Finnish Energy Policy System and a Development of the Multilevel Governance

Finland has a lot of experience in dealing with the environmental issues, mainly because its strong reliance on natural resources that has contributed on the development of a strong environmental administration. The climate policy in Finland has developed from early emphasis on mitigation and energy policy into an action on adaptation at the national level (Juhola 2010, 149.) The Finnish strengths are considered to be the effective environmental administration and legislation, and the consideration of environmental protection in all

sectors of society. Additionally, the extensive and detailed environmental data and

technological skills have been forming the basis of the effective environmental protection policies in Finland (Juhola 2010, 152.)

In the beginning, the climate policies in Finland were highly influenced by the economic consideration and energy aspects. The first mitigation measures and goals for Finland were defined by the First Carbon Committee at 1991 where the main tasks were to reduce the emissions, to maintain the existing carbon sinks and to provide help for the developing countries to mitigate the climate change. Finland ratified the United Nations Framework Convention on Climate Change 1992 and it entered into force 1994. Afterwards, Finland has committed itself to all the international agreements, including the European Union and its environment and energy policies. These commitments also included the Kyoto targets for GHG reductions to no more than 1990 level’s (Juhola 2010, 154.)

Traditionally, the Finnish energy system has been based on a strong governmental control and regulation. The state-owned companies have had a monopoly or oligopoly position in the production of electricity and peat, oil refining and import of natural gas. The majority of activities of the energy companies were subject to governmental license procedure. In terms of energy policy-making process, the authorities and few energy producers and distributors were part of the governmental preparatory bodies and played the key roles.

However, by 1995, the traditional state-centered Finnish energy policy making came to an end (Ruostetsaari 2010, 273). The Electricity Market Act passed in 1995 weakened the governmental regulation and control by introducing market-based steering patterns. The electricity markets were opened to the competition and the state-owned monopolies lost most of their monopolistic positions (Ruostetsaari 2009, 102.)

The next considerable change of direction in Finnish energy policy making can be timed to the beginning of the twenty-first century. The new European Union directives, such as Electricity Act and Natural Gas Act, came into force in 2005 regulating the internal marketing of electricity and natural gas. The international climate negotiations (UN) and the EU’s environmental policy and emission trade reduced the latitude of the national policies, even though the energy policy was not yet officially included in the EU agenda (Ruostetsaari 2010, 274.)

Since the twenty-first century, the Finnish climate and energy policy has been an integral part of the national, international and European environmental politics. These policies are formulated in the context of the international legal and political commitments, such as United Nations Framework Convention on Climate Change (Wilenius and Tirkkonen 1998, 295.) According to Monni and Raes (2008, 744), the European Union brought the multilevel governance system into the Finnish climate and energy policy sector. This means that the EU policies set an additional level of governance between the international and national policies for the member states.

Since Finland is a part of the European Union, it is involved in negotiations on climate and energy issues as a member state. The EU’s environmental policy forms the basis for

Finnish efforts to regulate the climate change and also for Finnish legislation on the energy sector. The European Climate Change Programme (EECP) operates under the European Commission and investigates the policy options and EU’s potential to meet the Kyoto Protocol targets (Valkila and Saari 2010, 2070.) Because Finland is a part of the EU, the climate and energy policy objectives and measures that are agreed by the Union are guiding the Finnish national preparation and implementation (Valkila and Saari 2013, 284.)

Traditionally, energy policy inside the EU has fallen within the jurisdiction of individual member states. During the recent years the member states and the European Commission have acknowledged the importance of a common European energy policy which has been considered to be the most effective response to the current challenges. These challenges include the climate change, but also issues related to the other environmental problems, energy security, energy efficiency and ways and means to reduce the greenhouse gases and the usage of fossil fuels. Lately, the role of the EU in steering the energy policy has

increased even though the implementation of EU policy decisions remains mainly in the national competence of individual member states (Voutilainen 2008, 121-123.)

The short term goal of the Finnish climate and energy strategy is to fulfill the binding targets that EU has set by the climate and energy package. EU is targeting to reduce its greenhouse gas emissions with 20 per cent by 2020 from the 1990 level whereas the target for Finland is 16 per cent reduction by 2020 from the level in 2005. EU is also targeting to reduce the primary energy consumption by 20 percent and the member states are expected

to increase their energy efficiency and total share of the renewable energy sources by 20 per cent. The defined target for Finland is to increase the amount of renewable energy in the final consumption for 38 per cent in 2020 (Teir et al. 2011, 6175.)

The climate and energy package has been seen as a crucial step for the EU’s sustainable development and a signal to the rest of the world that EU is ready to take the necessary steps in a battle against the climate change (COM 2010, 2). The ultimate goal of the EU’s climate policy is to limit the global warming to 2˚C and EU has expressed its willingness to reduce the GHG emissions by 30 per cent by 2020 and 60 to 80 per cent in 2050 from the level of 1990. However, EU is not willing to make these changes alone and it has challenged the non-EU countries to contribute accordingly. Finland’s long term target to reduce the GHG emissions is at least 80 per cent compared to the 1990 level as part of the international effort (Teir et al. 2011, 6175.)

The European Union is steering the Finnish energy and climate policy but the national level policy has a significant part to play. The Ministry of Employment and the Economy is the most important actor in the Finnish energy policy and it holds considerable expertise and power in energy, climate and innovation policy. The Ministry of Employment and the Economy is in charge of the supervision of the natural gas and electricity markets as well as the energy companies. The Ministry of Finance and the Ministry of Environment are also affecting to the Finnish energy policy by controlling economic policy instruments and environmental instruments respectively. There are also approximately 120 companies that are operating the power production plants but the three biggest companies own almost half of the total capacity. The government, energy-intensive industry and municipalities are the greatest shareholders of the companies and they are still influencing a lot in the Finnish energy policy (Kivimaa and Mickwitz 2011, 1813.)

To sum up, the conditions where the policy decisions are made in Finland have been changing especially during the 1990s and 2000s. Finland was one of the first European countries to liberalize the electricity markets at 1995 which had a huge effect on the markets and changed the direction of the Finnish energy policy making to less state-centric. At 2005, the emission trading started and it basically separated the state from the energy sector where the greenhouse gas emissions were concerned. The European Union has dramatically influenced in Finnish mitigation and energy policies. The climate and

energy package demanded actions and pushed the government to renew its climate and energy strategy towards the increased need for additional nuclear power and renewable energy (Salo 2011, 116.)

In the next section, I am going to discuss more about these National Climate and Energy Strategies and their role in the development process towards the more sustainable energy-mix in Finland.