Annual Climate Report: Clean energy transition makes good progress – further action needed to reach climate targets

Emissions from energy production are decreasing substantially but further actions will be needed to reach the national targets and meet the obligations set at the EU level. In particular, further actions will be needed in the land use and effort sharing sectors.

The Government submitted the Annual Climate Report to Parliament on Thursday 27 June. The Government reports annually to Parliament on the development of Finland’s emissions and progress towards the climate targets that have been set. The report presents the emissions from the emissions trading and effort sharing sectors and emissions and sinks of the different land cover categories in the land use sector. 

According to the Annual Climate Report, in 2023 greenhouse gas emissions were 11% lower than in the previous year. In energy and heat production that is included in the emissions trading sector the emissions fell by 19%, which is even more than was expected. This positive trend is mainly due to the considerable decrease in the consumption of coal and peat. At the same time, the proportion of nuclear and wind power in energy production grew.

“Our electricity production is already almost emission-free and there are things we can do to speed up the decrease in fossil fuel emissions. Nuclear power is an important part of the solution. Our greatest opportunity in terms of scale is to capture carbon dioxide from industrial smokestacks, and we are developing incentives for this. Our greatest challenge is the substantial carbon sink deficit in the land use sector. Measures will be needed to strengthen these sinks,” says Minister of Climate and the Environment Kai Mykkänen.

New actions needed to reach targets set in Climate Act 

Finland aims to be carbon neutral by 2035. This means that Finland’s emissions and sinks must be in balance, i.e. greenhouse gas emissions are equal to the removals or lower.
It is estimated that, in terms of the volumes, the need for further actions to achieve carbon neutrality by 2035 corresponds to almost a half of Finland’s current total emissions, which means that actions will be needed to reduce emissions by 19 million tonnes of carbon dioxide equivalent. Further action is needed in all sectors. 

The Climate Act sets a target for 2030 as well. According to the Act, total emissions, i.e. the sum of the emissions from the effort sharing and emissions trading sectors, must be reduced by 60% by 2030 compared to the level in 1990. The projected trend is close to the target level but further efforts will still be needed. The need for additional measures to reach the target for 2030 corresponds to 1.3 million tonnes of carbon dioxide equivalent.

Meeting EU obligation for effort sharing sector uncertain 

Emissions from the effort sharing sector decreased by 5.3% in 2023. The effort sharing sector comprises transport, agriculture, building-specific heating, waste management, non-road mobile machinery and F-gases, as well as small industrial and heat plants. Emissions decreased in all categories, including transport and agriculture, which are the greatest emission sources in the sector. Emissions from agriculture fell by about 1% and those from transport by about 4%.

“Our cars will not be clean overnight, but we will get there. We have decided to continue the tax incentive for electric company cars, which the sector itself considers as the main cause for the electric car boom we have seen in recent years. Finland will introduce the new EU emissions trading system for fuel distributors, which will significantly strengthen emissions pricing,” Minister Mykkänen says. 

In the effort sharing sector, Finland’s obligation set at the EU level is to reduce emissions by 50% by 2030 compared to the level in 2005. At the moment it is still uncertain whether Finland will reach the target.

As a whole, emissions from the effort sharing sector have decreased quite slowly compared to the emissions trading sector and relative to the climate targets. So far Finland has stayed within the annual quotas, but more emission reductions will be needed as the quotas will decrease towards 2030.

Land use sector falling far behind EU obligations for 2021–2025

The land use sector comprises land use, land use change and forestry (LULUCF). Forests and soil are the most significant carbon sinks in the land use sector. The size of the forest carbon sink varies a great deal from one year to the next, but in the past few years the sink has decreased considerably. Based on instant preliminary data, the land use sector was again a small net sink in 2023, but more accurate data will become available later. The land use sector was a source of emissions in 2018, 2021 and 2022. 

According to the current estimate, Finland will fall far behind the EU obligations for the land use sector for 2021–2025. To cover the deficit, Finland can purchase credits from other Member States. If the obligation is still not met, the deficit should be compensated for with further actions in the effort sharing sector. In practice, however, this is impossible because the obligations are already very strict. This means that Finland would very likely have to purchase emission allocations of the effort sharing sector from other Member States. The availability and prices of the credits and allocations of both the land use and effort sharing sector are not yet known. 

Climate actions outlined in strategies and plans that are under preparation

The Annual Climate Report provides the knowledge base for future plans that outline the climate actions to be taken. The Energy and Climate Strategy covers both the energy policy and actions concerning emissions and sinks. It also deals with climate change adaptation. In line with the Government Programme, the process to prepare the strategy includes decisions on the programme to pay off Finland’s emission debt, which aims to reverse the trend in the emissions debt accumulated since the start of the decade. The Medium-term Climate Policy Plan that is also under preparation sets out the actions for the effort sharing sector. The strategies and plans are prepared side by side and they should be ready in 2025.

The Government is also committed to continuing the measures to strengthen carbon sinks in the land use sector by implementing the National Forest Strategy 2035. A package of measures to strengthen forest growth and carbon sinks is being prepared as well. 

Adaptation increasingly important as climate change proceeds

The implementation of the National Adaptation Plan started in 2023. The datasets related to new climate risks help to target the adaptation measures appropriately. The identification of climate risks and planning of adaptation measures made progress in the Finnish regions and municipalities as well. It is important to actively prepare for the impacts of climate change and anticipate the risks as part of the planning in different sectors.

Inquiries: 

Lyydia Ylönen (policy questions) 
Special Adviser to Minister Kai Mykkänen  
tel. +358 50 476 1341
[email protected]

Hanne Siikavirta (Annual Climate Report)
Ministerial Adviser 
tel. +358 295 250 049
[email protected]