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Report: Government Programme’s energy and climate objectives attainable

Government Communications Department
Publication date 2.2.2017 10.18 | Published in English on 2.2.2017 at 11.00
Press release 46/2017

The energy and climate objectives set out in programme of Sipilä’s government provide a roadmap towards a low-carbon society. The main conclusion drawn in the impact assessment of the energy and climate strategy is that the current policies are capable of achieving the emission reduction target for the effort sharing sector – i.e., the sector outside the EU emission trading system – as well as the national targets related to the increased use of renewable energy, reduced consumption of fossil fuels and self-sufficiency in energy procurement. The greatest increase is foreseen in the use of domestic wood-based raw materials, which will diminish the role of forests as carbon sinks and may increase pressures affecting biodiversity.

The research project ‘Sustainable energy and climate policy and the role of renewables in Finland’ (KEIJU) takes a look at the Government’s energy and climate policy. It provides a comprehensive assessment of Finland’s potential for attaining the energy and climate objectives imposed by the Government Programme, the Climate Act and the European Union (EU) cost-effectively and consistently. The project was carried out jointly by VTT Technical Research Centre of Finland Ltd (VTT), the Finnish Environment Centre (Syke), the Natural Resources Institute Finland (Luke), the National Institute for Health and Welfare (THL) and the University of Helsinki (UH). The project was coordinated by VTT and carried out as part of the implementation of the 2016 Government plan for analysis, assessment and research.

According to the simulations made by VTT, the need for additional reductions in greenhouse gas emissions in the effort sharing sector – the sector outside the EU emission trading system – is slightly over 5.3 Mt of CO2 equivalent by 2030. As the calculations make allowance for international flexible measures worth 0.7 Mt of CO2e, this leaves a domestic reduction need of 4.6 Mt of CO2e by 2030. Of this, about 2.6 Mt could be achieved in the transport sector, assuming that biofuels will account for 30 per cent of the motor fuels used in road transport and that energy efficiency in traffic and mobility systems will improve. Additionally, emissions will decline in all other effort sharing sectors, such as heating of buildings not connected to district heating networks, agriculture, mobile machinery, F gases and waste management.

Attainment of the objectives established in the Government Programme

According to the calculations, the share of renewable energy would reach 43 per cent of the final energy consumption, already in 2020, which would clearly exceed the 38 per cent target established for Finland by the EU. The objective set out in the Government Programme to increase renewable energy to 50 per cent during the 2020s would only just be achieved. In renewable electricity generation, a clear increase in solar power is expected. In contrast, the growth of wind power is expected to slow down when production aid for new plants is discontinued, but to achieve the 2030 target for renewable energy, a 2 TWh increase in wind power would still be necessary.

An increase in the relative share of biofuels to 30 per cent of all fuels sold, together with the objectives established for gas-powered and electric cars, will bring the share of renewable energy in road transport to about 32 per cent. A large percentage of the biofuels are second-generation fuels produced from domestic raw materials.

With the measures outlined in the strategy, the 55 per cent target for self-sufficiency in energy procurement and halving the use of imported oil to meet domestic consumption would only just be achieved. The calculations assessing the impacts of the strategy do not exclude the use of coal entirely. Consequently, coal would still be used in 2030 to the tune of 2 TWh. Part of this coal would be replaced by imports of wood-based biofuels.

Impact on the economy

The measures to achieve the objectives of the Government Programme will affect economic steerage and public finances. An economic analysis shows that the declining rate of increase in energy consumption and a shift towards renewable energy will affect public finances, primarily through fuel tax revenues, because the tax on biofuels is lower than on fossil fuels. Biorefineries, in turn, will require investment subsidies, at least temporarily. According to the impact assessment, the GDP would shrink by about 2.6 per cent by 2030 relative to the baseline scenario. The impact will be due to a decline in private consumption and investments and the slowdown of foreign trade. Employment would fall by about 0.15 percentage points relative to the baseline scenario but still grow by over 3 per cent compared to 2015.

Impacts on availability of timber and carbon sinks

Of the renewable energy sources, growth will be greatest in wood-based bioenergy. The harvest potential of Finnish forests is enough to meet the raw material needs of both the forest and energy industry. The role of forest industry by-product streams in energy production is predicted to grow, while the use of forest chips will also increase. Forests will continue to serve as carbon sinks, but if the fellings of roundwood increase to about 80 million cubic metres by 2035, as foreseen in the estimates of timber use included in the energy and climate strategy, the carbon sink is expected to shrink to half of what it is today during 2021–2030. The sink will be restored to the current level over the following decades if the use of timber levels off. The impact of the shrinkage of the carbon sink on Finland’s emission quotas and the Finnish economy was not assessed because the EU proposal for reference levels in not yet available.

Environmental impact assessment

Once realised, the strategic policies, separately and in conjunction with other policy measures, will have an impact on climate change, biodiversity and watercourses, air pollution, public health and living conditions. As a result of the shrinking carbon sink of forests, due to the increased use of timber, the combined effect of emissions and sinks on the concentration of carbon dioxide in the atmosphere will remain more or less at the current level up to 2030. The impact of the increased use of timber on biodiversity will depend on how the additional fellings are carried out, where energy timber is harvested and what measures are taken to prevent detrimental effects on biodiversity. Air pollution and emissions are also estimated to fall considerably by 2030 thanks to other policy measures already adopted. The policies create pressures to develop living conditions and lifestyles that reduce greenhouse gas emissions from transport, housing and other consumption. Ultimately, the impacts on the welfare of the various population segments will be determined by how the policies are implemented in practice.

Report (in Finnish)

For more information on the Government’s analysis, assessment and research activities, see tietokayttoon.fi

Inquiries: Head of Research Team Tiina Koljonen, VTT Technical Research Centre of Finland Ltd,tel. +358 (0)50 359 9549, e-mail tiina.koljonen(at)vtt.fi

Senior Research Scientist Sampo Soimakallio, Finnish Environment Institute, tel. +358 (0)50 366 9810, e-mail sampo.soimakallio(at)ymparisto.fi

Research Professor Antti Asikainen, Natural Resources Institute Finland, tel. +358 (0)295 323 250, e-mail antti.asikainen(at)luke.fi