Dr Ulla Heinonen
Director, Green Growth
Confederation of Finnish Industries EK
Finland
ulla.heinonen@ek.fi
Tiina Haapasalo
Chief Policy Adviser, Transport and Infrastructure
Confederation of Finnish Industries EK
Finland
tiina.haapasalo@ek.fi
In many respects, Finland is considered a pioneer in the green transition. Back in the 1990s, Finland introduced the world's first carbon tax. Climate change mitigation, clean energy, material and energy efficiency and the circular economy have been on the agenda for decades. Today, Finland has one of the most ambitious carbon neutrality targets in the world: according to the national Climate Act, Finland's net emissions should be zero or negative by 2035.
Figures prove that when it is properly implemented, the green transition also promotes economic growth. Finland's total emissions have fallen by 32 % from the 2005 level, even though the economy has grown. In addition, the green transition has opened up unprecedented investment prospects in clean energy production, the low-carbon industry and services. However, challenges remain, particularly in the land-use and effort-sharing sectors, where further efforts are needed to meet national targets and EU obligations.
In particular, the EU’s emissions trading system, which includes large industrial and energy production plants, has succeeded in making significant emission reductions in Finland. The country's energy transition has progressed rapidly, and emissions have fallen in line with the change in energy production. Emissions from electricity generation have fallen by 87 % since 2010, with zero emissions now accounting for 94 % of the total production.
Arctic shipping and icebreaker technologies are examples of Finland’s pioneering role in the maritime industry. For example, advanced hybrid propulsion technologies have been combined with high-end efficiency in engine power to reduce the climate emissions of the newest icebreaker Polaris by up to 9 %.
Russia's invasion of Ukraine has accelerated Finland's energy transition and energy independence. Only two years ago, Finland imported significant amounts of electricity, gas and fuels from Russia. Now, imports have been successfully replaced by clean domestic production, wind, solar and nuclear power. Energy production has risen significantly from pre-war levels, while wholesale electricity prices have returned to pre-war levels. There is still significant potential to increase affordable, emission-free electricity production, and the government's objective is to double the production of clean electricity.
Potential for green growth
In Finland, both the public and private sectors see the ambitious climate targets as a tool for economic growth. In our thinking, the green transition is a win-win for both the climate and the Finnish economy and exports, due to Finland’s leading position in clean energy and sustainable technologies as well as energy and material efficiency.
According to the Green Investment Data Dashboard, published by the Confederation of Finnish Industries EK, Finland has more than EUR 260 billion worth of investment plans related to the green transition (www.ek.fi/greeninvestments). Most projects are at an early stage, but the volumes are nevertheless unprecedented, considering the size of the Finnish economy.
Finland is in an excellent position to attract investments related to the green transition. Its carbon neutrality target for the year 2035 makes Finland a unique pilot market. The country's strengths include advanced technological expertise and a skilled workforce, exceptional conditions for clean energy such as wind power, solid infrastructure, as well as access to clean water, mineral resources, forests and biogenic carbon from the forest industry, which can be used, for example, in hydrogen economy solutions. Finland's social stability, high-quality education system and recent NATO membership are valuable assets, as well.
Expectations for policymakers
The climate transition is a demanding challenge for society and the economy. Finland and the EU are among the first to face this. Investments and innovations are needed on an extraordinary scale in order to reach the climate targets and realize the full potential of the green growth. This requires skills, talent, funding, efficient investment-permitting processes, and a well-functioning infrastructure for energy, transport and digitalization. A predictable political and legislative environment in the EU and Finland, as well as policy coherence are essential in order to attract the required long-term and high-risk investments.
According to businesses, the future goal of EU policymaking should be to achieve the climate targets in a cost-effective way, utilizing market-based and technology-neutral measures. The role of the policymakers is to set the direction and targets, but not to pick the winners. The markets are already moving fast towards the green transition. Also in Finland, the energy transition is taking place in a market-driven way. The threats to this market-driven approach are overly detailed regulation and the global state aid competition. State aid is still needed, but only for emerging technologies and higher-risk projects.
It is in the interests of both the climate and the economy that the EU continues to pursue an ambitious climate policy. However, over the next five-year period, the focus should no longer be on producing new regulation and instead we must ensure that the Green Deal regulation that has already been decided is implemented efficiently and effectively. Now is the time to boost sustainable economic growth and competitiveness, improve the Single Market, promote the circular economy and resource efficiency, develop key technologies and knowledge, create innovation and attract investment. We also need regulatory drivers for exploring new technologies such as carbon capture and technological sinks.
The green transition is not something to be compromised – instead it should be advanced in all smart ways. It will help Finland and Europe meet the major challenges of the economy, the environment, citizens' well-being, resilience and security.