Finnish National Roadmap for the Implementation of the Environmental Technologies Action Plan for the European Union

Transcription

1 Finnish National Roadmap for the Implementation of the Environmental Technologies Action Plan for the European Union MTI Publications 17/2006

2 Finnish National Roadmap for the Implementation of the Environmental Technologies Action Plan for the European Union MTI Publications 17/2006 Technology Department

3 Series title and number of the publication Aleksanterinkatu 4 P.O. Box 32 Tel MTI Publications FIN Helsinki FINLAND FIN GOVERNMENT Helsinki FINLAND Telefax /2006 Authors Mervi Salminen Date April 2006 Commissioned by Ministry of Trade and Industry Date of appointment Title Finnish National Roadmap for the Implementation of the Environmental Technologies Action Plan for the European Union Abstract In January 2004, the European Commission launched the Environmental Technologies Action Plan (ETAP). ETAP rests on a broad definition of environmental technology, embracing all technologies which prove less harmful to the environment than their alternatives. In the spring of 2005, the revised EU Competitive Strategy set greater challenges than before for environmental technology. This so-called Lisbon Strategy, and the EU s Economic and Employment policy guidelines which enlarge on it, focus on the importance of innovativeness and efficient use of resources as a competitive factor throughout the EU. When submitting national reports in conjunction with the Lisbon Strategy, member states also report annually on ETAP s progress at national level. Finland s national implementation of ETAP is coordinated by the Ministry of Trade and Industry with help from an ad hoc group consisting of representatives from other ministries, funding bodies, industrial organisations and research institutions. The Ministry of the Environment is responsible for the EU-level co-ordination of preparatory work related to measures involved in ETAP implementation. This National Roadmap has been drawn up by the Ministry of Trade and Industry and processed by the national ETAP ad hoc group, and a draft of it has been posted for public comment on the Ministry of Trade and Industry s website. Regional players were also heard during the preparations. The document defines national goals and actions connected with promoting environmental technologies. All actions described have either been recently implemented, are in progress or are planned. The challenges presented are matched with ideas which are common property about how environmental technologies should be promoted, the cases mentioned describing Finnish best practices in this regard. Resource and energy efficiency, as well as environmental benignity, have traditionally constituted the basis of new Finnish production technology. This is evident, for instance, in the development of processes within the forest and metal industries and the eco-efficiency of energy technologies. The principle behind the related innovation policy has been based on integrating environmental issues into all technology programmes. MTI contacts: Technology Department / Mervi Salminen, tel and Hanna Karilainen, tel Key words ETAP, environmental technology, EU, Lisbon Strategy, technological progress, sustainable development ISSN Pages 58 Published by Ministry of Trade and Industry Language English ISBN Price 13 Sold by Edita Publishing Ltd

4 Foreword In January 2004, the European Commission issued a communication on the Environmental Technology Action Plan (ETAP), which supports the Lisbon Strategy s implementation, based on the following objectives: to remove the obstacles so as to tap the full potential of environmental technologies for protecting the environment while contributing to competitiveness and economic growth; to ensure that over the coming years the EU takes a leading role in developing and applying environmental technologies; to mobilise all stakeholders in support of these objectives. ETAP rests on a broad definition of environmental technology, embracing all technologies which prove less harmful to the environment than their alternatives. ETAPs objectives are in line with those already formulated in Finland. The development and utilisation of environmentally friendly technology is important to Finland. Efficient use of resources and environmental benigness have formed the country s traditional basis for production technology innovations. The EcoExport Committee (Ekovientitoimikunta) issued a report in 1995 considering Finland s strengths in terms of environmental competencies, and confirmed that such strengths existed in a broad range of areas, estimating that eco-exports represented one fifth of all Finnish exports and that by 2010 the importance of environmental competencies in international competition would have grown dramatically. Environmental innovations are a priority area in the activities of Tekes and Sitra. The former's technology strategy defines environmental technology as a focus area emphasising the general relevance of environmental friendly solutions, processes and services in various areas. Tekes is developing its processes in order to better promote new technologies. Sitra has launched a new environmental programme, Cleantech Finland, with the goal of making environmental technology into a growth area in the internationalisation of SMEs. Since the 1990s, industry has emphasised the importance to general competitiveness of eco-competitiveness, environmentally aware product strategies and environmental technology. One could claim that Finland has long had a broad understanding of the need for environmental technology innovations and the role played by the resolution of environmental problems in securing corporate competitiveness and creating new environmental enterprise.

5 Further to this, the Ministry of Trade and Industry has drawn up this national roadmap, which has been considered by the national ETAP ad hoc group and a draft of which was available for comment on the ministry s website. Regional players were consulted during the preparation of the roadmap, which proposes measures to be taken in Finland in promoting the creation and adoption of environmental technology, and the related businesses. In addition, future challenges are identified. Helsinki, 8 th March 2006 Mervi Salminen Ministry of Trade and Industry

6 Contents Foreword... 5 Contents Introduction National Inovation System in Finland Financing institutes Research institutes Getting Technologies from Research to Markets Research and Development Boosting innovation activity European technology platforms Verification of technologies and performance targets Getting from Research to Markets Measures in Support of Eco-industries Developing financial instruments Promoting exports Eco-industry networks Private and public sector partnerships Developing service business Measures in support of waste-related companies Measures in support of energy technology Public Instruments Procurement methods... 44

7 6 Awareness Raising and Training Influencing Globally WTO Doha Development Agenda; trade and environment Multilateral Environmental Agreements (MEAs) Promoting environmental technologies in developing countries Co-operation with neighbouring areas Appendix 1 ETAP ad hoc group Appendix 2 List of abbreviations Appendix 3 Links... 58

8 9 1 Introduction Resource and energy efficiency, as well as environmental benignity, have traditionally constituted the basis for new Finnish production technology. This is shown, for instance, in the development of processes within the forest and metal industries and the eco-efficiency of energy technologies. In public research and development funding, environmental aspects have been a priority since the 1970s. The principle of the innovation policy has been to integrate environmental issues into all technology programmes. When a new product or a production process is better both in environmental terms and in providing other additional benefits to the user it will take less time for it to gain a foothold in the market. Since the early 1990s, the industry has in its own documents stressed the significance of eco-competitiveness, environmentally oriented product policies and environmental technology for competitiveness. In Finland, there has been a broad consensus on the need to develop new environmental technologies and to solve environmental problems to ensure the competitiveness of enterprises and to create new environmental business opportunities. The development and exploitation of environmentally friendly technology is important for Finland. More than one third of Finnish exports consist of products and production methods where the major sales argument is environmental compatibility. Only one fifth of these exports consist of environmental technology in the traditional sense (a more narrow definition, the so-called end-of-pipe technology). The authorities are responsible to identify and set clear targets for environmental and energy policies. They have also an important task to identify the technological strengths, which will promote the implementation of environmental and energy policies in a cost-effective way by sufficiently proactive measures. The actions of the authorities have a higher than average impact on the market in the environmental sector. Legislation creates demand for new technologies, economic incentives alter market prices, and the uncertainty of legislation and incentives and the difficulty of predicting them are a risk for business operations in the sector, etc. Fundamentally, environmental business operations are not very different from any other kind of business operations. The success of companies follows the general rules for business operations and markets. For that reason, projects aimed at business development should be based on initiatives from companies and be adapted to the companies needs. It is the task of the authorities to promote development of human resources and create a predictable legislative environment and infrastructure that support sus-

9 10 tainable development and create a good operating environment for companies. Interference in the actual business operations should be avoided. The basic idea is that the authorities can set goals and it is then up to the company to choose the ways and means to reach those goals. The national implementation of EU s Environmental Technologies Action Plan (ETAP) is in Finland coordinated by the Ministry of Trade and Industry with help from an ad hoc group consisting of representatives from the other ministries, funding bodies, industrial organisations and research institutions. The Ministry of Environment is responsible for the EU-level co-ordination of preparatory work related to measures involved in ETAP implementation. This National Roadmap has been drawn up by the Ministry of Trade and Industry and processed by the national ETAP ad hoc group, and a draft of it has been posted for public comment on the website of the Ministry of Trade and Industry. Regional players were also heard during the preparations. The document defines national goals and actions connected with promoting environmental technologies. The actions described have been either recently implemented, are in progress or are planned. The challenges presented are masterless ideas about how environmental technologies should be promoted. The cases mentioned describe best Finnish practices on promoting environmental technologies.

10 2 National Innovation System in Finland 11 Diagram 1 illustrates the Finnish innovation environment. The figures in the diagram represent the total extent of each organisation in million euros in Environment-related R&D accounts for about per cent of the figures. The numbers in parenthesis indicate the share of state budget funding. The funds of Tekes and the Academy of Finland are funded entirely from the state budget. Diagram 1. Innovation environment in Finland resources and funding (The numbers in parenthesis incidate the share of state budget funding) 2.1 Financing institutes Tekes, the National Technology Agency ( is the main public financing and expert organisation for research and technological development in Finland. Tekes funds come from the state budget via the Ministry of Trade and

11 12 Industry. Tekes has a budget of EUR 400 million, a source of funding for projects annually. Tekes channels approximately half of its total annual funding through technology programmes which are used to promote development in specific sectors of technology or industry, and to pass on results of the research work to business in an efficient way. Programmes have proved to be an effective form of cooperation and networking for companies and the research sector. Programmes are initiated in areas that are strategic to the future competitiveness of industry and the service sector in Finland. Diagram 2. Technology programme process In autumn 2005, a total of 22 extensive national technology programmes were ongoing. The duration of the programmes ranges from three to five years; their volume ranges from EUR 20 million to EUR 150 million. Tekes usually finances about half of the costs of the programmes. The second half comes from participating companies and research institutes. Companies can participate with their own projects or by joining common research projects. Companies, research organisations, and Tekes plan the technology programmes together. The planning takes place in working groups and at open preparatory sem-

12 13 inars. The Board of Tekes makes the decision launch a programme. Each technology programme has a steering group, a co-ordinator and a responsible person within Tekes. The Academy of Finland ( is an expert organisation in research funding. The funding of scientific research in all disciplines is carried out by several funding instruments e.g. research programmes, the centres of excellence, researcher posts and research projects. The Academy consists of four Research Councils. Environmental research has an important role in the funding profile of the Research Council for Biosciences and Environment. Furthermore, the Research Council for Natural Sciences finances Environmental Research especially related to environmental technology. In the Finnish research funding system the funding of the basic research is the task of the Academy. The Academy cooperates closely with other national financiers, e.g. Tekes and ministries, whose role is to fund mainly applied research. This jointly funded research is an important element of the Finnish innovation environment and it has also been a benefit for entering the European Research Area where for example, the ERA-NETs aim at different financiers cooperation for future joint Research Programmes. Finland is very actively involved in the ERA-NETs; the Academy is coordinating two ERA-NETs. Sitra, the Finnish National Fund for Research and Development is an independent public foundation under the supervision of the Finnish Parliament ( It has launched a new programme called Environmental Programme Cleantech Finland. The purpose of the programme is to upgrade the business activities and competitiveness of the Finnish environmental sector for global markets. In Finland a systematic effort has been made for a number of years to build a national innovation system based on co-operation between producers and users of knowledge. The cluster programmes started in 1997 are an example of this development work. In the beginning, eight programmes were scheduled for the period under five ministries. The Finnish Environmental Cluster Research Programme is a collaborative programme ( > Research > Research Programmes > Programme) between researchers, the business sector, public authorities and funding organisations. This programme aims to raise the level of environmental know-how, improve the state of the environment, create favourable preconditions for entrepreneurship, and integrate environmental issues more closely into the Finnish system of innovation.

13 14 The main financiers of the programme are the Ministry of the Environment, the Ministry of Trade and Industry, Tekes, and the Academy of Finland. The Finnish Ministry of the Environment is responsible for the coordination of the programme. The theme of the fourth phase ( ) is Ecoefficient Society. The central issues of the programme are the control of climate change, prevention of waste production, recycling, promotion of a good and healthy environment, sustaining biodiversity, and economic instruments and their effectiveness. 2.2 Research Institutes VTT, the Technical Research Centre of Finland, ( is a contract research organisation with more than employees providing a wide range of technology and applied research services. The volume of projects classified as environmental projects is approximately 250 person-work years. The research ranges from clean products and production processes to environmental protection, monitoring and assessment technologies. VTT is also a technical expert supporting government and enterprises on technical issues. The environmental aspect is an essential element in all VTT's technology and innovation research. Strategic technology themes are an instrument that aims to develop competitiveness and core competence in areas that are deemed important. One of the current strategic technology themes is Clean World. It focuses on sustainable development, the use of renewable resources and the reduction of greenhouse emissions. The aim is to decrease the emissions and environmental impacts by developing novel processing methods especially for the pulp and paper, chemical and energy sectors. The technology areas include green chemistry, biotechnology, fuel cell technology, novel production methods of biofuels, as well as clean indoor air and in-situ remediation methods. VTT is one of the largest European research and development units in the field of bioenergy, especially in forest biomass-based expertise. It is actively networking with R&D institutes and industrial partners worldwide to advance new bioenergy technologies. For example, VTT coordinates Bioenergy NoE, which integrates the expertise of eight leading European bioenergy institutes. Its key objective is to build a Virtual Bioenergy R&D Centre that can spearhead the development of a technologically and economically efficient biomass and bioenergy industry in Europe.

14 15 VTT also carries out technology foresight studies. An example of environmental technology foresights is the Nordic Hydrogen Energy foresight ( ). This was a joint effort of the five Nordic countries, where VTT was one of the core partners. The aim of the projects was to provide decision support for companies and research institutes in defining their R&D priorities and to assist governmental decision makers in making effective framework policies for the successful introduction of hydrogen energy. SYKE, the Finnish Environment Institute, is both a research institute and a centre of environmental expertise ( > Finnish Environment Institute). SYKE's research focuses on changes in the environment, seeking ways to control and abate these changes. SYKE's research programmes assess environmental problems from a multi-disciplinary perspective by integrating social sciences, natural sciences and engineering sciences. Research may focus on global environmental issues, such as climate change and declining biodiversity, or on regional or local issues. The technology-related R&D focuses on issues like LCA of industrial sectors and products, IPP issues like product panels and the development of BAT technologies and knowledge for EU and national needs. Special attention is devoted to the analysis of policies with environmental effects and their evaluation and assessment by combining several approaches and scientific disciplines. Analyses of technological change, production and consumption are becoming increasingly important.

15 16 3 Getting Technologies from Research to Markets Research and Development 3.1 Boosting innovation activity The new technology strategy of Tekes gives environmental technology a more eminent role and also stresses the generic significance of environmental issues in various sectors. Within national technology programmes, more funding than ever is being allocated to the development of environmental technologies. In 2004, Tekes funding for projects containing a significant environmental element amounted to EUR 81 million. This accounted for about 20 per cent of the total volume of Tekes funding. The figure includes projects aimed at improving energy efficiency (32 per cent) and projects on renewable energy sources (14 per cent), and thus also projects on climate-change technology. The financing of environmental, energy and climate change technologies are linked together in a complex way. In recent years Tekes has had several environmental technology programmes and programmes with a strong environmental focus, such as: ClimBus Business Opportunities in Mitigating Climate Change Streams Recycling Technologies and Waste Management FINE Particles Technology, Environment and Health The budget of these programmes totalled approximately EUR 120 million, which includes planned financing by all the participants as well as financing by other external financiers for the duration of the programmes. Other financiers are expected to account for approximately 50 per cent of the total budget of the programmes. Currently, some 250 companies and 70 research institutes are participating in the programmes. In energy-technology programmes, such as the DENSY programme for distributed energy systems, as well as in the focus area of the small-scale use of wood, environmental issues are usually the driving force.

16 17 Case: ClimBus Technology Programme Although the need to reduce greenhouse gas emissions presents challenges to industry worldwide, it also offers many new business opportunities. Global markets for mitigation technologies and services are expected to grow rapidly. To support and create these new business opportunities, the ClimBus technology programme promotes and finances the development of technologies and services to reduce greenhouse gas emissions. The programme will run from 2004 until the end of 2008, and the total ClimBus budget is estimated to exceed EUR 70 million. The ClimBus programme focuses on areas of technology in which Finland already has solid expertise. Finland has strengths in, for example, clean energy production and fuels, especially biofuels, and also energy-efficient technologies. Special objectives will be set for the development of services. The programme also aims to generate an overview of the business opportunities that the international climate policy creates. Information about future technologies and the technological possibilities for emissions mitigation will be compiled in the programme as well. The following diagram illustrates the process of innovation and the role of the ClimBus programme in it as well as the role of other organisations and programmes that provide support for companies and research organisations in Finland. Diagram 3. Climbus programme

17 18 According to Tekes new technology strategy, the development of services and new business concepts are emphasised in the ClimBus technology programme. Emissions trading and emissions monitoring will create a demand for new services and new kinds of businesses. This is because emissions will soon be a cost factor for all energy users. Integration of services with technology deliveries will provide added value for customers and a competitive edge for technology suppliers. At its best, integration means moving from the sale of equipment to the sale of operations and to life-long customer relationships. This is why development of services and business models are also crossing over into the other focus areas in the programme, for example by creating new business models and services, barriers to the introduction of energy-efficient technologies can be eliminated. More information: Tekes is currently drafting several programmes aimed at enhancing innovations, programmes in which environmental technology also has a role. Serve, the technology programme for innovative services, aims to turn services into a competitive growth area. The Responsive Business Operations and Management Approach programme aims to improve companies business capabilities, which are usually of key importance in the functioning of the entire innovation chain. The programmes being drafted also include the Biotechnics to Production (SYMBIO) programme, the key area of which is to, e.g., develop new biotechnology applications for the environmental sector. In summer 2005, Tekes executed a sectoral application procedure concerning measurement technology. The themes included process emissions and monitoring the state of the environment. A good number of themes related to environmental technology are being studied, and several of them will be turned into programmes. Among these themes are recycling of materials, use of new materials and security. Many other environmental technologies, such as water supply and sanitation technologies, contaminated soil management technologies, and air-pollution control technologies, are developed in individual R&D projects funded by Tekes. These projects outside the programmes are also essential for covering all important R&D themes in Finland. This combination of strategy-driven funding (programmes) and demand-driven funding (individual projects) has proved to be an effective way in fostering R&D in Finland. The new technology strategy of Tekes emphasises the development of services and business competence of the networked economy along with technology development. Business perspective in technology development accelerates implementation of research results and promotes innovation activity.

18 19 Development work and piloting are often targeted at the new business practices and concepts of the networked economy as well as their applications. Development requires that the research on technologies, commercial science and behavioural sciences be combined. Service-business competence is essential for the traditional manufacturing industry, the service sector and new businesses. The future competitiveness of the industry is decisively based on services integrated into the product or production. Customised product-service packages and new types of solutions will also produce new business concepts in global markets. The Academy of Finland is at the moment preparing a research programme on sustainable production and products. The programme s main objectives are new materials, processing of materials and environmentally friendly production technologies, eco-efficiency, industrial ecology and green chemistry approach and methodologies, the influence of environmental legislation on industrial production and the influence of the environmentally friendly new technologies on environmental legislation and the development of internationally competitive products, production methods and services and concepts with respect to environmental aspects. Environmental technology-related research has been funded e.g. in the Finnish- Swedish Wood Material Science and Engineering Research Programme ( ), which is building a knowledge base and sustained research cooperation in the area of wood material science and engineering to enable development of innovative sustainable, eco-efficient and cost-competitive products, processes and services. In the research programme Sustainable use of natural resources ( ) the Academy, Tekes and the Ministry of Agriculture and Forestry jointly funded projects on e.g. green chemistry and eco-efficiency. The Academy is also one of the financiers in the Tekes technology programme FINE Particles Technology, Environment and Health ( ). Challenges The challenge for the development of environmental technologies in Finland is less a shortage of technologies, than the fact that market and demand issues play too small a part in technology development and programmes. The real challenge for companies is to make their technologies commercial and internationally marketable, and to develop and improve the business skills needed for this. In preparing technology programmes, it is essential to pay more attention to the matching of international opportunities and Finnish expertise. The final years of technology programmes could include coaching for the

19 participating companies in how to turn their products into commercial and internationally marketable products. There is not always sufficient willingness or capacity to commercialise the environmental technologies resulting from research or corporate R&D work. Refocusing and outsourcing of business operations creates opportunities for new innovative businesses. It is a future challenge to focus on the full application and utilisation of innovations in addition to supporting innovation activity in the first place; this is an area where there is room for improvement. The European Union has given high priority to developing competitiveness and environmental business operations. This is seen in, for instance, ETAP. The environmental theme of the European Union s 7th Framework Programme for Research should work as a natural support and tool for the implementation of ETAP. It should place the emphasis on the research of new environmental technologies in addition to research on environmental problems. In the Competitiveness and Innovation Program the role of ecoinnovation and environmental technologies should be made clear. The perspective of resource and energy efficiency must be integrated more effectively than previouslywith national technology and research programmes. The development of new solutions demands a long-term perspective from R&D funding. Discussion between different players must be encouraged in order to enable recognition of opportunities emerging from the environmental and energy policies and the national technology strenghts European technology platforms Finnish organisations have participated actively in the preparation of the following technology platforms: Water Supply and Sanitation (Tekes and the Finnish Water and Waste Water Association) and Sustainable Chemistry (the Finnish chemical industry) The Forest-Based Sector Technology Platform was prepared by the Finnish and Swedish Forest Industries Federations. The aim is to influence actively future programme launches, too. There will be nationwide dissemination of information on them, directed to SMEs in particular. Working through technology platforms is new. They are expected to be flexible action forums. They make various interested parties, especially industry, more closely committed to planning and to the resulting research work.

20 21 Case: Waste-water treatment in rural areas Rural and under-developed areas are one of the main challenges included in the strategic research areas of the European Water Supply and Sanitation Technology Platform. Many challenging areas exist both within and outside Europe. The treatment of wastewater in rural areas of Finland with no centralised sewerage system will be improved greatly over the coming years, thanks to harder legislation, which came into force on Waste water in areas not connected to any centralised sewerage system must be treated so that it does not pollute the environment and there is no risk of pollution. About a million people, some 20 per cent of the population of Finland, live in houses that are not connected to centralised sewerage systems. This means that about permanent residences and a further holiday homes must treat their own wastewater on site. The treatment systems in very many cases are obsolete or otherwise ineffective. It has been estimated that the new legislation will speed the upgrading of facilities at properties by The new regulations will lead to a reduction in the total phosphorus load in the wastewater from the unconnected homes of a million people from the current level of almost 400 tonnes a year to less than 100 tonnes within the transition period of years. The total area of rural residential environments harmfully affected by wastewater has been estimated to be reduced from hectares to hectares. Preparation of the reform to improve the efficiency of wastewater treatment in sparsely inhabited areas began in 1994 in connection with the national programme for water protection that was to continue until Preparation and enforcement of new legislation has set the focus for both public and private research and development resources. The Finnish Environment Institute (SYKE) carried out several national research projects on the operations of wastewater treatment plants in sparsely inhabited areas in The Decree allows a transition period of 10 years for old buildings, during which time their wastewater systems must be adapted to the requirements of the Decree. The long transition period gives 1) opportunities to various players such as authorities, planners, contractors, equipment suppliers and companies providing maintenance and repair services to develop their operations in the sector, 2) sparsely inhabited areas time to adapt economically and get used to the reform, 3) advisory services and information provision time to influence sparsely inhabited areas and individual inhabitants, and 4) society a chance to develop the support and derogation systems needed. One particular challenge is to develop appropriate and reasonably priced maintenance and service functions for wastewater treatment systems to ensure access to such services. In autumn 2005, a European standard (EN ) including a treatment efficiency testing method for small wastewater treatment plants was published. This standard helps the enforcement of national regulations and makes it easier for customers to choose treatment equipment that complies with the statutory requirements. Testing in accordance with the new standard has already started. The Finnish Environment Institute collects reliable information on wastewater treatment equipment and methods that are generally available in Finland, and provides that information for the public on the Institutes website. More information: > Environmental Protection >Water Protection > Wastewater treatment in rural areas

21 22 Challenges Based on the experience gained from the operating model of technology platforms, the need and possibilities will be estimated to establish further platforms in Finland based on our national interests. Areas of particular interest to Finland include waste management, the production of recycled raw materials and bioenergy. 3.3 Verification of technologies and performance targets The Finnish Environment Institute (SYKE) in its capacity as the national BAT contact point, has contributed to the integration of new economic activities into the BAT network. In 2004, for instance, a specific energy efficiency group was founded. Now Finland has 33 sectors in the BAT network. Finnish industry has been internationally active in the preparation of BAT (Best Available Technique) documents. VTT having an outstanding competence on several fields of environmental technologies participates in the European project TESTNET, the aim of which is to develop a European system for the production of reliable and independent performance data for environmental technologies. TESTNET, which started in September 2005, covers two technology areas: water technologies and clean production technologies. Environmental monitoring will be included in both technology areas. The project is a first step for a sustainable structure for the verification of environmentally sound technologies in Europe. In TESTNET, VTT is responsible for the development of a systematic, continuous practice for identifying promising environmentally sound technologies and innovative solutions (product, process and service innovations) to be verified. SYKE is initiating testing of small-scale waste-water treatment facilities for the Northern European market in its wastewater laboratory.

22 23 Case: Energy conservation agreements Voluntary energy-conservation agreements play a key role in the implementation of climate strategy and associated energy conservation programme. The voluntary-agreement scheme was launched in Finland in November They are framework agreements concluded by relevant ministries and branch organisations with the aim of increasing the efficiency of energy use. Motiva, a state-owned company, is responsible for administration and monitoring of the agreements. At the end of 2004, there were eight energy-conservation agreements in force covering not only industry but also the energy sector, the property and building sector and the municipal sector, buses and coaches, and residential properties. The agreements cover about 60 per cent of Finland s total energy consumption. Companies and communities subscribing to the agreements undertake to carry out energy audits or analyses in their own properties and production plants, to draw up an energy conservation plan, and to implement cost-effective conservation measures. The Ministry of Trade and Industry, for its part, undertakes to subsidise energy audits and analyses, as well as energy-conservation investments fulfilling certain criteria. With regard to housing properties, responsibility for audit subsidies and assistance for improvements in energy economy rests with the Ministry of the Environment. At the end of 2004, the total annual impact of the conservation measures in all participating companies was 6.1 terawatt-hours. The implemented saving is the equivalent of the annual electricity and thermal energy consumption of over 300,000 single-occupancy houses. Industry accounted for some 85 per cent of the savings. The annual impact of conservation measures implemented to date in carbon-dioxide emissions is about 1,7 million CO2 tonnes. Impact of the agreements on energy conservation The estimated saving in energy costs was more than EUR 110 million a year. Corresponding investments totalling more than EUR 220 million have been made in industry, and about EUR 55 million in the power plant sector. More information: >Areas of operation >Energy Conservation Agreements Challenges The national discussions have highlighted the importance of realiable testing of environmental technologies, but some provisions have been made on the development of the new European testing system. Finland will actively follow the development of this system and influence its development so as to ensure that the system fits in easily with

23 other product testing and is cost effective. On a national level, it should be ensured that Finnish companies also have equal access to testing services. Finland also gives priority to the development measurement standards, which verify the reliability of the test results and their comparatibility in different countries. Finland has several directories covering environmental technologies. They should be linked together and also linked with international portals. The work of developing a national database of environmental technologies could be allocated to, for instance, funding bodies or ministries. This could also support exports and the adoption of environmental technologies by SMEs. A national overview of the expertise of environmental companies should be performed, including environmental expertise and related service provision in the public sector. Environmental research, technologies and solutions should be given a higher profile, for instance, through a special portal. The high standard of Finnish environmental expertise (in the broadest sense, including expert assignments and project management) should be advertised, and its commodification, commercialisation and export should be promoted. 24

24 25 4 Getting from Research to Markets Measures in Support of Eco-industries A recent report reveals that the turnover of Finnish environmental technology business amounted to about EUR 2,1 billion in The statistical report identified approximately 300 environmental-technology enterprises in Finland. These are mostly small, recently started and, in the best case, starting to go international. Over five years, the domestic turnover of the sector has increased by approximately 16 per cent. Exports account for nearly half of the turnover. Taking account of subsidiaries abroad as well, the turnover of the Finnish environmental technology business amounted to approximately EUR 3,4 billion. The figures do not, however, fully cover, for instance, environmental solutions adopted by the new process industry. Neither do they cover traditional eco-industries (such as waste management, trade of scrap, wastewater utilities etc.). Statistics reveal that the turnover of the latter, excluding municipal units, amounted to EUR 1,3 billion. Monitoring of the development of environmental business operations is continuing (the Ministry of Trade and Industry, Sitra, Tekes and the Ministry of the Environment). The aim is to develop a practical statistics system for environmental business operations and a database of companies in the environmental sector based on it. In order to do this, the field of businesses covered by the statistics must first be defined in order to allow definition of environmental technologies and expertise as a separate sector. Small enterprises often develop innovative technologies and solutions, but their resources are not sufficient enough for export efforts. The fragmentation of the sector and the small size of enterprises constitute a bottleneck in terms of exports. The start, growth and internationalisation of enterprises will be promoted by various instruments (such as equity investments in SME's, developing business know-how and promoting exports). Supporting actions should be tailored to meet individual enterprises needs. The Finnish National Fund for Research and Development (Sitra) has launched a new programme called Environmental Programme Cleantech Finland. Capital investments form the main tool in boosting the development of SMEs. The environmental programme also participates in developing new methods for funding companies and looking for innovative models to facilitate the financing. Sitra s environmental programme is carried out in close collaboration both with the private and public sector. The aim is to produce a widely endorsed plan for the

25 26 environmental technology field in Finland, introducing new approaches and interpreting the signals, as yet weak, regarding the direction the sector will take in the future. The programme also strives for synergy with other similar programmes abroad. It will build international co-operation networks with enterprises and other actors in the EU and accession countries and follow developments in the environmental field. Project Areas Objectives Tools Industry profile Bringing cleantech firms forth Network/Cluster Analysis Follow-up of market development Statistical Systems Development, Market follow-up Challenges of the Future Foresight System, National Network, R&D Analysis The Wherewithal for Venture Capital Investments Finnish VC Investment Analysis and Follow-up System, Cleantech Venture Forum in Growth and internationalisation Finland as top ranked environmentally country Company Networks Target market Studies Financing Top-ranking Competences Innovative Entrepreneurship New Businesses New Markets Integration Finland Regional co-operation, client driven business and network models Company driven pilot projects for selected markets Financing Models, Subsidies and Funds Industry analyses Industrial residuals, material efficiency, green public procurement International co-operation, Business Awards, Trade Shows, congresses Venture Capital Investments National Action Plan Diagram 4. Sitra's environmental programme developing the baseline for capital investment In co-operation with the Ministry of Trade and Industry s foresight forum and the Government s foresight network, Sitra will start to develop a national foresight network in autumn A national foresight process in the field of environmental technology will also be carried out within Sitra s environmental programme starting in autumn Challenges It is important to ensure that support measures do not distort competition in the sector.

26 Finland already has advanced environmental technology and expertise. The obstacles lie in areas such as problems with commodification, commercialisation for a target market and the marketing of solutions in general.we need more client and market-based export projects and a more effective networking of the dispersed field of companies in the sector and these companies and international partners (including bringing operations close to the client in the target market). The development of competitiveness must focus on the most promising areas. In order to ensure that this is done, the strengths of environmental technologies and expertise in Finland must be identified. A study of this must be made both in terms of the sector and in a way that crosses the boundaries between sectors. Choices must take into account the needs of the internatonal market and the predictions for growth. It is also important to recognize the challenges and drivers connected with the various environmental sectors. In addition to this, the environmental expertise and service provision in the public sector should also be studied. Networking among the various players should be promoted in order to develop new business opportunities and improve the flow of information (cf. section 4.4). There are a number of organisations that strive to promote new technologies, corporate growth and internationalisation. Service providers should improve cooperation through offering service packages, for instance Developing financial instruments Various innovative devices are applied to encouraging the founding of new companies, company growth and internationalisation (for instance, provision of venture capital for SMEs in the environmental sector, development of business skills and promotion of exports). In the venture capital sector, Sitra is a launching a VC Investment Analysis and a Follow-up System. A CleanTech Venture Capital Forum is going to be arranged in ETAP and CIP will probably bring new funding instruments and sources to the Commission and the European Investment Bank Group. The financial institutions, including Sitra, will have to be ready to utilise them as promptly as possible.

27 The Kyoto Protocol creates demand for renewable energy sources and energy-efficient technologies, as well as provides financial instruments supporting investments. Sitra s environmental programme, the technology programmes and other project funding of Tekes, the Ministry of Trade and Industry s energy aid for new technology projects, export credits and targeted funding for utilisation of existing technology and technology exports will be needed as national financing tools. Challenges Promotional measures must be effective and innovative. The environmental sector has been a focus for specific promotion programmes in many countries. An international comparison of public-sector support measures should be undertaken and effective measures should be created in Finland. Financing skills and tools must be developed to an international top standard (cf. Green Net project). The bureaucracy surrounding financing should be cleared up, especially as regards funding applications. The preconditions for venture capital investments should be improved, and so should availability of risk financing for the reference plant stage. National funding models should be examined in order to split the risks related to environmental technology investments. Getting reference plants for new technologies is difficult in Finland (as well as in many other countries). In addition to R&D funding, targeted funding for the utilisation of existing technology (securing the chain by which technology is transferred to practical use) and technology exports (finished technology, possibly adapted to local conditions) is needed. Public funding systems that promote business group projects must be developed Promoting exports Successful exports have been restricted not so much by technological shortcomings as by sales and marketing issues. Success in sales demands extensive cooperation, particularly between the public sector and commercial companies. Finpro carries out its work (to boost the internationalisation of Finnish companies and to reduce the risk involved) with more than 300 experts and 50 export centres

28 29 in 40 countries. The aim is to match what Finland can offer with international opportunities. It is a key aspect of Finpro s work in Finland to help companies that are about to enter the international market or that have recently begun to work on this to evaluate their own potential for internationalisation and their competitiveness, and to look for the best potential export countries or partners for them. Finpro, together with other innovation organisations, strives constantly to find companies with internationalisation potential or new technologies. Finpro also organizes export rings, through which participating companies provide, for example, Poland with landfill-site technology. Project advisory services enable companies to follow consulting, supply and contract projects run by international financial institutions in different markets and tender for open projects. Tekes aims to support internationalisation as part of its projects and programmes and services tailored to groups of SMEs. In this context, Tekes also develops new service business. The foresight into international environmental-technology markets is important from the national perspective. Sitra s environmental programme will initiate target market surveys in India, for example. Tekes offers internationalisation aid for the U.S. markets through the GAP programme. Challenges It is important to perform international market forecasts for environmental technologies from a national point of view. The public sector should work together with leading companies to strenghten and utilize a Finnish brand for the environmental industry. 4.3 Eco-industry networks The customers of environmental technology businesses often need a package solution for their problems and not separate products. Finnish enterprises should be able to offer comprehensive systems consisting of products and services provided by various producers. The internationalisation of the environmental industry depends largely on the success of the leading Finnish companies (the main suppliers, companies in all). The SME sector will benefit chiefly as a subcontractor to the Finnish market