Author: Kaupo Reede, Head of Biorefining Unit, acting as Head of Applied Research Center.
Large-scale funding programmes worth billions of euros do not emerge overnight in Europe – they are the result of years of strategic work, political decision-making, and increasingly, direct input from companies themselves. In recent years, Estonian biotechnology companies have been actively contributing to exactly this kind of decision-making process.
Estonian companies are involved in the preparation of a new biotechnology-focused IPCEI together with Germany and Finland, and Estonia’s role in this process is far from merely formal.
What is IPCEI?
The European Commission is preparing a new Important Project of Common European Interest (IPCEI) focused on industrial biotechnology. IPCEI is one of the European Union’s most powerful state-aid frameworks, enabling billions of euros in development funding to be channelled into selected future technologies in support of strategic autonomy and international competitiveness.
As an exception to standard state-aid rules, IPCEI allows for large-scale public investment in projects that are too risky or capital-intensive for the private sector to undertake alone. The core objective of the instrument is to strengthen Europe’s technological sovereignty by reducing dependence on third countries and securing access to critical technologies, raw materials, and expertise.
IPCEIs focus on:
- radical innovation, including first industrial deployment;
- cross-border value chains, involving partners from multiple EU Member States;
- the green and digital transitions, supporting climate neutrality and strengthening Europe’s digital capabilities.
A unique opportunity for companies
For companies participating in an IPCEI, involvement is both a quality label and a springboard for growth.
First, IPCEIs can cover a significant share of a project’s so-called financing gap, which banks or venture capital often consider too risky to support. Second, they open the door to collaboration with Europe’s leading industrial players and top research institutions. Third, IPCEIs support the critical phase in which technologies proven in laboratory conditions are deployed for the first time at an industrial scale.
It is no coincidence that the IPCEIs launched so far represent tens of billions of euros in combined public funding and private investment. Initiatives in hydrogen technologies, battery technologies and microelectronics have already reshaped Europe’s industrial landscape.
Estonia’s contribution: hydrogen and cloud technologies
In recent years, Estonia has actively joined IPCEI initiatives, demonstrating its ambition to move from a subcontractor role towards that of a technology developer.
- Hydrogen IPCEI (Hy2Tech): This is the most widely known example for Estonia. Estonian company Elcogen was selected to participate in the project to develop world-class fuel cells and electrolysers. This has enabled the company to attract investment and build a new manufacturing facility in Tallinn.
- Cloud Technologies IPCEI (CIS): Estonia is involved in the development of next-generation cloud services and edge computing infrastructure. Estonian IT companies and the state are participating with the aim of creating secure and distributed data-processing capabilities across Europe.
- Microelectronics: Estonian companies (such as GScan) and research institutions have explored opportunities to participate in the microelectronics value chain, contributing to the development of sensor and chip technologies.
These examples show that IPCEI is not solely the domain of large countries – with the right timing and meaningful contribution, smaller countries can also position themselves at the heart of Europe’s strategic value chains.
Biotechnology IPCEI: Estonia’s focus area
The new Biotechnology IPCEI is aimed at advancing industrial biotechnology. At the end of 2025, the Joint European Forum for IPCEIs approved a plan to launch three sub-areas that have been discussed with EU Member States and for which countries’ initial interest and readiness to participate have been mapped:
- Bio-based chemicals (lead partner: Germany),
- Bio-based materials (lead partner: Finland),
- Food and feed biotechnology (lead partner: Estonia).
It is precisely the last of these – food and feed biotechnology – where the input of Estonian companies and research institutions has been particularly influential. Alternative proteins, cell-based agriculture, and solutions that enhance food safety are areas in which Estonia’s competence and ambition are clearly visible at the European level.
In Estonia, the preparatory work is coordinated by the Estonian Business and Innovation Agency and AS Metrosert, with strategic responsibility held by the Ministry of Economic Affairs and Communications. However, the substantive focus of the initiative has been shaped above all by companies themselves, through sector mapping, consultation rounds, and structured discussions.
What does this actually mean for Estonia?
For Estonia, the Biotechnology IPCEI is not merely another funding instrument, but an opportunity to shift the focus of the economy from the valorisation of wood and oil shale towards high-tech bioindustry. In particular, the industrial track launching in 2026 will help bring research-intensive solutions from the laboratory into real-world production.
First, IPCEI helps overcome the so-called “valley of death” – the stage at which many Estonian startups and research groups (for example in wood chemistry, alternative proteins and synthetic biology) have proven their technology scientifically but lack the capital to finance the first pilot or industrial-scale facility. IPCEI makes it possible to close this financing gap and transform Estonia’s raw materials into locally produced, high value-added bio-based chemicals and materials.
Second, IPCEI gives Estonian companies access to Europe’s “champions league”. These are not isolated projects, but integrated value chains in which Estonian solutions are linked from the outset with major European industrial partners – for example as suppliers of bio-based materials to the German automotive industry.
Third, IPCEI significantly strengthens research and development capacity. Projects require close cooperation between companies and universities and promote knowledge spillovers, bringing top-level applied research, funding and international expertise to Estonian universities.
Finally, IPCEI supports regional development. As bioindustrial production is often located close to raw material sources, it creates conditions for new production facilities and well-paid jobs to emerge outside Tallinn and Tartu.
A step towards higher added value
Ultimately, the impact of IPCEI lies not in individual projects, but in a broader strategic shift. In wood and bio-based industries, this means moving away from exporting logs, pellets and cellulose towards producing bio-based chemicals, advanced materials and bioplastics; in the food sector, it means scaling cellular agriculture and alternative proteins from the lab to industrial production.
IPCEI also gives Estonia access to Europe’s billion-euro funding pools, enabling the attraction of foreign investment, the establishment of new production facilities and the consolidation of Estonia’s role in Europe’s future industrial value chains. At the same time, it contributes to strengthening Europe’s strategic autonomy by reducing dependence on fossil resources and offering bio-based alternatives for industry.