State support partly offsets cost increases

The Estonian fisheries sector has returned to business following the pandemic apparently without facing any serious long-term effects. E-commerce, which flourished during covid, is likely to continue in one form or another as consumers have accustomed themselves to the convenience of buying fish online. Export markets, the main focus of Estonia’s sprat and Baltic herring producers, largely remained open after initially closing borders at the beginning of the pandemic. Fish shops, restaurants, catering establishments, and hotels function without restrictions so, in general, ways of doing business within th e fisheries sector have not changed.

As the market recovered from the covid crisis, the war broke out in Ukraine. For Estonian processors of sprat and herring this was another emergency following on the heels of the first. Ukraine is the most important market for Estonian suppliers of these pelagic fish and immediately after the onset of hostilities all shipments stopped. Belarus, a transit destination for supplies to Ukraine, was targeted by sanctions and was no longer accessible. Shipments to Ukraine through Poland were put on hold as both exporters and importers waited to see how the situation would develop. Siim Tiidemann, Deputy Secretary General for Fisheries Policy and Foreign Affairs in the Ministry of Rural Affairs, adds that some Ukrainian fish shops closed and buyers of Estonian fish delayed settling their bills due to the situation.

Customs data reveal exports back to normal after dip

However, by the middle of April 2022, some five weeks after the war began, exports of sprat and herring picked up again, says Eduard Koitmaa from the Ministry of Rural Affairs after studying the data from Estonian Tax and Customs Board. Ukraine is a big country and the aggression focused on certain areas. Estonian processors and traders and their Ukrainian counterparts found ways to resume the movement of sprat and Baltic herring into those parts of the country that were less affected by the war. In fact, the trade was better than it was during the covid years and therefore the ministry did not have to enact measures to support the industry. Logistics were an issue, however. The border crossing between Poland and Ukraine was used not just for the transport of fish but also other goods, including humanitarian aid, resulting initially in queues and delays due to the sheer volume of goods that was crossing the border. According to Mr Koitmaa, another contributory factor was the switch from EU trucks to Ukrainian trucks that was made at the border to meet insurance requirements. But even under difficult conditions people continue to eat so demand picked up again and factories continued to work. In March the Ukrainian hryvnia had not yet depreciated to the extent that it did a few months later, so imports were still affordable.

Of the three fishing producer organisations in Estonia, one sends almost its entire production to Ukraine and while it has also started looking for new markets it still supplies Ukraine as despite the war the country is open. The three POs, which catch some 95 of Estonia’s sprat and Baltic herring quota, have found ways to operate in these new circumstances, says Kairi Šljaiteris from the Ministry of Rural Affairs, but they have also had to adapt. For example, a marketing campaign prepared between the Estonian Fisheries Information Centre and the Estonian Association of Fisheries to promote fish under the label “Baltic Premium Fish” in Ukraine has now been shelved.

The product imported from Estonia is block frozen Baltic herring and sprat that is then made into products for human consumption in Ukrainian factories. Another popular item is spiced sprat. The analysis of the data from the Estonian Tax and Customs Board also revealed canned fish products being exported from Estonia for humanitarian purposes and dried sprat and Baltic herring being sold in the UK for petfood.

National and European measures to compensate for higher energy prices

Another fallout from the Ukraine war is the rise in energy prices. While the high gas prices have affected the processing industry to an extent it is the high cost of electricity that causes the real suffering. Some companies have benefited from fixed price contracts with long durations that they signed before the war, but others have seen their costs rise as electricity prices increase. The ministry is in the process of approving a new measure that will offer support to companies hit by higher electricity prices. Ms Šljaiteris says that several national measures have already been approved and are bringing relief to small and medium companies, but the measure currently being processed by the ministry is funded under the EMFF (European Maritime and Fisheries Fund 2014-2020) and will support companies retrospectively. The compensation comes from money in the fund earmarked for extraordinary measures as the EMFF period is closing at the end of 2023. Disbursal of the aid is likely to start in February 2023. The support targets the Baltic Sea trawling fleet and the long-distance fleet which are the two segments that use the most fuel. The support scheme compares the average price of fuel over a period before the war with the average price after the war started and offers the difference as compensation. Consumption of fuel by the coastal fleet is relatively modest and setting up a system of compensation for the small volumes of fuel used by individual coastal fishers would be too onerous. Coastal fishers benefit therefore only from national schemes that reduce taxes on fuel. The second part of the scheme supports companies that experienced steep increases in their electricity bills. Here again electricity costs before and after the onset of the war are compared and companies are entitled to the difference in the form of support for the period March to December 2022. This aid flows mostly to processing and fish farming companies.

Companies also invested in diversifying their energy supplies, for example, by establishing solar parks. The EMFF

Ocean fish catch, tonnes

offered support for this activity, but interest from the sector was only modest. Now, with electricity and gas prices rising significantly, there has been a surge of interest in greener options from businesses in the sector, says Mr Koitmaa. In addition, during the covid crisis getting hold of solar panels was difficult and companies were more wary about investing due to the unstable situation.

Estonian EMFAF programme has a strong environmental focus

The Estonian programme for the European Maritime, Fisheries, and Aquaculture Fund 2021-2027 (EMFAF) was recently approved by the European Commission. The EU contribution amounts to EUR 97m and the national contribution to EUR 42m. Virginijus Sinkevi ius, Commissioner for Environment, Oceans and Fisheries noted that the programme would focus on stimulating research, innovation, and investments in energy efficiency. The biggest chunk of the allocation (38) goes towards sustainable aquaculture and processing, while sustainable fisheries receives a third, and blue economy activities, which include the

Baltic Sea catches by trawlers, tonnes

implementation of communityled local development (CLLD) strategies, receive 22. The goals of the programme are to boost the sector’s resilience by making it more sustainable, to fight climate change, to preserve biodiversity, and to combat marine litter among other targets. The new programme will continue from the old (2014-2020) which also had a heavy focus on the environment in relation to fisheries, aquaculture, and local community development, says Mr Tiidemann. Among the bigger changes he mentions is the way scientific projects within fisheries are dealt with. Estonia has decided to create three different research programmes where the issues to be studied are defined by the ministry in discussion with scientists and the fisheries sector. This way resources can be directed towards projects, more environmentally friendly fishing, for example, to ensure that the outcomes will be useful for fishermen. Another area of focus is the aquaculture sector, production from which like European production as a whole, has tended to stagnate. We want our aquaculture to move more towards the sea, he says, because costs in land-based aquaculture are relatively high and output has not shown any significant increase. The goal now is to increase production to 10,000 tonnes by 2025 (from 850 tonnes in 2021). Mr Tiidemann admits this is an ambitious target but points out that there are several project applications to produce fish in the sea. The environmental impact of farming fish in the Baltic Sea and ways to compensate for these effects, for example by growing mussels or algae, will necessarily be taken into account when evaluating projects. A further plan is to pre-grow the fish on land to a certain size to create a market for juvenile fish which can then be introduced into cages in the sea. This reflects a change from the last programme period when investments in new farms were not funded but existing farms could apply for support. He is aware that for any operator costs will have to be kept down as competition from Norwegian salmon and trout will be fierce.

Companies place investments on hold due to high inflation

Today, with the highest inflation in the euro zone, Estonian producers are struggling with ballooning costs. To some extent these can be passed on to consumers, but they too are switching to cheaper alternatives. However, most of the production is exported and the export figures have remained strong suggesting that buyers abroad are absorbing the increased prices. Mr Tiidemann points to the other impact of inflation which is that companies are deferring their investments because prices have increased so much. Even plans that have been approved for support from the EMFF are being put on hold for this reason. Additional support to compensate for increased prices in not available,

Baltic Sea coastal catches, tonnes

according to fund rules, he says. Groundfish such as cod have not been targeted by Estonian fishers for the last several years so they have not been affected by the slashed cod quotas in the Baltic Sea. Decommissioning of vessels is not encouraged by the administration as the removed capacity is difficult to reinstate when stocks recover. Instead, Mr Tiidemann would rather put money into measures that help the stocks such as habitat regeneration, or establishing spawning and nursery areas. This is in line with the goals of the CFP and also more in tune with Mr Tiidemann’s personal convictions.

Measures encouraging youngsters to join the sector need to consider existing over capacity

The lack of interest in a fishing career among young people is another ingredient in a complex situation of struggling stocks, excess fishing capacity, and ageing fishermen. A young fisher has to make substantial investments in a vessel, equipment, and fishing rights before he can start fishing. In addition, the job is physically highly demanding and there are lots of rules to follow. These factors contribute to young people’s preference for careers in other industries. The administration is trying to encourage fishers to add more value to their catch and sell it locally through direct sales to consumers rather than to middlemen. This will give the fishers a greater share of the value and increase the local consumption of fish as well as contribute to the economy of coastal communities. If young people see how money can be made through fishing and further processing they may also be more inclined to join the trade. At the same time the administration has to balance the need to encourage young people to join the trade with the excess capacity that exists already.

In recent years some European countries have carried out tests with remote electronic monitoring which refers to a system of cameras on board fishing vessels which monitor the fishing operations. Many fishers are against the idea of being watched as they work, so trials have offered incentives (such as a bigger catch quota). The idea is to discourage discarding or other illegal activities while fishing. In Estonia the administration places more value

Farmed fish production, tonnes

on educating the fishermen to abide by the legislation. The measures in place should be sufficient to prevent such activities. If cameras are to be deployed it should be based on risk assessment and the results should be analysed to establish whether such tools influence fisher behaviour. In the pelagic trawling fleet which is responsible for the bulk of the Estonian catch discards are hardly an issue. That said Estonia has an ongoing trial where three Baltic trawlers targeting sprat and herring have been equipped with cameras. Another measure to monitor fisheries is the introduction of an app PERK through which fishers register their catches. Use of the app is voluntary at the moment but will be obligatory from 2024 and it will be particularly useful to monitor the activity of fishermen on the Peipsi lake where individual transferable quotas have just replaced the previous “Olympic” method. Under the latter system fishers catch their quotas as fast as

Inland water catches, tonnes

possible and then stop fishing. To ensure the app is used, the ministry also offers support to fishers to purchase a suitable mobile phone in case they do not have one and has organized training sessions to use the app.

Adaptation measures planned as climate change impacts become more apparent

The impact of climate change on water temperature has not been a serious issue for several consecutive years in Estonia but that may be changing. Summer temperatures were higher than normal in 2018 to 2020 and precipitation was lower, according to the meteorological office. This trend if it persists is likely to have an impact on the aquaculture sector. Some adaptation measures are planned, for example, investments in oxygenating systems and deep wells which should help in dry periods, and the positioning of cages in deeper water in the

Baltic, so that the fish can avoid warmer surface water. With support from the EMFF and EMFAF companies are also reducing their contributions to greenhouse gas emissions by investing in new energy-saving equipment, and by setting up solar panels to produce energy for their own use. Under the EMFAF 2021-2027 programme fishermen can invest in new engines for their vessels if they emit 15 less carbon dioxide than the old engines. Fishers are happy with the fund and the opportunities it offers, says Mr Tiidemann, though there are a couple of things they would like to change including the high administrative burden and the proportion of the allocation that goes to local action groups as well as into administration either as technical aid or for fisheries control and data collection. Some grumble about the need for energy audits which are necessary to unlock support for energy- and resource-saving equipment, for example. But in general, there have been no major differences in opinion about the support and how it is used, and fishers appreciate that it covers some of the increased costs they face due to the war.

The Estonian fisheries and aquaculture sector has shown its ability to cope with crises of different kinds. Support from the EMFAF to make the industry more environmentally and economically sustainable will further increase its resilience to shocks, so that it is less affected and quicker to recover when faced with headwinds in the future.