Estonian President: First countries to go green will gain the most

The complete speech of President Kersti Kaljulaid at the World Energy Congress

Excellencies, ladies and gentlemen

I would like to tell you a story of my country. Maybe it is also inspiring globally if we think of the situation in global energy market today. This general feeling that we must change the way we produce and use energy. Yet we do not yet feel quite comfortable doing things the new way, because there is no clear academic pathway or business plan to take us where we want to be – not using less energy, but using it with clean consciousness, if I may say so. Using clean energy.

Many of you have heard of the Estonian miracle of digitally transformed society. It is a country where people never go to government offices, because all services – with the exception of getting married, you have to show up to your own marriage – run online.

Estonia never set out to become the world`s only totally digital government service provider in 25 years’ time. We did not plan to be the catalyst to create a pan-European integrated digital identification model, leading us into single digital market in the EU.

Yet it happened. This is what Estonia is today — the digital sandbox, the test site for digital services. Why did it happen? Because Estonia was facing a very similar situation to the energy sector today: lack of resources, no clear business case for us to become developed state from emerging market, and no clear understanding how new technologies could support us in it. 

Estonia is a country of a million people and while starting its transformation, belonged to the class of middle-income countries, an emerging market relatively poor in new technologies.

Knowing this it becomes clear that turning into a digitally transformed nation and doing so first in the global world could not happen by smart state investment into the tech products created by local scientific community.

In short, Estonia was not Germany. How on earth then did it become a digital society able to provide not only Germany, but the rest of European Union countries with an example on technological transformation? Nowadays catalysing the whole European Union towards digital development?

The answer is in hindsight very simple. Smart and innovative creation of the legal space combined with the deep trust and cooperation between private and public sector. Not investing as a state, but creating legally permissive state for private ideas to fly and to test and try new technologies. Not going alone but in deep and comprehensive partnership with private sector. Not doing by ourselves, but setting incentives for the markets to develop Estonian living standards, without the state spending on national debt. Estonian debt level is still below 10% of the GDP.

At the turn of the century, Estonian political classes realised our ability to grow based on low cost good quality workforce and benign, low corruption, transparent business environment alone is very limited. We needed to become a testbed for new ideas.

What did we do? We scanned the horizon for new technologies and tried to see, how these could benefit the economy and the society, allowing us to be first in on grand scale, therefore getting paid for our societal experiments in using new technologies, rather than paying for ready-made solutions.

We chose digital technologies and population genomics as areas with perspective – they were promising as far as technology goes, and they also promised huge societal effects.

It came naturally, because we simply did not have any government services – after soviet occupation ended, we started from the scratch. So, going straight to the digital service provision — this was the solution we could see already happening in the private sector. So, we wanted it for the public sector as well.

Electronic tax board came online in 1997, digital signature guaranteed by the state – a first digital passport globally and still the only one widely used by all the people in any country – followed in 2001, 18 years ago.

Of course, we had to engage the whole society, and we did. It took us about 5-6 years, then we realized that Estonians had done something that no other society at that point even considered. We had gotten used to new technologies in our lives. Everyone—young people, old people etc. Everybody was in. This meant we could totally abandon the old technologies—the paper.

As I said — we used no state money, apart from creating this digital ID and public services based on this ID. The rest was markets, who sensed the society ready to become mass market for otherwise untested ideas. What the state did was it created a safe legal space for all society to use new technologies and digital services.

You see? I think by now we clearly understand the parallels with today’s energy challenges. We need to do something similar on the global scale. Not trying to better what we currently have, not accepting that we cannot change unless we have fully depreciated and exhausted the current energy generation resources. Accepting that something similar will have to happen as happened in the world of petrol lamp producers when electricity went into mainstream use.

Those already in operation should not despair – the change will take about one tech cycle, so everybody has time to earn back their investments if they are operating today with old technologies. But I share Jeffrey Sach`s opinion that we should stop building CO2 emitting systems today and set aside at least 1% of global GDP for radically changing the way we use energy.

Do we need radically new technologies?

Not really. We know that full energy need of the world will be met if a territory similar to Spain is covered with solar cells. That is the current global consumption level.

We know that intermittency of green energy sources can be counterbalanced by bigger, if possible, global grid, which will allow for the fact that somewhere there is always wind and also somewhere there is always light.

We know we can provide for pretty good battery capacities, their only problem being they would all be micro capacity compared to the need of one state. Therefore, we need to change to the thinking that people can be themselves responsible for keeping the lights on—instead of the current thinking that big distribution grid owners are responsible for keeping the lights on.

We know also that offshore grids would allow huge wind parks to be created by the private sector, and water reservoirs can function as big megawatt immediate reserves in transmission grids, balancing again the production and supply, say on a small continent like Europe.

See – the situation is in this sense perfect that we already have all technologies finally in place what we need – thanks to, by the way, to many governments who have subsidized green developments—including this country. To certain cost of their societies obviously, but working towards saving the planet while accepting that people had to pay.

I am quite sure that this tradition will also continue – we see today EU getting ready to declare the need for climate neutrality by 2050. It already has the objective of 80% neutrality. It is the world`s biggest and richest single market, and it has a political class, which understands that these objectives can only be achieved if we skew the market forces and force the market to adapt to our demand of no CO2 emissions. This is torturous to current energy producers and distributors, but this torture is absolutely necessary. To achieve that our planet will be saved. The economy and the energy sector undoubtedly will adjust to this market skew, if given good enough forward guidance.

Europe is today full of businesses already reacting to the previous steps of the EU, taken gradually years ago. However, only today these steps, which were taken years ago are yielding really high CO2 quota prices and also high volatilities between peak time and low time energy consumption — making it feasible to pay for customers for adjusting to these prices rapidly.

We also have technologies in digital spheres which allow to automate these adjustments, create real time energy and also reserve markets and allow each customer control of their own consumption.

It is also possible for micro-producers and normal consumers to connect through new technologies and directly buy or sell electricity. We will discuss later how to do that, on the panel of blockchain for example. It is yet another example how we already have the tool for green future.

So, what is keeping us globally from going green, if all tech is available and we all realize that not going green carries existential risks, therefore making the high investment needs estimated by J. Sacks to be 1% of the global GDP?

I think it is the same factor as with development aid distribution – transaction costs of getting such a global agreement, implementing and controlling the results in clear feedback loop – cannot be done unless we find the market forces to do so. All states who have escaped poverty and reached the ranks of developed nations – including Estonia, in last 30 years – have demonstrated that it can only happen if you align your societal needs, in this case going green, with the interests of the market.

Hence the only thing what helps us is exactly what the EU does – we skew the markets, by administrative capacity, because we have the general support of our people to do so – to adjust to carbon-free future. Yes, our societies – yours and mine – will bear the cost of the transformation, true. But in the end, technologies become cheaper, other markets will apply them for purely market reason, quicker if they too exercise some kind of green skew to natural market forces or slower if they do not and we know that there are developed markets who do not, but even those will follow if green is making more economic sense then dirty energy.

This is the only way I see the planet can be saved. There is no other rich common market such as the EU — it is the biggest and probably most capable of starting the change.

Other powerful markets are not yet ready to embrace an economy free of CO2 emissions. But there are islands, here and elsewhere, other markets and societies, who are already ready to accept the need to change.

The more we know that there are those islands ready to go green quicker, the more equally we will redistribute the cost of going green.

But in all those societies, when it finally becomes economically feasible, then of course our companies will benefit. So finally, not our generation but the next one, will reap the benefits of being the frontrunners of going green. At that point it will only happen when green is cheaper than the old energy, plus the necessary business model. So, it will probably take 20–30 years, but as markets have always adapted to conditions and we will provide the incentives for green as the condition, I am sure it will happen.

I started my speech with Estonia`s digital transformation. We are now a generation later from that start and Estonia makes today 7% of its GDP of ICT related services. We also know that in energy sector a lot of Danish wealth is created by the fact they were frontrunners in wind energy technologies. So, the old adage – first ones gain, last ones pay – still holds true, even if, for our generation certainly – the payday will not come quickly enough for us to directly benefit, but our children will.

Will it be in time to save the planet, none of us can predict. Where is the tipping point for the planet beyond which its adjustment to higher temperatures will make the planet inhabitable to Homo Sapiens, no one knows.

Therefore, even if I see that the positive change can be best caused by the action by the EU and other green islands, the change will happen quicker if other regions will weigh in with their own legal space setting for greener energy. It will create more economic sense to apply all green technologies globally. And if this happens, we all might go to being CO2 free energy users the critical 5 or 10 or 20 years quicker.

The planet will still heat somewhat more, the water levels will keep rising somewhat, but it might be tolerable. We, the humankind, would never know ourselves how close to the brink we came, but so be it. I prefer the market forces pushed by smart policymaking and legal space-setting to act quickly and save us all from knowing the alternative.

Thank you for your attention!