Finland has a lot at stake – A big twist in the EU threatens to reach the forests

The EU’s emissions trading system has been up and running for over twenty years, but this year saw an exceptionally tough twist on the rules of the emissions trading system – and more is expected during the fall.

The system based on the trading of emission rights has halved the emissions of energy production and heavy industry in the EU region in two decades. At the beginning of the year, however, emissions trading became the scapegoat for high energy prices in Europe, especially in countries like Italy and Poland, which are still dependent on fossil energy.

There has also been a strong message about Germany’s heavy industry, which is struggling with profitability problems. The main demand has been to curb emissions trading so that the competitiveness of energy-intensive industries does not suffer from the rising costs of emission rights.

For Finnish industrial companies, the question is almost the opposite, as they have counted their investments on tightening emissions trading and want to sell more energy-efficient and low-emission technologies to the rest of Europe as well. The fear is that these plans will fall apart.

When Finland celebrated its summer vacation in July, the EU Commission presented a proposal on the steps of emissions trading until 2040, which balances between two camps.

According to the proposal, the EU’s emissions trading would tighten in the next decade as well, but not at such a steep rate as at the current pace. Emission rights are also distributed for free for longer than planned, but in return, emission reductions are expected from industry. The commission also promised companies more money from emissions trading revenues to reduce emissions.

In Finnish industry, the proposal, which maintains the broad lines of emissions trading, was mostly met with relief. Instead, for example, the organization of the German chemical industry already had time to call the presented mitigations a mere fog curtain to cover the scrapping of European industry, when the country’s own infrastructure does not allow emissions to be reduced at the required pace.

The outcome gives a foretaste of the fact that the debate about the future of emissions trading will continue in the fall, when the Commission’s proposal will be considered by the EU Parliament and the Council of Member States. In Finland, there is no room for delay, because the matter is already going to move forward in the parliament in September, and the final guidelines are supposed to be approved by the beginning of next year.

The end result is also significant from the point of view of what kind of emission reductions will be required in the future in places other than the energy sector and industry.

There has been no talk of renewing the agreement reached at the end of last year on the 2040 climate goal. If emissions trading is relaxed, then the necessary emission reductions must be sought elsewhere, i.e. from traffic or carbon sinks in forests. This is an important question for Finland.