Dear Prime Minister, ladies and gentlemen,

We have today had the opportunity to hear about the many truly excellent solutions available to us in the fight against climate change. The Climate Leadership Coalition has contributed to some of these and the organization have also lent their support to some of the others we have been hearing about.

In addition to the ideas we’ve already heard about, we have come to the conclusion that, as climate change continues to gather pace, what we need now is a more system-led and market-driven method that will:

– ensure that emissions are reduced in a way that is economically efficient while
– driving the necessary investment that we need to see and
– allowing us to develop measurable methods for carbon capture

What I’m specifically talking about here is the best way forward for the European Union and the sort of things Finland could champion when it assumes the EU presidency next autumn.

Between 1990 and 2030, the EU will have reduced its carbon emissions by around 1% per year. On 28 November, the European Commission published its new climate strategy which calls for Europe to achieve carbon neutrality by 2050. For this to be achieved, investment between 2030 and 2050 would need to triple from current levels.

Current EU policy is based on three pillars – EU carbon trading, 45% coverage and country-specific effort sharing and land use sectors – and drives uncertainty for long-term investors.

– Is it feasible to predict national policies for 27 members states given that domestic priorities are often liable to change in the aftermath of elections?
– What is the sensible approach to take in view of the fact that there is likely to be significant divergence in terms of progress and policies even within the same sector/industry?

It’s also worth mentioning that national policies adopted by individual member states tend to mean that the most cost intensive solutions are implemented first even when significantly better results could be achieved with less outlay.

In addition to the issues I’ve already highlighted, the Commission’s new strategy demonstrates that the technical boundaries between the current three sectors are on their way out. As transport decarbonizes, emissions trading schemes will be introdused and biomaterials will bring the LULUCF sector even closer to the other two pillars. All Carbon Capture and Utilization (CCU) will lead to a “horizontal flow” of carbon through all three pillars. I expect that the three-pillar model will become increasingly unwieldy as investment volumes rise and technology continues to advance.

So, what now?

To conclude – the EU will need to have in place a better system for managing carbon emissions and sequestering by 2030 at the latest. As you know, this point has already been made by earlier speakers here today.

On behalf of the CLC, I would like to propose the following two-step approach:

Step 1

Targets that lay the groundwork for a systemic solution to be agreed at the European Council meeting on 9 May:

– The EU should set a target for achieving net-zero emissions at the latest by 2050 or earlier taking the IPCC findings into account.
– Based on the target, the EU should agree on a binding carbon budget for the remaining GHG emissions.
– The EU should revise and align the 2030 and 2040 targets with the net-zero target.

Together with our Nordic partners, CLC put forward this proposal last summer. It attracted significant new support, largely from the Nordic countries. The figure currently standing at 80. The Confederation of Finnish Industries is one of the signatories.

Step 2.

Launch Europe-wide project to create and implement a systemic solution during Finland’s EC presidency in autumn 2019:

– California and Quebec might work as benchmarks as both states have adopted systems covering roughly 85% of all CHG emissions. The schemes comprise transport and certain aspects of forestry and agriculture. The profits raised through the schemes will be placed in a fund and used to drive decarbonization initiatives and to benefit deprived local communities.
– Under the Californian system, landowners who generate significant sequestration capacity will also be able generate income through carbon trading.
– The system should also be set up to encompass carbon leakage and some other appropriate climate actions taken outside of the EU.

To be clear, while I’m not proposing for the EU to copy the Californian model, it does incorporate a number of features that the EU would do well to adopt at the design stage. We will also need to look at and improve on best practice in other sectors, as discussed today by Mika Anttonen, Antero Vartia and Pekka Lundmark.

A systemic, market-driven and technology-neutral new model that’s based on a closed CO2 budget would have the benefit of responsively maintaining the cost of CO2 at the appropriate level and allow for more predictability in terms of outcomes. This would also represent significant opportunities for the Finnish export sector.

Jorma Ollila
Vice Chair
Climate Leadership Coalition

For further information, please contact:
Jouni Keronen, Director, Climate Leadership Council, +358 (0)50 453 4881