LUT University has published a report on the possibilities and challenges facing the Finnish chemical industry as it transitions away from fossil raw materials and energy. The chemical industry is highly important to Finland, because it accounts for 20 per cent of the country’s export earnings. If the industry abandons fossil fuels and raw materials, the Finnish economy and society stand to gain significant benefits.
Representatives of five chemical industry companies based in Finland were interviewed for the report. All companies are involved in the Power-to-X economy. Power-to-X (PtX or P2X) refers to technologies that utilise renewable electricity and fossil-free raw materials to create products such as hydrogen, e-fuels, and chemicals. The capture and utilisation of bio-based carbon, such as carbon dioxide emissions from pulp production, plays a key role.
“The EU has lost half of its share of the global chemical markets over the past 20 years, and the chemical industry is Europe’s second largest industrial source of carbon dioxide emissions. That's why the industry needs renewal. We in Finland have an excellent opportunity to change the situation, but it won’t happen on its own,” says Petteri Laaksonen, research director at LUT.
Changes needed at the national and EU levels
Finland isn’t expecting any large investments that would promote a fossil-free chemical industry. Companies interviewed for the report felt that current EU regulations don’t provide sufficient incentives for the transition. An industry transformation would require both national and EU-level actions.
Company representatives emphasised the importance of processing fossil-free raw materials in Finland. That would help retain the added value of related products, such as chemicals and fuels, in Finland. The report also highlighted that individual companies can’t carry out the transition on their own. Establishing PtX business value chains requires wide-ranging synergies and collaboration between companies, enabling them to share both expertise and risks.
“Bio-based carbon dioxide sources in the EU are largely located in Finland and Sweden, which both have strong forest industries. Utilising them requires carbon capture and utilisation projects and the large-scale expansion of renewable electricity generation capacity,” explains Jenna Ruokonen, project researcher at LUT.
Recommendations for chemical industry development
- The availability and utilisation of carbon dioxide and renewable electricity need to be ensured.
- EU regulation is needed to strengthen the demand for fossil-free products in the chemical industry.
- The production costs of fossil-free products must be levelled to improve their competitiveness compared to fossil ones.
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Important growth opportunities for Finland
“Finland has every opportunity to pioneer in the chemical industry transition if we harness domestic bio-based carbon dioxide and renewable electricity for economic growth and well-being,” Laaksonen summarises.
A fossil-free chemical industry would offer important growth opportunities and societal benefits. The transition would have many positive impacts on the environment, economic growth, and security.
- Bio-based carbon dioxide emissions from the forest and energy industries would become valuable raw materials. Fossil-free chemicals and fuels could help avoid fossil carbon emissions and related costs.
- The chemical and technology industries would have considerable opportunities to increase their export. Moreover, new investments would lead to startups, new jobs, and new business.
- Transforming the chemical industry would improve Finland’s supply and energy security, as chemicals and fuels could be manufactured from domestic raw materials with renewable energy. Moving away from fossil fuels and their import would reduce cross-border dependency and geopolitical risks.
LUT University continues this research in its recently launched FinGeo project. The research project establishes a foundation for new ideas in innovation and industrial policy during the transition from the “great moderation” of globalisation to geoeconomics defined by global power politics. FinGeo is a three-year collaborative project of ETLA Economic Research, LUT University, and international partners.
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Panu-Petteri Laaksonen
