Carbon-Neutral Finland 2035 Is a Tough Objective

In order to fight the climate change, the European Union and Finland as its member country are seeking carbon neutrality by 2050, Finland already by 2035. In this brief, we assess the development of Finnish greenhouse gas emissions (CO2 equivalent) in 2019–2024 based on Etla’s most recent macroeconomic and industry sector forecasts. Technological change that will cut greenhouse gas emissions is paramount for the efforts to reach carbon neutrality. We use three technological assumptions that describe how the emission intensity of value added may develop. Our baseline scenario, based on how value added will change in each industry combined with their average development in emission intensity over the past few years, shows that the aggregate emissions will decrease on average by about four per cent annually in 2019–2024. Compared to our previous forecast, we have now calculated the development of CO2 emissions in the electricity, gas and steam producing sector and the development of carbon sinks in a new way. However, this good development is not yet enough to reach the carbon neutrality target which requires a speed of decline in emissions of around six per cent annually. Consequently, technological change needs to accelerate considerably. The public sector can support the efforts to reach carbon neutrality by, among other things, R&D funding, removing harmful subsidies, introducing environmental taxes, and being active in the development of the EU’s emissions trading system. Carbon neutrality can also be taken into account in public procurement and infrastructure investments.