The Climate Agreement will create demand for Finnish cleantech
The Paris Agreement on climate change was concluded last December. The climate conference set the target of holding the increase in atmospheric temperatures to below 2 °C and striving towards an increase of less than 1.5 °C by 2100. The agreement was characterised as historic, and in April it was signed by 175 countries in New York. The next step is ratification, in other words approval by national legislatures, and the realisation of the pledges given, i.e. emission reduction targets. The agreement will come into force when it includes at least 55 percent of global greenhouse gas emissions. As China and USA ratified the agreement in the beginning of September, the agreement covers now 40 per cent of the global emissions.
A global price for carbon
The EU has long strived to reduce carbon emissions through its own climate policy. The EU is on track to meet its 2020 emissions reduction targets, but global-level emissions continue to grow. The EU’s aim is to reduce its own greenhouse gas emissions by at least 40 percent by 2030 (as compared to emissions levels in 1990).
In comparison to other countries, the EU’s target and commitment is ambitious. When production and investment are transferred abroad due to a more stringent climate policy, we talk of carbon leakage. A global climate agreement reduces the risk of carbon leakage, as competitive conditions around the world even out.
In addition to EU emissions trading, there are other national or regional emissions reduction mechanisms around the world which should, in future, be linked together. A global price for carbon emissions would enable trade in emissions rights between different countries and economic areas. Both more stringent global climate targets and emissions markets encourage businesses and states to invest in cleantech. Investments in lower emissions solutions are worthwhile if they are cheaper than the emissions rights that would otherwise be required. In this way, reductions are targeted at companies where the replacement of old, polluting technologies is cheapest. The same logic also applies to energy efficiency investments.
Finnish technology companies are pioneers in cleantech.
The more broadly we can get emissions markets to work, the larger the market will be for Finnish cleantech expertise. There is a need to energise these markets, as it is estimated that around two thirds of the total emissions reduction investments required by 2050 should come from the private sector.
Finnish technology companies are pioneers in developing environmentally friendly methods and practices. For example, our cleantech strengths include heat exchangers, heat pumps, heat recovery systems, district heating and cooling technologies, combined heat and power production, environmentally friendly solid-biofuel combustion and boiler technology, second generation biofuels, smart grids, frequency converters and integrated processes in metals and forest industries.
It is important that countries take the advantage given by the climate agreement from the market pull and thus conduct their climate activities as cost-efficiently as possible. Market-based climate work would also increase the export opportunities of pioneering countries like Finland.
This article has also been published in Vahterus's customer magazine.