Will the EU Environment Committee cause the downfall of the Finnish economy?

The European Parliament's Committee on Environment, Public Health and Food Safety (ENVI) has by a clear majority accepted the proposed European Union legislation on Land Use, Land-use Change and Forestry (LULUCF). This is a new method of calculating the capacity of forests to act as carbon sinks. The adoption of this legislation has been widely criticised in the Finnish media. But what does the decision really mean, and how will it affect the Finnish economy?

In the Kyoto Protocol of 1997, agreement was reached on reducing greenhouse gas emissions. There is still no agreement, however, on how the costs of reducing emissions are to be shared. The ENVI proposal that has just been adopted involves sharing of the costs of greenhouse gas emissions between the EU countries. It was no surprise that there would be disputes over what share of these costs each country would have to take. 

Global warming–that is, the effect of actual emissions–is affected by emissions from burning and land use. In land use, the main carbon sinks (absorbers of positive carbon dioxide emissions) include forest growth, amongst other sources. Among the most hotly-disputed questions in the negotiations for the Kyoto Protocol were the fact that large countries such as Germany and the United Kingdom had mostly destroyed their own forests, and the destruction of the rainforests in developing countries. In light of these facts, it was decided in Kyoto to limit land use emissions. Already at that time, a political agreement was made that forest growth would not be compensated for. This was disadvantageous for Finland.

The new decision takes a position on how much forest growth is needed. This decision is political: instead of calling for forest growth, the amount of carbon combustion could be reduced. When negotiating on the share of the burden to be allocated to each country, for countries that use a lot of coal it is preferable to put the largest share of the burden on countries that grow large amounts of forest, such as Finland. This allows the coal-using countries to continue their high-emissions activities.

The most advantageous solution for Finland would have been for the growth of forests to be taken into account in determining the country's share of the burden. The carbon-sink effects of forests–that is, the amount of atmospheric carbon dioxide bound by forest growth but which is released back into the atmosphere by logging and forest fires–has varied between 20 and 50 million carbon dioxide equivalent tonnes from 1990 to 2013.  The carbon sink of the Finnish forests has accounted for 30–60% of Finland's total annual CO2 emissions. In the EU decision, annual net emissions of 2.5–3.5 million carbon dioxide equivalent tonnes were allocated to Finland.  In other words, Finland is being penalised for lack of forest growth, even though the country's forests are actually growing. Finland aims for 10-20 million cubic metres of additional logging per year, which equals 10-20 carbon dioxide equivalent tonnes per year.  As long as this new European Commission decision remains in force at a price of EUR 30 per tonne, Finland will have to pay the European Union EUR 50-70 million per year for the country's use of its own forests, even though the number of trees in forests is increasing.

In the negotiations, Finland got hit twice when the 2009-2012 period was chosen as the reference period, because the use of Finnish forests within that period was unusually low. Finland's desire to change the reference year was bluntly rejected by other EU countries. If it is agreed that Finland will be allowed to fell the growth in its forests, then the German and British burdens for emissions reductions will increase. In other words, the costs for Germany and the UK will increase. Clearly, the Committee on Environment, Public Health and Food Safety's cost allocations were not based on the science. They were political.

Leaving logging undone is a challenge for Finland. If we cut more–that is, if we cut the amount of the Finnish target volume of 20 million m3 per year–then the total income from stumpage will be EUR 700 million. But in doing so, we can say goodbye to new biorefinery investments. At current prices, we will lose out on EUR 1,500 million in earnings from pulpwood, and on EUR 570 million in turnover from sawn timber. We will also lose out on a total of EUR 200 million on bioenergy production of pulp, waste wood, and logging residue. Other consequences of this situation will be that that the forest industry cannot be expanded, growers will not get their stumpage money, and the cumulative effects on the economy will not be visible.

Economic realities have gotten a lot of attention in the Finnish media, and for good reason. However, less attention has been paid to environmental values. Political decision-making is always a question of reconciling many different goals. Forests are not only carbon sinks, but also important recreation areas and habitats for a great many species. And indeed, the EU has pointed to environmental values as justification of its forestry regulations. When forests grow more but the amount of wood taken from them does not increase, then the area to be logged decreases, and a larger total forest area can be given over to nature conservation.

The EU's political decision-making rests on economic, human and environmental assessments. In this latest decision by the Committee on Environment, Public Health and Food Safety, environmental values won.

More information:

Esa Vakkilainen, Professor, esa.vakkilainen@lut.fi, +358 40 357 8684