The Commission will present its proposal on Wednesday, which will be negotiated between Parliament and the Member States for at least a couple of years. In Finland, care is taken to take account of forest management and maritime transport.
From the future The week will be a major climate week in the EU, with the EU Commission on Wednesday 14 July presenting its proposals for climate action in the coming years and practical tools for the EU to reduce emissions.
There are as many as a dozen legislative proposals coming up with completely new tools. The proposal includes, for example, at least guidelines on carbon tariffs that the EU would impose on more carbon-intensive imports from countries with less stringent environmental regulation.
The package is big because climate regulations are interlinked in many ways.
The Commission proposes EU legislation, but the decision-making power lies with the Member States and the EU Parliament. Indeed, a negotiation period of at least a couple of years is ahead, during which the Commission’s proposals will become laws binding on EU countries.
This is also a strict place for Finnish decision-makers, as the Commission’s proposals can have a lot to file in order to take into account some of Finland’s special features.
In advance Most of the talk has been about forests, but there is more controversy in the package for Finland. For example, the Finnish export industry is largely dependent on sea freight – and if emissions trading expands to maritime transport, will transport costs rise, will the competitiveness of companies weaken?
The EU tightened its emission reduction target so that in 2030 greenhouse gas emissions should be 55 percent smaller than in 1990.
In addition, the EU wants to be climate neutral in 2050, meaning that CO2 emissions would be produced no more than the amount that can be sequestered from the atmosphere into carbon sinks.
The new target level will be called the climate package in English Fit for 55 (ready for 55).
The emission reduction target is enshrined in EU climate law, ie it legally obliges to take action to reduce emissions.
The EU’s goals are in line with the intentions of the Finnish government. Finland wants to be climate neutral already in 2035, but some of the decisions needed for this have not yet been made in Finland.
HS reviews what is currently known about the Commission’s proposals and how the proposals will affect Finland. The Finnish government will form its own positions on the Commission’s proposals next autumn.
Since 2005, the EU has had emissions trading for industry, energy production and intra-EU aviation. These sectors pay for the right to emit carbon dioxide into the atmosphere.
Emissions trading has been the main tool of EU climate policy and its importance seems to be growing. Finland is one of the countries driving this.
According to preliminary information, the Commission intends to present a separate emissions trading scheme for road transport and heating of buildings. The current emissions trading scheme already covers all major district heating plants as well as electricity generation.
Installations involved in emissions trading must obtain a permit for each tonne of CO2 they emit. To this end, they buy allowances at auction, where the price is determined by supply and demand.
Some permits are issued free of charge in the so-called free distribution. According to leaked information from the Commission, the free allocation would first be halved by 2030 and expire in 2035 at the earliest.
This means that the price of allowances will rise. It is a strong incentive for zero emission production.
In Finland, the increase in the price of emission rights so far has led to the exclusion of peat in energy production, for example.
In Finland a study on national emissions trading in road transport is under way. This will not work if an EU-wide system is to come.
In road transport emissions trading, a model in which a fuel distributor would buy allowances could be considered. When emissions are to be reduced, emissions trading is likely to raise the price of fuel.
The Commission is expected to propose extending emissions trading to maritime transport between EU countries. Finland wants the EU to take into account, among other things, the fact that ice-reinforced ships consume more energy and produce more emissions.
Read more: Ignoring winter shipping in EU emissions trading could mean an additional bill for Finland – Minister Harakka writes to the Commission
Carbon tariffs are a completely new tool in EU climate policy, and it is still uncertain how the Commission will be able to make a final proposal next week.
The aim is to prevent so-called carbon leakage, ie the transfer of production from the EU to countries with less climate control outside the EU.
Carbon tariffs and emissions trading must be reconciled, because so far it has been precisely the allocation of free allowances to industry that has been the EU’s means of preventing carbon leakage, ie the flight of industry to countries with lighter regulation.
Carbon tariffs coming into force in 2023 could cover, for example, imports of steel, aluminum, cement, fertilizers and electricity from outside the EU.
Solvable there are many things. The most burning of these is how well carbon tariffs fit into the rules of the game in world trade. The threat is that the EU will retaliate against China or Russia, for example.
Carbon tariffs have another purpose: the EU plans to use them to collect what is called “own resources” in the EU language. They could reduce the debt that the EU is now taking on to finance the recovery of its member states.
According to the Financial Times the aim is to collect around € 10 billion a year in coal duties.
Burden-sharing means that the EU has set national, binding emission reduction targets for non-trading sectors, such as transport, heating, agriculture and waste management.
Emission reductions for the burden-sharing sector have been distributed among the member states mainly on the basis of gross domestic product. As a rich country, Finland’s goal is from the highest point: the current obligation is to reduce emissions by 39 percent by 2030 compared to 2005 levels.
The Commission also aims to increase emissions reductions in the burden-sharing sector, and their granulation by country is emotional. The obligations of the countries of Eastern Europe are now low.
It is unclear whether transport and heating will remain included in the burden sharing if they are turned into a separate emissions trading scheme.
In Finland, for example, the Energy Industry has been concerned about whether the Commission is becoming overlapping and in some cases even contradictory.
Emission standards for cars
The Commission intends to tighten emission limits for passenger cars and vans. The tightening can be so severe that production of new internal combustion engines in Europe will end in the 2030s.
Finland supports this, in addition to which it is hoped that the production of gas cars, which has recently become more common, will continue in Europe. Several projects related to biogas production are underway in Finland.
The Commission intends to reform the recently entered into force regulation on land use, land use change and forests – also known as lulucf.
Land use and forests are now strongly included in the EU’s emission reduction targets.
On an EU-wide scale, land use acts as a net sink, ie it removes more CO2 than it produces and is therefore a significant counterbalance to emissions.
The situation varies from country to country. In Finland, the net sink of forests is significant, but its size depends on the annual fellings.
According to preliminary information, the Commission intends to propose an increase in the net sink by 2030, when in the past it was enough that the sink should not at least decrease. According to the draft proposal seen by the HS, a binding target would be set for each country. It is essential for Finland that the responsibility does not lie only with forest lands.
The current accounting rules are complex and it is hoped that the reform will bring about an improvement.
Read more: New forest spill from the EU Commission: intends to present national carbon sequestration targets to member states
The Commission intends to raise the target for renewable energy. According to the current target, the share of renewable energy sources in the EU should be at least 32% of final energy consumption by 2030. Finland has set its own target of 50 percent.
Implementation of the current Renewable Energy Directive has only just begun. It contains sustainability criteria For forest biomass, which is important for Finland, ie the preconditions for when wood-based energy is considered sustainable and can be included in the renewable energy target.
The criteria apply to both biomass produced in the EU and imported from third countries.
It seems that the Commission is opening up the sustainability criteria that have just been agreed, which in the Finnish forest industry is seen as a model example of too short-term decision-making. New requirements are emerging for the sustainability of forest biomass.
Waste of energy increases emissions, so the Commission is tightening energy efficiency targets.
This applies both to the Commission’s overall target for 2030 and to the Member State-specific targets, which are projected to increase significantly.
In Finland, companies and municipalities have done voluntary energy efficiency agreementsfulfilling the obligations of the current Directive. There are many ways, such as waste heat recovery, improving building technology in real estate, and so on.
The Commission is likely to suggest to Member States that efforts be made to get rid of exemptions and subsidies for national energy taxes.
On the other hand, the Commission may propose to extend the tax base to new products, e.g. hydrogen, whose production is the subject of several ongoing projects in Finland as well. Transition periods are believed to be long.