Finland is prepared to perform its share of the EU's climate targets

While the climate objectives proposed for our country are highly challenging, Finland is prepared to perform its fair share so that the EU-wide targets can be reached. For this, a new climate and energy strategy will be completed during this year. It will chiefly focus on the 2020 targets and the measures they require, but it will also present a vision up to the year 2050. Energy conservation and promoting renewable energy will be the cornerstones of this strategy.

The energy and climate policy has become a priority within the EU. Currently, the Union is taking a stronger lead in the issue, through the adoption of the integrated climate and energy strategy by the European Council in March 2007 and the introduction of an ambitious climate and energy package by the European Commission.

The EU heads of state agreed last year on ambitious targets to combat climate change, by a unilateral commitment to the reduction of greenhouse-gas emissions by 20 per cent by 2020, from the emission levels of 1990.

In the long term, or by 2050, the guideline target involves a reduction of emissions by as much as 60–80 percent. In order to realize this, a binding target was set, prescribing that 20 percent of the EU's total energy consumption and 10 percent of transport fuels must come from renewable energy sources by 2020. In terms of energy efficiency, the indicative improvement target was set to 20 percent by 2020.

Highly challenging objectives for Finland

As a consequence of the policy outlines determined by the heads of state, the European Commission issued its climate and energy package in January this year.

With respect to Finland’s national overall target for renewable energy, the package suggests a 38 percent share of final energy consumption by 2020. This means increasing the use of renewable energy by 9.5 percentage points compared to its share in 2005.

As for greenhouse-gas emissions, Finland should decrease these in sectors outside the emission trading regime – such as housing, agriculture and traffic – and achieve a 16 percent reduction by 2020 from their 2005 levels.

For companies within the emissions trading regime, an EU-wide emission cap is proposed, and the cap for 2020 would be set at -21 percent from the emission level in 2005. This would be a significant alteration to the current emissions trading regime.

The EU’s objective is to achieve a comprehensive international agreement on restricting greenhouse-gas emissions for the post-Kyoto period.

Climate change is a global challenge, and can only be curbed by a comprehensive international agreement including all industrialized countries and key emerging economies, such as China, India and Brazil.

Such a comprehensive agreement could also safeguard European industry’s competitiveness on the world market. If binding emission restrictions only apply to facilities operating in the EU area, there is a risk of a so-called carbon leakage, meaning that energy-intensive industry will be relocated and located to countries with no emission restrictions. This would cause a distortion in competition.

While the objectives proposed for our country are highly challenging, Finland is prepared to perform its fair share so that the EU-wide targets can be reached.

I believe that everyone is aware of the fact that attaining our objective will require extensive new measures in all sectors of energy production and consumption – from electricity generation, heating and other housing to traffic, industry and agriculture. In the long run, for the post-2020 period, these objectives also require fundamental changes in the urban structure and our behaviour.

New climate and energy strategy to be completed soon

The Government’s Ministerial Working Group on Climate and Energy Policy is just finishing Finland’s long-term climate and energy strategy. The working group is chaired by Minister Mauri Pekkarinen and includes representatives from all parties in the Government.

The strategy should be ready for submission to Parliament during November. This strategy will define the measures required by the EU outlines and targets I mentioned earlier, regarding greenhouse-gas emissions, renewable energy, energy supply as well as energy efficiency.

The strategy will chiefly focus on the 2020 targets and the measures they require, but it will also present a vision reaching up to the year 2050. Energy saving and promoting renewable energy will constitute the cornerstones of this strategy.

Decreasing emissions in non-trading sectors

In 2005, greenhouse-gas emissions from the non emission-trading sectors accounted for more than 35 million metric tonnes of carbon dioxide equivalents.

Finland’s obligation – a reduction of 16 per cent – means that by 2020, greenhouse-gas emissions in non-trading sectors must be less than 30 million tonnes.

To achieve this, Finland must reduce these sectors’ emissions by approximately 6 million tonnes. About one million tonnes can be achieved through flexibility mechanisms, for instance by procuring certified emissions reductions from the developing countries.

Most of the non-trading sector’s emissions come from traffic, agriculture, construction machinery and households’ heating boilers mainly using light fuel oil as their energy source, and meeting our target will require reduction measures particularly related to these factors.

In practice, however, other factors within the non-trading sector also need to be considered, including small-scale district heating, methane and nitrogen emissions from agriculture and fluorinated gas emissions from industry.

In transport, emission reductions can be realised by promoting the usage of transport biofuels, improving the energy-efficiency of cars and, in the long term, by rendering the urban structure more compact and, thus, reducing transport needs. The development of second generation transport biofuels must play a central role. In the long run, such biofuels can be produced from wood-based raw material.

The recently implemented car tax reform aims at the renewal of the national car fleet into a lower-emission one. In addition to car tax, the prospects are being investigated of modifying the annual car usage fee to become emission-dependent.

In addition to biofuels and car emissions, total vehicle mileage must also be reduced. The urban structure must be rendered more compact in order to reduce the daily need to rely on transport for going to work or in leisure time.

In this respect, the municipalities will play a key role as urban planners. A compact urban structure will facilitate the organisation of public transport and enable the location of services near citizens, particularly in cities.

With regard to heating, reducing emissions will namely refer to the need to reduce oil heating and shift towards district heating, wood fuels and heat pumps. In the future, liquid biofuel will be able to replace some of the light mineral oil used in oil heating.

The modification of heating solutions in existing buildings will most probably require support measures from the state. In housing, in addition to promoting renewable energy sources, another critical measure would be to enhance energy efficiency in homes. Accordingly, the Ministry of the Environment has already initiated the related preparations.

Increasing renewables extremely challenging

Increasing renewable energy proposed for Finland is extremely challenging. At the moment, Finland is one of the leading countries in terms of the utilization of renewable energy sources and bioenergy in particular, and we have the third highest share of renewables in EU, right after Sweden and Latvia.

The greatest potential for increasing the share of renewables lies in greater use of woodchip, particularly in combined heat and power generation. According to the national forest program, the use of woodchip could be almost fourfold from the current slightly over 3 million cubic metres.

Increased use of wood, however, would be insufficient for fulfilling the entire obligation. Rather, increasing the use of all renewable energy forms is needed.

Wind power must be increased strongly, in spite of the fact that its support requirements are higher than for the utilization of biomass. The use of crop biomass and various waste-to-energy solutions, hydropower and heat pumps must also be increased.

Support and steering tools coming

Such an increase in renewables will not be possible without extensive support, paid for by energy consumers, directly or though the systems of the society. The current support systems are mainly based on investment subsidies and tax supports. According to preliminary estimates, attaining the targets will require multiplying this support from its current level.

During the preparation of the climate and energy strategy, assessments will be made on the need to implement new steering tools, such as feed-in tariffs. Many of the 27 EU member states have some kind of feed-in system in place or are planning to implement one. New steering tools are indeed most likely needed.

The nature of the support systems, regulations or other types of steering tools which will finally be adopted are to be defined in the climate and energy strategy.

A noteworthy factor regarding the renewables target is that it is defined as a percentage of final consumption. This means that a higher share can be achieved both by ‘increasing the numerator’ or ‘reducing the denominator’.

Consequently, energy-efficiency and energy saving will become more important in the future. Should we fail to realise this improvement, the targets of renewables will be so difficult to reach.

The future electricity requirement has been the subject of active public debate. Consumption estimates made for the strategy clearly refer to a lower electricity requirement than suggested by the figures presented by electricity producers. In the future, we must be able to halt growth in electricity consumption.

This, of course, requires vigorous steering tools. Nevertheless, the starting point for the strategy work will be that the supply of electricity needed in business and industry will be safeguarded – restrictions on economic activity have not been considered applicable to the considerations.

At the end of April, the Ministry of Employment and the Economy established a broad-based committee to evaluate and prepare new measures concerning energy saving and energy efficiency in order to meet our climate and energy obligations. The committee will consider all social sectors, from private consumption to business and industrial consumption.

Opportunities for technology providers

Although restricting emissions will elevate costs in the short term, climate-change curbing efforts will present excellent opportunities for technology exporters and producers.

Both within the EU and globally, a true boom period for bioenergy, wind power and efficient energy-usage technology awaits us. Already, climate and energy technology is among the fastest growing industries in Finland.