Impacts of the 2030 targets on Finnish energy systems and national economy

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1 Impacts of the 2030 targets on Finnish energy systems and national economy EERA JP e3s expert workshop, 15 th Jan. 2015, Brussels Tiina Koljonen, Research Team Leader VTT Technical Research Centre of Finland

2 Recent and ongoing impact assessments for policy making in energy and climate by VTT Update of the Energy and Climate Strategy for Finland in 2013 Energy and emission scenarios up to 2025 (scenarios with 2020 measures and with additional measures) Low Carbon Roadmap 2050 for Finland The report of the Parliamentary Energy and Climate Committee was published in October 2014 Low Carbon Finland 2050 platform research project. Reports published in November Nuclear policies Electricity demand scenarios up to 2035, impacts on energy prices and national economy Report published on August /02/2015 2

3 Impact assessments of the EU 2030 policy framework The impacts of the EU 2030 climate and energy policies on Finland's energy and national economies Report published on spring 2014 Analysis was focused on analysing the cost efficient pathways to achieve the possible non-ets targets Several new projects underway (financed by the Prime Minister s Office) 1. Analysis of the 2030 targets, which take into account the possible LULUCF policies (i.e. simulation of the proposed three options for the inclusion of the LULUCF into the 2030 framework) 2. Analysis and comparison of the IAs made in the other EU MS 3. More detailed analysis on Finland s transport sector 27/02/2015 3

4 Finland s GHG emissions vary with industrial (export)volumes and weather conditions The major uncertainty is related to the future industrial structure Collapse of export industries Cold and/or dry years in the Nordic region Source: Statistics Finland /02/2015 4

5 Industrial sector consume about half of Finland s final energy, which is produced by versatile energy sources There are also a lot of debate related to the future energy demand in Finland Total primary energy consumption in 2013 Final energy consumption in 2013 Source: Statistics Finland /02/2015 5

6 The 2020 renewable target for Finland is 38% from final energy consumption, which is reached mainly by increasing the use of wood fuels A long tradition of sustainable forest management has doubled the growth of the Finnish forests 27/02/2015 6

7 Innovation, cooperation and combination make Finland a real pioneer in bioeconomy Biodiesel from tall oil combined with pulp production Biogas and -ethanol from residues combined with pulp and sawnwood production UPM Bio oil from forest residues combined with heat and power production Metsä Group Wood in innovative urban construction Fortum

8 Impact assessments of the EU 2030 energy and climate framework for Finland Impact assessments for energy systems with TIMES-VTT model and national economy with general equilibrium model VATTAGE developed by the Government institute for economic research (VATT) Basis for the scenarios Baseline according to updated energy and climate strategy Three policy scenarios assuming the same GDP/capita burden sharing for non-ets as in the 2020 framework All scenarios were run with exogenous CO 2 price, i.e. 10 /t CO 2 in 2020 and /t CO 2 in /02/2015 8

9 Policy scenarios included -32%, -36% and -40% non-ets (i.e. NETS) targets for Finland Finland would be net buyer of emissions allowances -16% NETS target in /02/2015 9

10 All the non-ets sectors need to reduce GHG emissions but the reduction is the largest in the transport sector Mt CO2 eq BASE NETS -32% NETS -36% NETS -40% Transport Agriculture CH N 2 O Space heating Machinery Waste F-gases Other NETS Total /02/

11 The 2 nd generation biofuels replace mineral fuels in road transport In % of final energy in road transport should be drop-in biofuels, which may be used in existing vehicle fleet 27/02/

12 2 nd generation biofuel plants use mainly domestic wood as a raw material Large biorefineries are mainly integrated to pulp and paper industries => effective use of side products and wastes of forest industries The most critical question for Finland is related to future sustainability criteria of wood based biomass 27/02/

13 Energy system costs increase radically if the non-ets target is tighter than -36% 500,0 450,0 400,0 350,0 300,0 250,0 200,0 150,0 100,0 50,0 Direct energy system costs compared to the Baseline in 2030 M eur/a 2030 Marginal costs of GHG reduction in the non-ets sector eur/t CO ,0 EPKS -32% EPKS -36% EPKS -40% 0 NETS -32% NETS -36% NETS -40% 27/02/

14 Macroeconomic effects of the EU 2030 policies are moderate for Finland However, there are uncertainties related to global competitiveness of energy intensive industries. Also, more detailed cost analysis of non- ETS sector, especially the transport sector, should be done. 27/02/

15 Next steps Updated scenario runs with updated inputs (incl. nuclear decisions, changes in the taxation, etc.) Especial focus on the transport and LULUCF sectors Required future work: Better data and more detailed analysis on all the non-ets sectors. Especially the non-ets industries and agricultural sectors require further attention. Possible impacts of the EU 2030 policies on the competitiveness of Finland s export industries (pulp & paper, metal, clean tech) Impacts of the possible future sustainability criteria for wood 27/02/

16 TECHNOLOGY FOR BUSINESS Contact: tel