, excise duties on diesel and petrol will rise by 5–7% per year and on electricity and gas by about 20% per year. The extension of the EU ETS (ETS2) will also raise household heating costs. Existing social support and the EU Social Climate Fund (SCF) will help to protect vulnerable households. Households in difficulty have access to a subsistence benefit, which includes housing and heating costs (Ministry of Climate, 2025_[3]). The general formula for calculating the subsistence benefit is: subsistence level + housing costs – income. The subsistence level is fixed each year through the state budget, and indexation is discretionary, with amounts adjusted upon government decision. Nevertheless, it is not always sufficient. According to the latest audit in 2021, one-third of recipients of the subsistence benefit were left with income below the subsistence level after paying actual housing expenses (National Audit Office of Estonia, 2023_[13]). Housing cost limits used in the subsistence benefit are set by municipalities, which are obliged to review them at least annually. As their adequacy has varied across municipalities, the Ministry of Social Affairs is strengthening monitoring and guidance to ensure that the limits better reflect actual housing and energy costs. From 2026 to 2032, the SCF will provide Estonia with EUR 248 million (0.6% of GDP), including 25% of Estonian national co-financing. However, there is a risk of delay since Estonia did not yet transpose ETS2 into national law. Estonia should ensure that housing cost limits in the subsistence benefit adequately reflect actual housing and energy costs and it should prioritise energy-efficiency investments for vulnerable households to deliver lasting reductions in household energy bills.

Figure 3.5. Higher energy prices hit disproportionately low-income households

Source: Eurostat.

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3.1.6. Strengthening forest management to support climate goals

Over half of Estonia’s surface is covered by forests. During 2006–10, LULUCF absorbed almost 5 million tonnes of CO₂ equivalent annually. However, the sector has been a net emitter since 2014 as annual felling volumes increased by more than 40% during the past ten years (the average of 2014-23 compared with 2004-13), considerably reducing carbon sequestration capacity (Figure 3.6.). Restoring the sector’s sink function would be a major contribution to meeting the climate targets. Peat production was the main source of LULUCF emissions in 2023, accounting for half of total. More than 80% of that was related to horticultural peat production, with the remainder emitted from peat production areas (Ministry of Climate, 2025_[26]).

The share of protected forests has steadily risen, reaching 28.4% of forest area in 2024, with 16.8% under strict protection (19.7% in 2025), putting Estonia well ahead of its neighbours and peers. According to the Forest Act, forest owners are obliged to ensure reforestation at the latest within five years after logging or natural disaster. Afforestation is encouraged via grants. A new Forestry Development Plan to 2035 stresses sustainable and adaptive forest management that considers biodiversity and climate change and considers and continuous-cover forestry (CCF) under which only part of the trees in a forest are felled supporting the carbon sink capacity. While the National Forest Strategy has included information on harvesting volumes reflecting estimated forest increment, recent policy changes place less emphasis on a single recommended national logging volume. Private forest owners have called for clearer guidance on future restrictions and conservation groups for stricter limits to protect biodiversity. Estonia’s experience with CCF remains limited and it lacks a legal framework, leaving uncertainty about when and how it can be applied. Past attempts have shown regeneration failures. An improved legal framework for CCF and state-led pilot projects on appropriate soils via the Estonian State Forest Management Centre (RMK), as well as technical guidance for municipalities and private owners, would allow for expansion of CCF. Finland’s forestry strategy combines regulatory measures with targeted incentives to restore the LULUCF sector as a carbon sink, delivering both climate and rural development benefits. New Zealand’s ETS system also includes forestry, creating financial incentives to retain and expand forest cover. Both approaches illustrate how forest policy can support climate mitigation through different policy mixes (Box 3.1).

Figure 3.6. Increased felling reduced carbon sequestration capacity in Estonia

Source: OECD and Statistics Estonia.

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Box 3.1. Restoring LULUCF as net carbon sinks: lessons from Finland and New Zealand

Finland and New Zealand illustrate two distinct but complementary approaches to strengthening the contribution of forests and land use to climate mitigation. In both countries, forests play a central role in meeting climate objectives.

Finland is a forest rich country, with forests covering 66% of total area, compared with 54% in Estonia in 2022. Finland’s LULUCF sector has shifted from being a major net carbon sink to a net emitter due to increased harvesting, slower tree growth, and rising peatland soil emissions due to drainage of peatland -undermining the country’s ambitious 2035 net-zero target. Given current technology, measures in the LULUCF are the least costly to meet climate targets. Finland is advancing a range of policy initiatives to restore the LULUCF sector as a key contributor to its 2035 net-zero target:

• Continuous-Cover Forestry (CCF): Promoted as an alternative to clear-felling, especially on nutrient-rich peatlands, CCF maintains harvest levels while reducing soil emissions. Estimated abatement costs are EUR 30–40 per tonne CO₂, i.e. below current ETS prices.

• Rewetting drained peatlands: Raising peatlands’ water table in peatland forests, to keep it optimal for forest growth, while reducing soil emissions. Estimated costs range from EUR 20–30 per tonne CO₂.

• Conservation programmes (e.g., METSO and Helmi): Offer financial incentives to private forest owners for setting aside high-biodiversity or high-carbon-value forest lands.

• Forest protection and land-use regulation: Finland has increased its share of protected forest land, especially in the north.

• Agricultural subsidy reform: Proposed reforms aim to replacing land-area based subsidies with an emission adjusted yield subsidy incentivising land-use choices that maximise economic output at minimum social cost. For example, subsidies could be paid based inversely on GHG emissions per euro of agricultural output.

These measures target both short- and long-term carbon removal while addressing trade-offs with biodiversity, rural livelihoods, and economic use of forests. However, full implementation will require predictable funding, stronger stakeholder engagement, and further policy alignment across land-use sectors.

New Zealand relies heavily on carbon pricing and forest sinks for climate mitigation. Forestry was the first sector to enter the New Zealand Emissions Trading Scheme (NZ ETS) in 2008. Under the scheme, eligible forest owners can receive emission units for carbon removals, while deforestation creates ‘surrender’ obligations. This design gives forestry a direct carbon price and creates a financial incentive to retain and expand forest cover.

The inclusion of forestry in the ETS appears to have had a significant impact on land-use, helping to discourage further deforestation and encouraging new planting. Deforestation, which had increased in the years before forestry entered the scheme, began to reverse after 2008. Afforestation has also been supported by complementary grant schemes, including the Afforestation Grant Scheme, and programmes aimed at reducing erosion and improving water quality.

Sources: M. Vainchtein and D.Haugh (2025) The forest will echo your call: national policy options for equitable and sustainable forest land-use management in Finland, OECD (2017), OECD Environmental Performance Reviews: New Zealand 2017 and Bibbee, A. (2011), Green Growth and Climate Change Policies in New Zealand.

Estonia has begun adopting ecosystem-based practices. This is welcome as protecting and restoring ecosystems—particularly wetlands and forests—delivers both mitigation and adaptation benefits. Progress has been made in expanding forest protection and in accelerating restoration. The EU-funded Mires Estonia project restored natural water conditions on nearly 8,000 hectares by closing drainage networks, building dams, moving soil, and sowing sphagnum moss to enhance habitat regeneration. Looking ahead, the implementation of EU certification framework for permanent carbon removals, carbon farming and carbon storage in products (CRCF) could strengthen incentives for private landowners to increase carbon storage in forest biomass and soils by improving buyer confidence and potentially creating new revenue streams through a trusted voluntary carbon market. Stronger enforcement of environmental protection in forestry is also needed. In the past, the Estonian Environmental Board issued cutting permits in protected forests without adequately assessing conservation impacts, partly due to outdated and inconsistent data (National Audit Office of Estonia, 2023_[14]). To fully harness the climate and biodiversity benefits of forest and wetland management, Estonia should strengthen the environmental protection in forestry and scale up ecosystem restoration.

Rewetting peatlands by raising the water table and shifting to paludiculture (cultivation of wetland-adapted crops such as reed grass) can reduce GHG emissions while maintaining income opportunities for farmers. Paludiculture biomass can substitute for peat in animal bedding and as growing media in greenhouse vegetable production. Wetlands used for low-emission paludiculture can be eligible for support under the EU Common Agricultural Policy (CAP), provided national rules enable such use. Estonia could consider aligning its implementation framework to ensure CAP support is accessible for paludiculture. The authorities should consider compensation mechanisms for production losses linked to peatland rewetting, as implemented for instance in Sweden, where landowners have been compensated for foregone production resulting from rewetting to reduce emissions. Experience from Sweden also suggests that any financial support be complemented by targeted training for planners and technical as there was a limited expertise in cost-effective, climate-friendly restoration and difficulties in recruiting qualified planners’ assistance (OECD, 2025 _[34]).

3.2. Climate-related risks remain moderate but require early adaptation action

3.2.1. Rising climate hazards call for strengthening resilience

Estonia’s average temperature in 2024 was already more than 2.2 °C above the 1981–2010 average compared with a 1.5 °C increase in the OECD as a whole. Although overall exposure to climate hazards is lower than in many OECD countries, climate change is expected to bring more frequent heatwaves and droughts, and more intense floods, storms and coastal erosion. The most significant threats are large-scale floods from rising coastal and inland water levels, extreme precipitation, extensive forest and landscape fires, and coastal erosion—especially in densely populated coastal zones and near inland water bodies. While risks to life and health remain limited, potential property damage is substantial (Ministry of Climate, 2017_[15]). This section examines how Estonia can limit the damages from these growing climate hazards, focusing on reforms to the insurance framework and stronger land-use and urban planning.

River flooding risk is the largest risk with 5% of the built-up area and 6% of the population are exposed to it and risks most pronounced along the shores of the Emajõgi in Tartu (Figure 3.7). Coastal-flood impacts are highest in Kuressaare, Haapsalu, Pärnu, and Tallinn. Lake-flood risk is highest on the shores of Lake Tamula in Võru. Storm-damage risks are greater in western Estonia, the islands, and other coastal areas (Ministry of Climate, 2024_[1]). In 2005, flooding in Pärnu—an urban area of 90,000—caused about EUR 22.4 million in damages. It disrupted electricity, transport, water, and sewage services and highlighted low household insurance coverage (Sagris et al., 2005_[36]). Official forecasts underestimated the storm surge, underscoring the need for stronger early-warning systems, more resilient infrastructure, and better urban planning.

Figure 3.7. Estonia faces a moderate risk of flooding

Exposure to 1-in-10-years river flooding

Source: OECD Database on Exposure to Climate-Related Hazards.

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Economic losses from weather and climate related extremes in Estonia have been among the lowest in the OECD at around 0.3% of GDP (Figure 3.8). However, the losses are likely to increase in the future amid higher valuations and more frequent extreme climate events. Climate risk to the banking sector is also limited. Estonian banks’ exposure to physical climate risks is among the lowest in the euro area, while transition risk is higher because the share of loans to high emitters is relatively high (ECB, 2021_[37]). The share of loans to higher-emission sectors—energy, transport, and manufacturing—has risen in recent years due to increased lending to the energy sector. However, the carbon intensity of the corporate loan portfolio has not increased, as a large share of new loans has financed renewable energy (Bank of Estonia, 2025_[18]) (Chapter 1).

Natural catastrophe insurance coverage in Estonia has been low covering only around 16% of total losses during 2005-24 (Figure 3.8). Insurance is not compulsory except for motor vehicles, mortgaged property and property used as commercial collateral. However, natural catastrophe insurance coverage has risen recently, with around 80% of homes now insured (Estonian Insurance Association, 2025_[19]). Coverage for jointly owned areas in apartment buildings is lower: only about half of housing associations carry insurance, leaving common areas underinsured. Flood insurance is usually included in policies, but some limitations regarding coverage and deductibles in case of repeated flooding exist. For example, rainwater leak is compensated provided that the building has not been flooded in the past five years. Such policies can encourage investment in climate-proof buildings. In some countries—such as Denmark—insurers offer lower premiums to policyholders who implement risk-prevention measures, strengthening incentives for adaptation (OECD, 2026_[35]). Adequate insurance is important to limit household vulnerability and unexpected fiscal burdens.

Figure 3.8. Natural catastrophe losses in Estonia have been low

Economic losses as a share of GDP (2005-2024)

Source: OECD calculations based on data provided by Swiss Re.

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Adaptation measures often require high upfront spending, which low-income households and small businesses may struggle with. In France, the “fonds de prévention des risques naturels majeurs” covers 80% of adaptation costs for SMEs and households located in flood zones with a flood-prevention plan. The fund is financed by the mandatory “CatNat” surcharge applied to all property insurance policies (Covea, 2023_[22]). Estonia could deploy tailored instruments for vulnerable groups such as means-tested grants, soft loans offering lower interest on longer grace and maturity periods.

Avoiding new construction in flood-prone areas would further reduce flood risk and damage. No-build buffer zones and/or protective works may be needed along the coast—especially the southwest Estonian shoreline—and on the banks of major rivers, where flood risk is set to rise (University of Tartu and Rake, 2023_[23]). Flood risk mitigation plans, which are prepared by related ministries and local governments in line with the EU Flood Directive, include measures to prevent and reduce risk by restricting building in high-risk areas; deploying nature-based solutions (forestry and agricultural practices, wetland restoration, green roofs, rain gardens, and more); upgrading stormwater systems; and reconstructing low bridges (Ministry of Climate, 2022_[24]). Estonia provides national Flood Hazard and Risk Maps via online portals, showing flood extent for events with varying probabilities, water levels, and estimated population affected. Users can overlay layers such as economic activities, hospitals, emergency services, and rescue teams. However, the flood mitigation plans should better explain how flood-risk maps inform the choice of objectives and measures. Such plans need to include an assessment of progress toward those objectives (European Commission, 2025_[28]). Land-use objectives can also be embedded in insurance policy frameworks. For example, the United Kingdom limits reinsurance coverage for developments built after 2009 to avoid new construction in risky areas.

3.2.2. Awareness of climate risks can be strengthened

Private investment in climate change adaptation lags behind, while awareness on public supports is low. Survey data show that 51% of Estonian firms have invested to address climate impacts, compared with 65% in the EU (European Investment Bank, 2025_[29]) (Figure 3.9). The general public lacks information on public support on adaptation actions. 72% of Estonian respondents, around the EU average feel, they are informed about what they can do to adapt their homes and lifestyles effectively. However, over a half of respondents are unaware of public subsidies or financial incentives available (European Investment Bank, 2025_[27]).

Awareness campaigns, climate content in school curricula, and crisis-preparedness initiatives have helped raise awareness (Ministry of Climate, 2022_[16]) (Box 3.2). The authorities can further strengthen environmental education and targeted outreach, especially in high-risk regions. Public understanding of risks and mitigation options could be improved by integrating climate-risk information into mandatory building certifications. For example, Germany’s “flood passport” (Hochwasserpass) provides property-level risk assessments and recommended precautions. Estonia could develop a similar tool using national flood-risk maps. The Climate Change Adaptation Strategy calls for construction practices that account for future climate conditions. Flood-mitigation plans foresee setting requirements for buildings in risk areas, such as minimum floor heights, placement of electrical equipment, and solutions for draining excess water. LIFE-IP BuildEST project (Box 3.2) produced advisory guidelines for building renovation to identify relevant risks and select appropriate mitigation measures. These guidelines could be used to develop binding standards in risk areas to improve building resilience and reduce future climate-related losses.

Figure 3.9. Adaptation investments are low

Share of firms in the survey

Source: European Investment Bank Investment Survey 2025.

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Table 3.4. Progress on past recommendations on building renovations

2024 Survey recommendations	Action taken since the last Survey
Broaden funding and technical support for residential renovations. Introduce minimum energy efficiency requirements for all existing non-residential buildings and gradually increase over time to lower emissions.	In 2024-25 more than 200 million euros renovation grants were disbursed from the total of 330 million EU support funds for 2022-2027. However, current renovation rates are insufficient to reach target set by EU Energy Performance of Building Directive.

3.2.3. Accelerating climate adaptation to strengthen resilience across sectors and regions

Estonia’s Climate Change Adaptation Development Plan—a comprehensive framework adopted in 2017—has a broad economy-wide coverage and focuses on energy resilience, ecosystem restorations, awareness campaigns, studies, guidelines and tools for planning (Box 3.2). Progress has been achieved across most priority areas, though awareness in key sectors such as tourism and food remain weak. The next phase of adaptation is to be achieved through the Climate change adaptation roadmap which will guide sectoral policy in transport, bioeconomy, energy, spatial planning, rescue capacity and health and infrastructure. The plan commits to generating and updating practically usable climate information, projections and warnings, and integrating adaptation goals and risks into sectoral policies and spatial planning. It seeks to strengthen risk assessment, planning and implementation capacity, especially in municipalities, and to introduce metrics to track adaptive capacity. The authorities also plan to develop guidance on how mitigation and adaptation targets should inform decisions and investment, including Environmental Impact Assessment and permitting (Ministry of Climate, 2023_[30]). The following sections examine how Estonia can speed up adaptation and strengthen resilience across sectors and regions, focusing on financing needs, governance and responsibilities, stronger monitoring and evaluation, and greater local capacity to plan and deliver measures.

Box 3.2. Estonia’s Climate Change Adaptation Plan measures and impact so far

Since its adoption in 2017, Estonia’s Climate Change Adaptation Development Plan has delivered across several priority areas:

• Health and rescue capacity: A remote-sensing method was developed under the RITA science programme to map floods in real time, supporting emergency response and urban planning. The Rescue Board upgraded its fleet with modern vehicles and firefighting equipment (Ministry of Climate, 2022_[16]). To update the fire hazard map daily, the fire hazard index has been calculated using forecast models for air temperature, humidity and wind speed, together with weather radar precipitation data since 2025,.

• Land use and planning: Guidelines and the overview of engineering solutions for stormwater management was prepared. A preliminary drainage plan for Elva city was developed. Technical flood-risk mitigation solutions prepared for Tartu and Kärdla to feed into local spatial and investment planning. Urban heat island maps for Estonia’s major cities were created using Landsat-8 satellite data to guide urban developers. Flood probability scenarios and risk maps were also made publicly accessible (Ministry of Climate, 2022_[16]). Green network planning guide was prepared for local governments green area planning (Ministry of Climate, 2024_[1]). Estonia planned no activities to address coastal erosion other than taking it into account for land use planning (European Court of Auditors, 2024_[17]).

• Natural environment: The State Forest Management Centre restored 871 hectares of peatlands and monitored 1 191 hectares of rehydrated sites. Coastal and marine biodiversity monitoring was strengthened, and a green network planning guide was issued to support landscape diversity (Ministry of Climate, 2024_[1]).

• Economy: Forest resources increased from 12.9 million m³ in 2014 to 16.2 million m³ in 2020, meeting the 2025 target. Tourism began adopting sustainability standards through Green Destinations and Green Key certifications. Agricultural land improvement measures enhanced food system resilience through increased sustainability and energy and resource efficiency. Estonian University of Life Sciences conducted a study on the status and need for gene reserve forests in Estonia identifying species, optimal sizes of areas required and best management. Climate literacy in tourism and food sectors remains low (Ministry of Climate, 2022_[16]).

• Society, awareness, and cooperation: Climate-related information campaigns were conducted, though business attention focused on COVID-19 survival. Emergency preparedness improved with new crisis guidelines, a nationwide hotline, and a hazard notification system (Ministry of Climate, 2022_[16]). However, the LB-SMS alert system remains slower than in most EU countries, with drills showing delays of more than 30 minutes. Climate-related crises such as storms, heatwaves, and floods have specific behavioural instructions, and in 2024 a Hazard Notification booklet was issued to guide sheltering and evacuation. A helpline 1247—initially launched during COVID-19—was expanded to cover environmental issues.

• Infrastructure and buildings: Road weather station monitoring systems were installed to improve hazard preparedness (Ministry of Climate, 2022_[16]). The LIFE-IP BuildEst project develops technical and pilot solutions to improve buildings’ resilience to extreme weather and reduce the need for repeated renovations. It models climate risks and tests adaptation measures, providing a basis for updating design standards and regulations. The project involves 18 Estonian institutions, including municipalities, NGOs, ministries, universities, and professional associations (Ministry of Climate, 2024_[1]).

• Energy and security of supply: About 75% of the electricity grid has been weatherproofed, meeting the 2030 target ahead of schedule (Ministry of Climate, 2022_[16]). Elektrilevi, largest distribution network operator in Estonia, covering 95% of the grid, aims to raise coverage to 85% within a decade, requiring EUR 1.6 billion in investment.

Financing needs have exceeded initial estimates and are rising further

Adaptation spending reached EUR 186 million (0.4% of GDP) in 2017–20 (Ministry of Climate, 2024_[1]). The latest estimate puts the total cost of implementing the National Adaptation Plan at EUR 598 million (1.4% of GDP), well above earlier projections (European Court of Auditors, 2024_[17]). The costs of the next phase of adaptation in Environmental Development Plan 2030 (KEVAD) are forecast to be at EUR 1.2 billion (2.9% of GDP) for years 2023–30. Most of the funds will be allocated for energy efficiency and capacity to adapt to climate change and nature conservation, investment in expansion of circular economy, protection of aquatic environment and waste management (Ministry of Climate, 2023_[30]). Similarly to the past, much of the financing is expected to come from the EU, financed by state funds, including ETS revenues. As financing requirements exceed initial estimates and are increasing, Estonia needs a credible, predictable financing plan anchored in domestic revenue sources and strategic use of EU/ETS funds. Estonia should align KEVAD’s adaptation priorities with the budget process, broaden and stabilise domestic funding for adaptation—potentially through earmarked instruments or risk-based contributions.

Weak governance and limited local capacity hold back adaptation

Risk assessment, planning and implementation capacity remains uneven across municipalities, reflecting wide differences in resources and expertise (Ministry of Climate, 2022_[16]). Regional and local governments are pivotal: in OECD countries, sub-national governments account for nearly 70% of public investment in climate-resilient infrastructure and shape resilience through the services and regulations they control—water, waste, housing, transport, energy, land-use planning, permitting and standards—thereby steering both public and private action (OECD, 2024_[31]). Local climate and energy plans exist but vary in quality and scope. At end-2024, 61 of 79 municipalities had such plans in place (Ministry of Climate, 2024_[1]). Larger cities, for example Tallinn and Tartu, have their action plans, which focus on mitigating climate impacts and outline the adaptation needs and actions. However, many local plans are based on outdated targets and often lack clear measures (Environmental Law Centre, 2023_[32]). Often, prior assessment of climate risks and its impacts are missing (European Environment Agency, 2025_[33]). Municipalities are not legally assigned the responsibility of climate adaptation. Adoption of Climate Act could bring more certainty as it should set general principles and directions of adaptation (Environmental Law Centre, 2023_[32]). The Climate Law should define municipalities’ responsibilities in climate adaptation and mitigation. This would provide legal certainty and ensure that local energy and climate plans are aligned with national objectives. The quality of local adaptation planning can be improved by updating outdated targets, setting clear and measurable actions based on prior analysis of climate risks and their impacts, and track progress.

Currently, Estonia lacks a comprehensive system to monitor, report and evaluate climate impacts, vulnerabilities, risks and adaptive capacity. Plans to introduce metrics to track adaptive capacity in Climate change adaptation roadmap and forthcoming Climate Law are welcome, establishing a framework for monitoring and managing climate action (Box 3.3).

Box 3.3. A new climate governance system to steer Estonia’s transition and adaptation

The Climate Law establishes a governance system that ensures climate vulnerabilities, exposures and adaptive capacity are monitored on an ongoing basis. It is designed to base decisions on up-to-date scientific analysis and to allow adaptation efforts to be scaled up or redirected as climate risks evolve.

The Ministry of Climate will oversee annual Climate Reports covering GHG inventories and assessment of climate change mitigation and adaptation. Every two years, the reports will include GHG projections, while every five years they will provide deeper evaluations of impacts on competitiveness, goal adequacy, and technological readiness, including carbon capture. The five-year review will also analyse subsidies, taxes, and fees that conflict with climate objectives, as well as assess climate risks.

Assessments of the effectiveness of implemented measures in the Climate Reports will feed into updates of sectoral development and action plans. This process helps to keep adaptation strategies evidence-based and aligned with evolving climate risks, either by adjusting existing instruments or by introducing new ones.

The Climate Council, established in 2023, would be tasked with independent assessment of progress. The Parliament will discuss the report and prepare an official response setting out its positions on the issues raised. This strengthens transparency and accountability in climate policy.

Sources: Ministry of Climate (2024a): Estonia's first biennial transparency report under the Paris Agreement, Ministry of Climate (2024b): Explanatory memorandum to the draft Climate-Resilient Economy Act.

Local governments will need funding to implement the necessary adaptation investments, but their revenue base is weak. In 2022, Estonian municipalities financed 29% of total public investment, well below the OECD average of 58%, and almost 90% of their income came from transfers and subsidies from central government. A large majority of municipalities reports inadequate financial support for adaptation. Another reported obstacle is limited administrative capacity (Figure 3.10) (European Court of Auditors, 2024_[17]). Municipal contributions towards adaptation have largely been sporadic and project-based (European Environment Agency, 2025_[33]).

To close the investment gap, the authorities should strengthen predictable, well-targeted intergovernmental transfers that reflect both revenue capacity and resilience needs and broaden own-source revenues. There is a considerable scope to increase municipal revenues from property (Chapter 4). Because residents and businesses in municipalities and high-risk areas benefit from adaptation investments—often via higher property values—Estonia could consider risk-based property taxation to finance investments in flood prevention and other resilience measures ensuring that those who benefit most from adaptation efforts contribute fairly to their costs. In France, for example, part of the surcharge levied on each natural catastrophe insurance policy is earmarked for the Barnier Fund, which finances risk reduction and prevention measures.

Municipal climate-risk planning is supported by upgraded environmental and weather-monitoring information systems. Estonia’s 2023 Municipal Green Reform Network, coordinated by the Ministry of Climate, helps municipalities tailor national green goals to local needs and feed them into the steering committee. Support also comes from the R-Club knowledge network, which develops joint projects and models for embedding the green transition in local governance and investment (Ministry of Climate, 2024_[1]). Those initiatives should be expanded, with a focus on facilitating access to finance, practical know-how, and open, user-friendly climate data and services.

Figure 3.10. Estonian municipalities lack financial and administrative capacity for adaptation

Source: European Court of Auditors (2024), Special report 15/2024: Climate adaptation in the EU – Action not keeping up with ambition.

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Table 3.5. Main findings and policy recommendations

MAIN FINDINGS	RECOMMENDATIONS (Key recommendations in bold)
GHG emissions have declined since 2018, mainly due to reduced oil shale use in energy sector, but emissions in other sectors show little progress. Current measures are insufficient to meet 2030 and 2050 targets. The Climate Law has been under development for 3 years, but has yet to be put before Parliament.	Swiftly adopt and implement the Climate Law, including sectoral targets and allocate clear responsibilities for implementation. Adopt sectoral roadmaps in the near term to strengthen policy certainty, guide implementation and facilitate access to EU and public financing. Implement additional measures in transport to develop well-balanced charging network and speed up grid-connection procedures, while strengthening measures in the LULUCF sector to ensure progress towards climate neutrality and compliance with EU obligations.
Rapid growth of renewables and rising electrification will strain grid flexibility and resilience. Energy price volatility remains a concern, heightened during the recent undersea power cable cut.	Accelerate investment in grid reinforcement, security and storage.
Renewables account for half of electricity supply already, but wind capacity lags far behind. Planning and permitting reforms have reduced delays. Offshore wind support was cancelled in 2025, creating investor uncertainty.	Set a stable long-term policy framework for wind generation and fully implement reforms to streamline permitting. Centralise environmental data and harmonize methodologies for Environmental Impact Assessment.
A CO₂-based car tax was introduced in 2025, but age-related reductions blunt the signals for replacing very old cars with more efficient ones.	Maintain the existing motor tax and consider replacing age‑based car‑tax reductions with targeted scrappage schemes for low‑income households
Higher carbon taxation weighs more heavily on low-income households.	Prioritise energy-efficiency investments to reduce energy costs for vulnerable households, while ensuring that the subsistence benefit adequately reflects actual housing and energy costs.
Since 2014, land use, land-use change and forestry (LULUCF) shifted from an emissions sink to a source due to rising felling volumes. Peat production was the main source of LULUCF emissions in 2023. The Forestry Plan 2035 lacks clear logging guidance. Continuous cover forestry (CCF) lacks a legal framework, while environmental protection in forestry is weak.	Set clear, sustainable logging guidelines and strengthen the environmental protection in forestry, supported by reliable environmental data and monitoring. Establish a legal framework and guidance to support wider adoption of continuous cover forestry (CCF). Consider supporting peatland rewetting and paludiculture, including ensuring Common Agricultural Policy (CAP) support is accessible.
Public awareness of public support for adaptation actions remains limited and private sector’s adaptation investment activity lags behind the EU average.	Integrate climate‑risk information into mandatory building certifications. Strengthen environmental awareness and education via targeted outreach in high-risk regions.
Municipalities lack clear legal mandates for climate adaptation. Municipal adaptation capacity is uneven, with limited financial and technical resources, and outdated local plans.	Clarify responsibilities of municipalities for adaptation, mobilise finances and align municipal plans with national targets. Provide technical assistance and targeted fiscal transfers and broaden own-resource revenues; scale up initiatives such as the R-Club and the Municipal Green Reform Network with a focus on access to finance and knowledge, open and user-friendly climate data and services.
Estonia lacks a comprehensive system to monitor, report, and evaluate climate risks and adaptation progress. The forthcoming Climate Resilient Economy Act will introduce annual reports, biennial projections, and five-year policy reviews.	Ensure robust monitoring and evaluation of climate risks and progress on climate change mitigation and adaptation by strengthening governance, as planned in the draft Climate Law.

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