ForTheDoers Blog

Lobbying in 2021: focus on European and Nordic climate and energy cooperation

Merja Paavola  ·  18 February 2021

In international energy policy, decarbonisation is the hot topic of the year 2021. The EU is reforming its legislation to reach the tightened emission reduction targets by 2030, and the Nordic countries are creating national plans that are more ambitious than the EU level. Fortum supports the EU climate policy and introduces means to achieve its targets.

People collaborating at an office

It is great to see that even globally, commitment to international climate policy has grown stronger. The United States re-joined the Paris Agreement, and among others, China and Japan have announced ambitious emission reduction targets. This gives faith in the battle against climate change being a strengthening megatrend.

The year promises major changes for Europe. Political focus is strongly on dealing with the corona pandemic and the implementation of EU’s recovery package, but also on advancing EU’s ambitious climate policy. At the same time, the exit of the UK from EU-level climate discussions may have long-reaching impacts – the country has promoted a market-based approach and been one of the member states most supportive of nuclear power.

The EU Green Deal was issued a year ago, and its implementation will begin with full force this year. In practice, the entire EU climate and energy legislation will be reformed in the next couple of years. The goal is to align the current regulation with the tightened target for 2030 and to create a path to the carbon neutrality target set for 2050.

Biodiversity is also a rising and important theme globally as well as in Europe. Biodiversity is strongly linked to both the UN Sustainable Development Goals and the European Green Deal. The European Commission addresses the topic in the EU biodiversity strategy, which extends to 2030.

Carbon neutrality is a common goal, but all emission-free production is needed to reach it

There is strong political will in the EU to reach carbon neutrality, which is vitally important. However, Fortum as well as other Nordic energy industry players are concerned about the development trend in which different emission-free forms of energy production are valued differently in political discussion. So-called new renewables (wind and solar power) are considered to be the best kind of emission-free energy, whereas emission-free nuclear power is faced with even ideological opposition, and the significance of hydropower as a flexible way of producing electricity is not always sufficiently recognised.

Politicians should not task themselves with choosing technologies, but with setting the framework. Based on it, the markets will select the best ways to achieve carbon neutrality. At the moment, there is a quite strong consensus on the ability to reach carbon neutrality mainly through electrification. Immense investments in new emission-free electricity production are needed – Fortum estimates that electricity use in the Nordics will increase from the current 400 terawatt-hours to 600 terawatt-hours. It is just as important to ensure that existing emission-free electricity production, such as hydropower and nuclear power, is also available in the future. When legislation is developed, all emission-free energy production should be treated equally; we cannot afford to discriminate against individual emission-free technologies, because they are all needed in curbing climate change.

In the EU, demands relating to sustainability are clearly increasing. The first batch of legislative proposals pertaining to the taxonomy, which steers sustainable investments, is currently being processed. The basic goal of the taxonomy is a good one, but the proposed implementation is not technology-neutral, but has to some extent started out from an ideological standpoint. The operating environment of companies may not have been fully understood, nor the fact that the energy transition is a long process and will take time. While emissions are being reduced, security of supply must be ensured. A quickly electrifying society is more dependent on electricity than before.

Read more: EU Taxonomy should be beefed up to support carbon neutrality

Hydrogen has been considered a key factor in decarbonisation, and we too believe that it is the best way to reduce emissions in sectors that cannot apply direct electrification, such as certain industrial sectors and heavy transport. However, large quantities of hydrogen will be needed, which means that it makes sense to use all emission-free electricity production in producing it. If only new renewables are accepted for hydrogen production, reaching the ambitious targets will be challenging.

Together, the Nordics would have an impact bigger than their size

The Nordic countries have created very ambitious energy and climate strategies, with tougher targets than those at the EU level. There are ongoing strategy processes in Finland, Sweden and Norway, preparing national measures for reaching the targets. In Finland, the energy and climate strategy is being updated, and Finland’s circular economy strategy and battery strategy have already been published. In Sweden, an electrification strategy is in preparation, as is a new system service strategy. Hydrogen is also discussed in Norway, and all three countries are preparing their national hydrogen strategies.

We at Fortum see that the Nordic countries have much to give to Europe. We can work as a multinational coalition, giving our message more weight. As a unified front, we can reach results in, for example, promoting a hydrogen economy and technology neutrality as well as in the further development of market-based climate policy.

In recent years, great work has been done in the Nordics; a few years ago, the Nordic countries agreed on a common energy vision for 2030 and a roadmap for implementing it. The plans were well received, but the matter has not progressed significantly after that. One reason for this is the fact that the Nordic cooperation lacks efficient structures and governance. This year, Finland heads Nordic cooperation as the president of the Nordic Council, and this presents Finland with an opportunity to get Nordic cooperation back on track and on ministers’ agenda.

The functioning of the electricity markets should be kept in mind

As discussion focuses on reducing emissions, the question concerning the functioning of the electricity market is sometimes ignored. The market must also be developed from the point of view of security of energy supply, considering the big picture. The Nordic electricity market has been a success story, and attention must be paid to its continued development. On the other hand, it is good to note that the foundations of the electricity market were built in the early 1990s, when energy production and the structure of industry and society were quite different from today. It is therefore necessary to discuss, what kinds of market mechanisms would best ensure that the three goals of energy policy – emission reduction, cost-efficiency and security of supply – are reached as weather-dependent wind and solar power gain significant ground.

Fortum’s strategy is aligned with the EU climate targets

Active dialogue with decision-makers and public influencers is an important part of Fortum’s daily work. Fortum fully supports EU’s climate policy and its targets, and the climate targets included in our strategy are aligned with the targets of the Paris Agreement. We strive to promote their actualisation on the EU level and introduce ideas on how different instruments, such as the Emission Trade System, should be developed to steer different sectors in a market-based, cost-efficient way towards the targets.

Merja Paavola

Merja Paavola

Corporate Vice President, Public Affairs
Tel: +358 50 396 1161
merja.paavola@fortum.com

Subscribe to ForTheDoers newsletter

Subscribe

The latest blog posts and articles in a newsletter to your mailbox