According to Etla’s new CO2 emissions forecast published today, the required average speed for greenhouse-gas-emission reduction in Finland is slightly lower than previously estimated. Greenhouse gas emissions have fallen due to both the contraction in production caused by the corona crisis and the reduced use of fossil fuels in the electricity, gas and steam producing sector in recent years. Etla has also revised its emission forecast estimate for the Finnish carbon sink. The required average speed for CO2-emission reduction is 5.8 per cent a year if the government’s carbon neutrality 2035 target is to be met.
As a result of climate change, the EU is aiming for carbon neutrality by 2050. Finland pledges to be more ambitious: carbon neutrality in Finland should be achieved by 2035. In practice, this means that the sum of greenhouse gas emissions and the natural carbon sink must be zero in 2035. In 2018, Finland’s greenhouse gas emissions were 56.4 million tons of carbon dioxide (CO2) equivalent and the carbon sink was -10.3 million tons. Emissions from energy use of fuel caused 75 per cent of all greenhouse gas emissions.
Considering the calculations now published by Etla, Finland’s carbon neutrality target is still a tough objective. However, Etla has lowered the average speed needed in reducing greenhouse gas emissions from its previous estimate.
According to the emissions forecast, the average speed needed in reducing greenhouse gas emissions in Finland is 5.8 per cent per year in 2018–2035. In January 2020, we estimated a reduction requirement of 7.6 percent per year. The estimate changed when the world around changed, says Ville Kaitila, a researcher responsible for Etla’s emission forecast.
– The world has changed. Our estimate has been lowered to some extent due to the contraction in production caused by the corona crisis but even more by the clear decline in the use of fossil fuels in electricity, gas and steam production in recent years. In addition, we have now calculated the development of carbon sinks in a new, more accurate way, says Kaitila.
According to Kaitila, achieving the carbon neutrality target requires a major technological change in energy production in general, as well as in production methods in the largest emitting industries and in household consumption. However, the key to reducing emissions is a clear decline in the use of fossil fuels.
The amount of greenhouse gas emissions has been declining in Finland since 2003, but production emission intensity has declined for even longer. The reduction in emissions is due to technological development and changes in the production structure. Emission intensity has decreased notably in electricity, gas and steam production, water and waste management, and oil and metal refining. On the other hand, the emission intensity of the transport sector, for example, has not decreased much.
According to a recent study by Ville Kaitila of Etla, “Carbon-Neutral Finland 2035 Is a Tough Objective (ETLA Briefs 90), Finland’s emissions will decrease on average by 4,1 per cent annually up until 2024. The accelerated decline is largely due to a clear fall in the use of fossil fuels in electricity, gas and steam production in recent years. However, this good development is not yet enough to reach the carbon neutrality target.
The development of emissions can be influenced by policy and pricing. However, the key is a clear decline in the use of fossil fuels and increasing carbon sinks. According to Etla’s Kaitila, investments both in, for example, low-carbon technology and its research and product development in Finland could help reach the carbon neutrality target and also create new export products.
– The public sector can support the efforts to reach carbon neutrality by, among other things, R&D funding, removing harmful subsidies, introducing environmental taxes, and being active in the development of the EU’s emissions trading system. Carbon neutrality can also be taken into account in public procurement and infrastructure investments, Kaitila argues.
Etla’s forecast for the development of Finland’s emissions is made as part of Etla’s biannual macroeconomic forecast for the next five years. CO2 emissions forecast is calculated using Etla’s Suhdanne forecast and it makes three alternative assumptions that describe the possible evolution of the emission intensity of output (value added) in the future. Industry production forecast is based on the macroeconomic forecast and the use of national input-output tables. The emissions projection is based on industry-specific production forecasts, household consumption and technological development. The forecast is not made on an annual basis but is an estimate of the five-year average development.