”Unilateral EU decision won’t save the climate”

The costs of Finnish forest industries threaten to increase by an amount equivalent to 16-37 percent of their annual payroll, due to the EU’s climate policies.

In January, the EU Commission published a new policy framework for climate and energy. The goal is to reduce greenhouse gas emissions within the EU by 40 percent by 2030, in comparison to the level of 1990.

The proposal is that the EU’s emission trading sector, like heat and electricity production, would reduce emissions by 43 percent and the non-emission trading – transportation, services and households – sector by 30 percent, both compared to 2005. How the targets of the non-emission trading sector would be allocated to each member state is so far unclear.

The VTT Technical Research Centre of Finland and the Government Institute for Economic Research (VATT) published an assessment in May of the effects of the EU 2030 goals on the Finnish energy system and national economy.

”There is one graph in the report that says it all. On all factors but one in the balance of resources, the effect is negative. The exception is investments, which are increasing according to some scenarios,” says Mr. Ahti Fagerblom, Manager for Energy and Climate Policy at the Finnish Forest Industries Federation.

Consumption, exports decrease

Fagerblom refers to a graph which depicts the macroeconomic effects of the EU 2030 policies in Finland in 2030. It shows a decrease in the gross national product, private consumption, exports, imports and rate of employment due to the EU targets.

The purchasing power of private households is predicted to decrease by 0.3-1 percent and the balance of trade by a few hundred million euros. Employment would decrease by 0.1-0.4 percent, depending on the development of real wages and the targeted emission reduction of the non-emission trading sector. The GDP would decrease by 0.7 percent at most.

VTT and VATT consider these effects reasonable, in contrast to what the Forest Industries Federation thinks.

Annual costs of EUR 370–800 million

”The predicted increase in costs of this policy would be between 370-800 million euros annually for the Finnish forest industries, which is equivalent to 16-37 percent of the sector’s annual payroll,” Fagerblom says.

The figures he refers to are based on a report published in June by the Pellervo Economic Research PTT on the effects of the EU 2030 targets. According to it, the costs of meeting unilateral EU targets will be borne by the forest and technology industries.

The costs to the forest industry are mainly caused by an increase in the prices of the emission permit price, electricity and transport costs, says Fagerblom.

VTT and VATT say that the emission permit price is expected to increase to 50 euros per carbon dioxide tonne by 2030. The current price is around five euros.

EU leads, but does anyone follow?

The EU has repeatedly announced its desire to be the leader in tackling climate change issues. The problem, according to Fagerblom, is that no one seems to be following the leader.

Targets set for industries within the EU will not stop Europeans from buying goods produced outside its borders and in very different regulatory environments.

Unilateral decisions by the EU will not save the climate, Fagerblom says, quoting Mr. Günther Oettinger, EU Energy Commissioner. Oettinger has said that one must be either stupid or arrogant to think that the EU alone can save the climate, as the EU’s share of global emissions in 2030 will be around 4.5 percent.

”Only global agreement helps”

”Yes, we need to stop the climate change and there are no easy solutions. We need a global agreement. Decisions by the EU alone will only halt economic growth in the EU,” says Fagerblom.

An economic downturn is a well-known means of cutting emissions. Lacking a global agreement, an economic downturn in Europe would simply cause growth and emissions to occur elsewhere.

The importance of a global agreement is highlighted by the UN’s forecast of population growth. In 2050, the world population is expected to reach 9.5 billion, 7.5 percent of whom live in Europe.

EU’s slogan is ‘growth and jobs’. Sometimes it seems as if, despite all the talk, climate issues override all others, Fagerblom says.

Next agreement talks in 2015

The assessment by VTT and VATT presupposes that Finland will reach the targets set to it by increasing the use of biofuels made mainly out of domestic raw material. Another assumption is that the state will subsidize this development significantly.

Also, they assume that Finland’s oil refining capacity will be increased thanks to bio refineries and that this will enable the exports of refinery products.

All of the above involves the use of wood. “What if forests will be regarded only as carbon dioxide sinks? That would mean wasting the chance to make products out of renewable material,” Fagerblom says.

Fagerblom wonders why the EU is already setting its targets, when the aim is to reach a global climate agreement only next year. “It’s just like playing poker and showing all your cards. Odd way to conduct negotiations.”

Further information:
Press release about the VTT and VATT’s assessment
The PTT study is not available in English