COMMISSION STAFF WORKING DOCUMENT Energy Union Factsheet Finland Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK Third Report on the State of the Energy Union
Date: 2017-11-23
Institutions: European Commission, Secretariat-General
Subjects: Finland, climate change policy, competitiveness, economic and social cohesion, energy cooperation, energy policy, innovation, investment, regional cooperation, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.11.2017 SWD(2017) 394 final  COMMISSION STAFF WORKING DOCUMENT Energy Union Factsheet Finland Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK  Third Report on the State of the Energy Union {COM(2017) 688 final} - {SWD(2017) 384 final} - {SWD(2017) 385 final} - {SWD(2017) 386 final} - {SWD(2017) 387 final} - {SWD(2017) 388 final} - {SWD(2017) 389 final} - {SWD(2017) 390 final} - {SWD(2017) 391 final} - {SWD(2017) 392 final} - {SWD(2017) 393 final} - {SWD(2017) 395 final} - {SWD(2017) 396 final} - {SWD(2017) 397 final} - {SWD(2017) 398 final} - {SWD(2017) 399 final} - {SWD(2017) 401 final} - {SWD(2017) 402 final} - {SWD(2017) 404 final} - {SWD(2017) 405 final} - {SWD(2017) 406 final} - {SWD(2017) 407 final} - {SWD(2017) 408 final} - {SWD(2017) 409 final} - {SWD(2017) 411 final} - {SWD(2017) 412 final} - {SWD(2017) 413 final} - {SWD(2017) 414 final}  
 
 
                              Energy Union – Finland 

 Finland 

                          Energy Union factsheet1 

1.  Macro-economic implications of energy activities 

Energy and transport are key sectors for the overall functioning of the economy as they provide an 
important input and service to the other sectors of the economy. The combined activity of these two 
sectors2 accounted for 7.3 % of the total value added of Finland in 2015. Similarly, their share in total 
employment3  was  6.4  %  in  2015,  of  which  5.9  %  in  the  transport  sector  and  0.5  %  in  the  energy 
sector.  

(source: Eurostat) 

The  decarbonisation  of  the  energy  and  transport  sectors  will  require  significant  investments  and 
economic  activity  beyond  the  remit  of  these  sectors  themselves.  The  energy  transition  implies  a 
structural  shift  in  economic  activity.  Energy-related  investment  and  jobs  will  in  part  migrate  from 
traditional  fossil  fuel  based  activities  towards  construction,  equipment  manufacturing  and  other 
services related to the deployment of low carbon and clean energy technologies. At the moment, the 
efforts related to the low-carbon and clean energy transition in sectors beyond energy can only be 
partially quantified and are therefore not included in this analysis. 

In  the  case  of  the  renewable  energy  sector,  both  the  direct  as  well  as  the  indirect  effects  on 
employment can be estimated. According to EurObserv'ER, in 2015, the share of direct and indirect 
renewable energy related employment in total employment of the economy in Finland was at about 

1  The  indicators  used  in  this  country  factsheet  largely  build  on  indicators  developed  for  the  Commission  Staff  Working 
Document  "Monitoring  progress  towards  the  Energy  Union  objectives  –  key  indicators"  (SWD(2017)  32  final) 
https://ec.europa.eu/commission/sites/beta-political/files/swd-energy-union-key-indicators_en.pdf 

2   Gross  value  added  and  employment  in  NACE  sectors  D-Electricity,  gas,  steam  and  air  conditioning  supply  and  H-

Transportation and storage 
3   National accounts, Eurostat 

1 

 
 
 
 
 
                                                            
 
                              Energy Union – Finland 

1.36 %, above the EU average of 0.54 %. This represents about 31000 workers. The turnover of the 
renewable  energy  industry  in  the  same  year  was  estimated  at  around  EUR  3.53  billion,  the  largest 
part  being  attributed  to  the  biomass  (EUR  2.3  billion)  followed  by  wind  (EUR  570  million),  heat 
pumps (EUR 350 million) and biofuels (EUR 200 million) industries. 

(source: EC based on Eurobserv'Er and Eurostat) 

An  indication  of  the  level  of  efforts  and  challenges  encountered  by  Finland  in  the  energy  sector  is 
given  by  the  Gross  fixed  capital  formation  (GFCF).  Investments  in  the  electricity  and  gas  sectors, 
which are taken as reference sectors, have been on an increasing trend since 2010. They represented 
around 1% of the country's GDP in 2015, higher than in the pre-crisis period. 

(source: Eurostat) 

In terms of trade, Finland is a net importer of fossil fuels and electricity. The trade deficit in energy 
products has fallen from about 3 % of GDP in 2005 to 1.5% in 2015, influenced by improvements in 
energy efficiency and an increase of domestic renewable energy sources and by the decrease in the 
prices  of  energy  commodities.  The  largest  decrease  is  accounted  for  by  petroleum  products.  The 
trade deficit for gas has also significantly reduced from 0.5 % of GDP in 2005 to less than at 0.05 % of 
GDP. 

2 

 
 
 
 
                              Energy Union – Finland 

(source: Eurostat) 

2.  Energy security, solidarity and trust 

2.1. Energy Mix 

In comparison to the average energy mix in the EU, Finland's gross inland energy consumption has a 
much higher share of renewable energy (33 % vs 13 %) and a higher share of nuclear energy (18.9% 
vs  13.6  %).  Conversely,  natural  gas  has  a  much  lower  importance  in  Finland  (7.1  %  vs  22  %).  To  a 
lesser extent, this applies as well for oil (27.6 % vs 34.4 %) and solid fuels (12.7 % vs 16.2 %).  

2.2.     Import dependency and security of supply 

46.8 % of Finland's energy consumption is covered by import, less than the EU average. This is due to 
the high importance of domestic renewables and nuclear energy in the energy mix4, which together 
meet almost half of the country's energy needs.  

The overall import dependency of Finland recorded a decrease of about 7.3 percentage points (p.p.) 
between  2005  and  2015,  whilst  at  the  EU  level,  import dependency  increased by  1.9  p.p. over  the 
same period. However, Finland imported almost all its natural gas, oil and hard coal in 2015. Russia 

4  

Imports of natural uranium and nuclear fuels are not accounted for in these statistics. See below for more 
information on that point. 

3 

 
 
  
 
                                                            
                              Energy Union – Finland 

was the sole supplier of natural gas to Finland, being also the dominant supplier of crude oil (83 %) 
and  hard  coal  (approximately  63  %).  The  associated  risk  is  only  partly  alleviated  by  the  below  EU 
average share of natural gas in the country's energy mix. 

 (Source: Eurostat) 

Nuclear power is considered domestic in the Eurostat statistics although the nuclear fuel is imported. 
In Finland, in 2015, 35 % of the imported nuclear fuel came from Russia, 32 % from Germany and 32 
% from Sweden. 27 % of the electricity supply was produced by nuclear power.   

The security of gas supply Regulation requires that, if the single largest gas infrastructure fails in one 
Member State, the capacity of the remaining infrastructure is able to satisfy total gas demand during 
a day of exceptionally high gas demand. Finland complies with this rule using demand-side measures, 
such  as  an  obligatory  fuel-switching  mechanism  for  its  heating  plants,  in  case  of  gas  supply 
disruption. 

(source: gas coordination group) 

4 

 
 
 
 
 
 
 
 
                              Energy Union – Finland 

3.  Internal market 

3.1. Interconnections and wholesale market functioning 

3.1.1.  Electricity 

(source: EC services based on ENTSOE         source: EC services based on ESTAT            source: EC services based on Platts and 
European power exchanges) 

Finland is part of the Nordic and Baltic wholesale electricity market. The Finnish electricity system is 
directly connected to the Swedish, Norwegian and Estonian systems and indirectly through these to 
the  other  Nordic  countries  and  the  other  Baltic  States,  and  continental  Europe.  In  2017,  the 
electricity interconnection level5 of Finland was almost 29 %, well above the 2020 target of 10 %.  

The  good  electricity  connectivity  to  the  Nordic  electricity  market  and  Western  Europe  and  the 
liberalised energy market led to a very dynamic power generation market with low and decreasing 
wholesale  electricity  prices.  Concentration  of  the  power  generation  market  is  much  below  EU 
average.  Wholesale  electricity  prices  are  well  below  the  EU  average  and  between  2013  and  2016 
recorded a higher decrease than the EU average (21 % in Finland vs 15 % in the EU).  

However,  wholesale  electricity  prices  in  Finland  are  not  fully  aligned  with  those  of  its  Nordic 
neighbours. The main reason for this is the insufficient capacity in the transmission interconnections 
from  the  Nordic  and  Baltic  market  area.  It  is  also  affected  by  the  use  of  imported  electricity  from 
Russia, even though this has decreased after 2011 when Russia introduced capacity payments on the 
export of electricity. Russian imports are more and more replaced with imports from Nordic markets. 
In  that  context,  Finland's  electricity  transmission  connections  with  Sweden  are  not  sufficient  for 
importing large volumes of electricity during peak demand periods. For this reason, an improvement 
of  the  Fenno-Skan  1  interconnection  with  Sweden  and  the  construction  of  a  third  Finland-Sweden 
North  interconnection  are  envisaged.  Conversely,  price  convergence  with  Estonia  has  improved 
following the completion of the EstLink2 project, financed via the European Energy Programme for 
Recovery.  

5 The interconnectivity level is calculated as a ratio between import interconnection and net generation capacities 
of the country (i.e. the 2017 value is the ratio between simultaneous import interconnection capacity [GW] 
and net generating capacity [GW] in the country at 11 January 2017, 19:00 pm as resulted from ENTSO-E 
Winter Outlook 2016/2017) 

5 

 
 
 
                                                            
                              Energy Union – Finland 

Finland will most likely remain an electricity importer until the completion of the new nuclear power 
plant project Olkiluoto-3, which is experiencing significant delays. In addition, Finland plans to extend 
the operation of existing reactors, and to build new nuclear capacity, if relevant, in the future. In this 
context,  continued  efforts  for  a  comprehensive  management  infrastructure  from  waste/spent  fuel 
generation to disposal will be needed. 

3.1.2.  Gas 

Wholesale gas prices are higher than the average EU gas prices. In addition, gas market competition 
is currently lacking.  

The  market  is  tightly  regulated  as  there  is  no  liberalised  wholesale  market  and  end  users  have  no 
choice of supplier. The situation is meant to improve thanks to the building of a new interconnector 
with Estonia. The Connecting Europe Facility's financing agreement on the Balticconnector pipeline 
project has ensured agreement for the construction of this gas pipeline linking Finland and Estonia, a 
project included in the list of Projects of Common Interest. The project, which is to be commissioned 
by 2020/2021, has obtained a significant financial support under the EU's Connecting Europe Facility 
programme,  including  a  grant  for  works  of  €187.5  million  (in  August  2016).  Once  completed, 
conditions would be granted for a gas market opening to competition.  

In  addition,  Finland  has  continued  the  development  of  five  smaller  scale  LNG  terminals  (each 
between 10-50 tcm of LNG storage) of which at least one located in Hamina Kotka is to be connected 
to the high pressure transmission network. The terminal located in Pori (30 tcm of LNG storage) was 
commissioned in August 2016 and it is the first of the smaller scale terminals to be completed. The 
remaining four will be commissioned in 2017 and 2018.  

On that basis, a new Natural Gas Market Act was passed in the Parliament in June 2017. According to 
the Act, the wholesale and retail markets for natural gas will be opened for competition in the beginning 
of 2020.  

(source: ACER for the left graph and European Commission services based on on Platts, gas hubs, Eurostat for 
the right graph) 

6 

 
 
 
 
 
 
                              Energy Union – Finland 

3.2. Retail electricity and gas markets 

3.2.1.  Electricity 

In  2015,  households'  electricity  prices  in  Finland  were  below  the  EU  average.  Between  2013  and 
2015, average band retail electricity prices for households decreased, but to a lesser extent than the 
wholesale prices. This can be partially explained by an increase in taxes and levies. Since 2010, the 
excise duty rate increased by about 50%. Overall, taxes and levies now represent 34 % of households' 
electricity prices.  

Finland  has  also  experienced  a  full  roll-out  of  smart  meters,  and  high  annual  switching  rates  by 
consumers from one electricity supplier to another. In fact, in 2015, around 98 % of final customers 
had installed an electricity smart meter and 12.5 % of consumers changed suppliers, twice as much 
as the EU average. Data handling and protection should be further facilitated by a data hub, covering 
Denmark, Finland, Sweden and Norway. The objectives of the data hub are to stimulate competition 
and  innovation,  increase  transparency  through  data  access  and  protection  and  to  create  efficient 
retail markets, where increasing amounts of data from smart meters can be sufficiently utilised.  

(source: ACER) 

(source: Eurostat)  

(source: Eurostat) 

 (source: ACER)  

3.2.2.  Gas 

Gas  represents  a  negligible  share  of  households'  energy  consumption.  Therefore,  Finland  has  no 
significant retail market for households. (Retail markets for industry are discussed in the section on 
competitiveness).  

7 

 
 
 
 
 
 
 
                              Energy Union – Finland 

3.2.3.  Market performance indicators 

According  to  the  periodical  survey  of  the  European  Commission,  Finnish  consumers  are  more 
satisfied than the EU average about the services received on energy retail markets.  

(source: DG JUST survey) 

3.3. Energy affordability  

In Finland, although climate conditions imply significant heating needs in EU comparison, the share 
of energy in total household expenditures of the lowest quintile of population is among the lowest in 
the EU. Furthermore, only a very limited part (less than 4 %) of citizens below the at-risk-of poverty 
threshold considers that they are unable to keep their home adequately warm. This can be explained 
by purchasing power and consumption expenditures of households, high energy efficiency standards 
of  residential  buildings,  and  low  retail  electricity  prices.  The  concept  of  vulnerable  consumers  has 
been  defined.  If  a  consumer  is  in  a  vulnerable  situation  and,  according  to  Finnish  legislation, 
principally  through  no  fault  of  their  own,  it  can  benefit  from  additional  protection  in  case  of  non-
payment of energy bills.  

 (source: ad-hoc data collection of DG ENER based on HBS with the support of Eurostat and national statistics) 

4.  Energy efficiency and moderation of demand 

Finland decreased its primary energy consumption by 4 % to 31.95 Mtoe between 2005 and 2015. 
Over  the  same  period,  final  energy  consumption  also  decreased  by  4  %  to  24.18  Mtoe.  However, 
these  percentage  reductions  rates  are  significantly  below  the  EU  average.  Therefore,  Finland has 
already achieved levels of primary and final energy consumption below the indicative national 2020 
targets  (35.9  Mtoe  in  primary  energy  consumption  and  26.7  Mtoe  in  final  energy  consumption). 

8 

 
 
 
 
 
                              Energy Union – Finland 

However, efforts would need to continue to keep up with the EU level of ambition and to ensure the 
targets can be met, in a context where economic activity (i.e. bio refineries, forest industry, etc.) is 
growing. 

 (source: Eurostat) 

In 2015 in Finland, industry was the largest energy consuming sector, representing a 44 % share of 
the total final energy consumption, which is well above the EU average (25%). The pulp and paper 
industry  on  its  own  represents  more  than  half  of  Finland's  energy  consumption  in  industry. 
Conversely, the energy consumption of Finland's transport sector was at around 20 % well below EU 
average. The energy consumption of the residential and services sectors in Finland are slightly below 
the EU average, with a share in total final energy consumption of 20 % and 11 % respectively. Since 
2005, similar trends in Finland and at EU level have been observed in the evolution of the share of 
final energy consumption across sectors: the industry share is decreasing, while the one on transport 
is increasing.  

(source: Eurostat) 

Although  primary  energy  intensity  decreased  over  the  2005-2015  period,  it  remains  above  EU 
average and it decreased at a slower pace. A sectoral assessment shows that the energy intensity of 
Finland's industry is one of the highest in the EU, and has been quite stable over the last ten years. 
This is also, to a lesser extent, true in the services sector, and the energy intensity of households is 
also above the EU average.  

Additional efforts could therefore be envisaged to improve energy intensity in these various demand 
sectors, but keeping in mind that certain industrial processes (i.e. steel) are already very efficient and 
so the potential for additional improvements remains limited. A positive development concerns the 

9 

 
 
 
 
                              Energy Union – Finland 

use of European Funds for Strategic Investments (EFSI) funds to finance various  nearly zero-energy 
building projects. The use of EU Cohesion policy funds in energy efficiency demonstrations in public 
infrastructure  and  in  SMEs  in  Finland,  in  line  with  its  operational  programme,  is  also  expected  to 
bring  benefits.  Energy  efficiency  agreements  (voluntary  agreements)  are  used  to  promote  energy 
savings in a broad range of industrial sectors and local communities. New agreements for the period 
2017-2025  have  just  been  signed  and  are  expected,  according  to  government's  estimates,  to 
contribute for about half of Finland's energy savings obligations linked to the implementation of the 
EU Energy Efficiency Directive. 

(source: Eurostat)  

(source: Eurostat)  

  (source: Odyssee database) 

Between  2005  and  2015,  the  final  energy  consumption  in  transport  recorded  an  average  annual 
increase of 0.3 %, slower than the 0.5 % average annual increase of the GDP. Although the decrease 
of  freight  transport  activity,  affected  by  the  economic  context,  negatively  impacted  final  energy 
consumption, this was offset by the increase of passengers transport activity which was continuously 
growing over the period.   

The share of collective passengers land transport into total passengers' transport decreased slightly 
between  2005  and  2015  indicating a  slightly higher  use  of  private transport means  both  in Finland 
and at the EU level.  

(source: Eurostat)  

        (source: Eurostat and DG MOVE pocketbook) 

10 

 
 
 
 
 
 
 
 
 
 
                              Energy Union – Finland 

(source: Eurostat)  

In 2016, the Finnish Government submitted a legislative proposal to Parliament, bringing the existing 
transport market regulations together in a unified act, the Transport Code (Liikennepalvelulaki). The 
Transport  Code  aims  at  creating  the  framework  for  organising  publicly  subsidised  passenger 
transportations more efficiently, enhancing the implementation of new technology, digitalisation and 
new business concepts, and making uniform and mobile travel chains possible.  

There are no road tolls in Finland. Different customer charging models are considered, such as 'time 
based  user  licence'  which  allows  to  use  the  infra  for  a  specific  length  of  time  or  'pay  per  used 
kilometre' (e.g. based on mobile phone location data). 

5.  Decarbonisation of economy 

5.1. GHG emissions 

In  2016,  GHG  emissions  were  16  %  below  their  1990  levels,  significantly  below  the  EU  average 
reduction  of  -23  %.  Finland's  non-ETS  emissions  are  already  3  percentage  points  higher  than  the 
allocation  for  that  year.  According  to  the  national  projections,  the  reduction  in  Finland's  non-ETS 
target for 2020 is projected to be missed with a margin of 1 percentage points. 

(source: EC and EEA) 

11 

 
 
 
 
 
 
 
                              Energy Union – Finland 

In  2016,  the  GHG  intensity  of  Finland's  economy  was  practically  the  same  as  the  EU  average, 
decreasing at a slightly slower pace than the EU as such since 1990. In 2016, the GHG emissions per 
capita were 28 % above the EU average.  

In 2015 in Finland, the largest sectors in terms of GHG emissions were the energy sector (about 30 % 
of the total GHG emissions) followed by industry (26 %), transport (20 %) and agriculture & fishery 
(14  %).  The  GHG  emissions  from  the  residential  and  commercial  sectors  were  well  below  the  EU 
average (i.e. 4.4 % vs 12.8 %) due to the limited direct use of fossil fuels for heating purposes.  

(source: EC and EEA) 

Preliminary accounts under the Kyoto Protocol for Finland show overall emissions of +0.7 Mt CO2-eq. 
as  an  annual  average  in  the  period  2013-2015.  For  comparison,  the  annual  average  of  the  EU-28 
accounted for removals of  -119.0 Mt. CO2-eq. It should be noted that in this  preliminary simulated 
accounting  exercise,  removals  from  Forest  Management  were  capped  to  -2.5  Mt  CO2-eq  per  year, 
due  to  significantly  exceeding  the  limit  of  the  difference  between  the  reported  sink  and  the 
accounting forest management reference level. Finland is one of four EU Member States which show 
overall emissions in this preliminary accounting exercise.  

Emissions  by  Deforestation  are  the  most  important  activity,  by  far  higher  than  removals  by 
Afforestation  and  still  relatively  higher  than  removals  by  Forest  Management.  Overall,  there  is  a 
decreasing  trend  in  emissions  due  to  declining  emissions  by  Deforestation  over  the  course  of  the 
three-year  period.  Commission  Implementing  Decision  2014/224/EU  of  16  April  2014,  allocating 
Finland  up  to  10Mt  CO2-eq.  allowances  to  be  used  to  compensate  deforestation  emissions  beyond 
the cap applied to Forest Management, has not been included in this simulation. 

12 

 
 
 
 
 
                              Energy Union – Finland 

Note: Forest Management credits are capped and presented as yearly averages when the total Forest 
Management credits of the considered period exceed the simulated cap over the same period. 

(source: EC and EEA) 

CO2 emissions in transport and alternative fuelled vehicles 

In  Finland,  the  CO2  emissions  from  road  transport  were  in  2015  at  95.6%  of  the  1990  levels, 
decreasing  more  prominently  from  2005  onwards.  This  reduction  of  the  CO2  emissions  was  also 
possible  due  the  growing  share  of  advanced  biofuels  in  the  transport  sector.  The  average  CO2 
emissions of new cars was in 2016 above the EU average but decreased between 2005 and 2016 by 
about one third, more than the EU average. 

(source: EEA/UNFCCC) 

The share of alternative fuelled cars in total sales on the Finnish market is still small (i.e. below 0.9% 
in 2015) but increased slowly from 2013. In 2015, 0.62 % of new cars in Finland have been hybrid-
electric and electric cars. However, according to national statistics, such numbers have increased in 
2016. In 2016, 1.2 % of new cars in Finland have been hybrid-electric and electric cars. Market uptake 
of the electric car is also supported by a growing number of charging points. The number of electric 

13 

 
 
 
 
 
                              Energy Union – Finland 

charging points in Finland has over the last four years more than tripled, from 267 units in 2013 to 
911 units in 2016. 

(European Environment Agency)  

       (European Alternative Fuels Observatory) 

Finland  is  contributing  to  lower  CO2  emissions  from transport also  by  having developed  a  liquefied 
natural gas (LNG) import terminal in Pori, aimed for industrial use as well as sea and road transport 
diversification.  

National Policy Frameworks under Directive 2014/94/EU on alternative fuels infrastructure have to 
establish targets, objective and measures for the development of the market of alternative fuels in 
the  transport  sector  and  the  deployment  of  the  relevant  infrastructure.  Finland  has  submitted  its 
National Policy Framework as requested under article 3 of the Directive 2014/94/EU.  

A detailed assessment of the Finnish National Policy Framework in terms of its compliance with the 
requirements  of  Directive  2014/94/EU  on  alternative  fuels  infrastructure,  its  contribution  to 
achievement  of  long-term  energy and  climate objectives  of  the  Union  and  coherence of  its  targets 
and objectives in terms of cross-border continuity has been published as part of the Communication 
on  Alternative  Fuels  Action  Plans  (COM(2017)652)  and   the  related  staff  working  document 
SWD(2017)365.  

5.2. Adaptation to climate change  

In Finland, a National Adaptation Strategy (NAS) was adopted in 2005 as an independent element of 
the wider National Energy and Climate Strategy. The NAS revision resulted in 2014 in the publication 
of a new national climate change adaptation framework known as the National Adaptation Plan for 
Climate  Change  2022.  The  key  principle  of  the  adaptation  plan  concerns  the  incorporation  of  climate 
change adaptation into the regular planning, implementation and development of all sectors and actions. 
A  national  monitoring  group  is  appointed  to  follow  and  evaluate  the  implementation  of  the 
adaptation plan, with representatives from the relevant ministries, research institutions, and regional 
and local bodies and actors. 

5.3. Taxes on energy and transport and fossil fuel subsidies 

Finland uses taxation as part of their climate policy, and has a carbon tax in place. A higher rate of 
€62/tCO2  is  applicable  on  transport  fuels,  including  petrol  and  diesel.  A  lower  rate  of  €58/tCO2  is 

14 

 
 
 
 
 
                              Energy Union – Finland 

applicable on heating oil fuels (light and heavy), natural gas, liquid petroleum gas and coal that are 
not used solely in electricity production. In addition to carbon tax, Finland taxes transport fuels and 
heating fuels based on their energy content. The energy content tax is 0.0163 €/MJ and 0.0091 €/MJ 
for  petrol  and  diesel  respectively.  For  heating  fuels  the  tax  is  7.05  €/MWh  (0,0016  €/MJ).  The 
vehicles taxes, i.e. both the circulation and registration tax, include a CO2-component. 

The overall tax burden on energy and transport (including carbon taxation) in relation to GDP is 2.8%, 
which is 0.5  p.p. higher than the EU average. It is  particularly  the tax burden on transport vehicles 
that  is  higher,  while  fuel  taxation  is  broadly  in  line  with  the  EU-average.  Taxation  of  heat  and 
electricity  is  slightly  above  the  EU-average,  and  has  also  shown  an  increase  since  2007.  The  tax 
burden on vehicles and transport fuels has in contrast remained relatively stable since 2007. 

 (source: Eurostat) 

Fossil fuel subsidies have overall increased in Finland in the last decade, while they however tend to 
show  a  decreasing  /  stabilising  trend  since  2011,  when  its  energy  taxation  structure  was  reformed 
with several energy tax rates increased. The energy taxation reform of 2011 included a transitional 
period for gas. The transitional period and tax support ended in 2015. Fuel taxation of diesel is lower 
than  taxation  of  gasoline.  Diesel  passenger  cars  are  subject  to  a  higher  annual  vehicle  tax  than 
gasoline  passenger  cars  to  compensate  the  difference  in  fuel  taxation.  Subsidies  to  peat  (which  is 
subject to a separate energy-tax regime in Finland) are included in the coal figures in OECD statistics 
shown above.  

15 

 
 
  
 
                              Energy Union – Finland 

(source: OECD Inventory of Support Measures for Fossil Fuels 2015)  

5.4. Renewable energy  

Finland's renewable  energy share, expressed in percentage of  gross final energy consumption, was 
39.3 % in 2015, already above its 2020 target. Finland also met the 2013/2014 indicative trajectory 
for the renewables share in gross final energy consumption. 

Finland is among the few EU Member States which already achieved the renewable energy share in 
transport, reaching 22 % in 2015. The renewable energy share is more than 50 % in the heating and 
cooling sector and about a third in electricity generation.  

 (source: Eurostat-SHARES) 

(source: Eurostat-SHARES) 

Electricity from renewable energy sources is mainly promoted through a feed-in premium. It applies 
to electricity produced from wind, biomass and biogas, but is not available to small producers and PV 

16 

 
 
 
 
 
 
                              Energy Union – Finland 

power producers. Instead, an “energy aid”, a state grant for investments in RES production facilities, 
is  proposed.  The  main  support  mechanism  for  heat  produced  from  renewable  energy  sources  is  a 
“heat bonus” allocated to Combined Heat and Powerplants working on biogas and wood fuel.  The 
cost of renewables support schemes is financed by the state budget rather than being passed onto 
final  consumers.  In transport,  the main  incentive  for  renewable  energy use  is  a  quota  system. This 
system obliges fuel vendors to ensure that biofuels make up a defined percentage of the company’s 
total annual sale of fuel. Furthermore, the use of biofuels is supported through tax regulation. 

Thanks  to  the  consistent  deployment  of  renewables  since  2005,  it  is  estimated  that  Finland  has 
reduced  in  2015  by  about  16  %  its  fossil  fuels  consumption.  In  addition,  it  is  estimated  that  GHG 
emissions  are  14  %  lower6.  This  is  mostly  due  to  a  strong  substitution  of  petroleum  products  with 
renewable  energy  (oil  represents  more  than  half  of  all  fossil  fuels  substituted  in  Finland),  and 
therefore linked to the use of renewable energy in transport.  

(source: EEA) 

5.5. Contribution of the Energy Union to better air quality 

Air  quality  in  Finland  continues  to  give  cause  for  concern.  For  the  year  2013,  the  European 
Environment  Agency  estimated  that  about  1,730  premature  deaths  were  attributable  to  fine 
particulate matter (PM2.5) concentrations7.  

Furthermore, for NO2, Finland reported exceedances of the binding EU air quality standard8. For the 
year 2015, Finland reported exceedances of the limit value for NO2 in 1 out of the 14 air quality zones 
in Finland9. 

6   Avoided  GHG  emissions  mentioned  here  have  a  theoretical  character  as  these  contributions  do  not 
necessarily  represent  'net  GHG  savings  per  se'  nor  are  they  based  on  life-cycle  assessment  or  full  carbon 
accounting. 

7 European Environment Agency, 2016, Air Quality in Europe – 2016 Report, table 10.2. The report also includes details as 
regards the underpinning methodology for calculating premature deaths.    
8 Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air quality and cleaner air 
for Europe, OJ L 152, 11.6.2008, p.1-44 
9 Compliance data as reported by the Member States as part of their official annual air quality report for the calender year 
2015 
Repository), 
http://cdr.eionet.europa.eu/fi/eu/aqd  

Eionet/Central  Data 

Environment 

European 

(available 

Agency's 

(EEA) 

the 

on 

17 

 
 
 
 
                                                            
                              Energy Union – Finland 

(source: EEA) 

The health-related external costs from air pollution in Finland have been estimated to be more than 
EUR  2  billion/year  (income  adjusted,  2010),  which  includes  the  intrinsic  value  of  living  a  healthy  life 
without premature death as well as the direct costs to the economy such as healthcare costs and lost 
working days due to sickness caused by air pollution10. 

The  Energy  Union  can  substantially  contribute  to  addressing  these  air  quality  problems  through 
measures reducing emissions of both GHG and air pollutants such as PM and nitrogen oxides (NOx) 
from major contributing sectors such as (road) transport, energy production, industry and residential 
heating (e.g. stoves and boilers)11. 

 (Source: EEA. This table reflects only sources of primary PM2,5 emissions.) 

10 See also the EU Environmental Implementation Review Country Report for Finland, SWD(2017)43 final of 3.2.2017 
11  National  emission  data  as  reported  by  the  Member  States  to  the  EEA  (available  on  the  EEA's  Eionet/Central  Data 
Repository), http://cdr.eionet.europa.eu/fi/eu/nec_revised 

18 

 
 
 
 
 
 
 
                                                            
                              Energy Union – Finland 

6.  Research, innovation and competitiveness 

6.1. 

Research and innovation policy 

Research on clean energy technologies is considered a priority in Finland. Finnish industrial policy has 
embraced  low-carbon  innovation  strategies,  including  the  development  of  bio-energy  from  by-
products. This has notably been supported by the use of EFSI funds to finance the construction of a 
new  large-scale  bio-product  mill  in  Finland  (Äänekoski).  Other  examples  include  public-private 
cooperation  to  promote  innovative  electric  bus  making  in  Finland,  or  the  St1  Deep  Heat  project 
which  will  involve  drilling  seven-kilometre  wells  for  pilot  geothermal  heat  production,  and  which 
received EUR 10 million governmental grants.  

In a European context, Finland is an active contributor to the ongoing work of the Strategic Energy 
Technologies  (SET)  Plan.  More  specifically,  it  currently  leads  the  temporary  working  group  for  the 
implementation of the integrated SET Plan actions on energy efficiency in industry, and co-leads the 
one  on  renewable  fuels  and  bioenergy.  It  also  participates  in  another  three  temporary  working 
groups  dedicated  to  nuclear  safety,  smart  solutions  for  energy  consumers  and  smart  cities  and 
communities. 

Finland is also involved in the Horizon 2020 programme, so far receiving 2. 8 % of the EU contribution 
devoted to the 'secure, clean and efficient energy' part of the programme. As of September 2017, 89 
participations from Finnish organisations have been awarded EUR 50 million in Horizon 2020 energy 
projects. This includes a grant of EUR 9.5 million to the Finnish company Wello Oy for its participation 
in  project  CEFOW  to  produce  clean  energy  from  ocean  waves.  It  also  includes  a  grant  of  EUR  5.2 
million to the Finnish participants in project my SMARTLife - Smart transition of EU cities towards a 
new concept of smart life and economy. Finland is also amongst the countries with a highest share of 
coordinators amongst participants and a highest number of project coordinators per capita. 

Globally,  Finland  joined  the  Mission  Innovation12  initiative  as  a  fully-fledged  member  in  November 
2016, during the Conference of Parties in Marrakesh (COP22). As a result, it has committed to double 
funding from a base-line level of EUR 54.9 million per year to EUR 109.8 million in 2020. Funding will 
be from TEKES (Finnish Funding Agency for Innovation) for clean energy research and development 
and  from  the  Ministry  of  Employment  and  Economy  for  demonstration  projects  of  clean  energy 
innovations. In addition, the Finnish government has earmarked EUR 100 million for investments in 
demonstration  projects  for  new  clean  energy  technologies  during  2016-2018. This  subsidy  scheme 
will  be  included  in  the  doubling  plan  for  Mission  Innovation,  and  it  will  increase  funding  for  clean 
energy innovations by EUR 20 million in 2016 and EUR 40 million in both 2017 and 2018. 

6.2. 

Investments and patents in the  Energy Union R&I priorities  

In  2015,  public  (national)  investments  in  the  Energy  Union  R&I  priorities  reached  EUR  239  million, 
having increased by 10 % compared to 2014. The highest share of investments (36 %) was attracted 
by the Efficient Systems priority of the Energy Union, followed by Sustainable Transport (28 %) and 
the Smart System priority (23 %). In the period 2007-2015, the maximum annual public investment 
was  EUR  269  million,  reported  in  2010.  In  2014,  the  most  recent  year  for  which  data  from  most 

12   http://mission-innovation.net/  

19 

 
 
                                                            
                              Energy Union – Finland 

Member States  are  available,  public investment per  GDP  in Finland  was  the  highest among  the  EU 
Member States and almost four times the EU average. 

Private investment in the Energy Union R&I priorities in 2013 was estimated at EUR 402 million (3 % 
of  the private R&I investment  in Energy  Union  R&I  priorities  in the EU).  The focus  was  on  Efficient 
Systems,  which  received  32  %  of  these  investments,  followed  by  the  Smart  System  priority  with  a 
share of 29 %. 

In 2013, the most recent year for which complete patent 13 statistics are available, 74 companies and 
research organisations based in Finland filed 159 patents in low-carbon energy technologies (2 % of 
the  EU  total).  The  focus  was  on  Efficient  Systems  (34  %),  followed  by  the  Smart  System  and 
Sustainable Transport priorities (24 % each). 

In 2013, private R&I investments and patents in Energy Union R&I priorities were higher than the EU 
average  when  normalised  by  GDP  and  by  population  respectively.  In  the  period  2007-2013,  both 
private  R&I  investments  and  the  number  of  patents  in  Energy  Union  R&I  priorities  increased  on 
average by 11 % and 24 % per year, displaying higher rates of increase than the EU indicators (6 % 
and 15 % respectively). 

Note: The international comparison (right) is shown for 2014 (Finland had reported EUR 218 million). Reporting 
at EU level for 2015 is not as complete, and very few countries have reported for 2016. 

13  

In the context of this document, the term 'patent' refers to patent families, rather than applications, as a measure of 
innovative activity. Patent families include all documents relevant to a distinct invention (e.g. applications to multiple 
authorities),  thus  preventing  multiple  counting.  A  fraction  of  the  family  is  allocated  to  each  applicant  and  relevant 
technology. 

20 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
                              Energy Union – Finland 

(Data sources: Public investment as available in the International Energy Agency RD&D Statistics database14 for 
codes  relevant  to  Energy  Union  RIC  priorities.  Patent  data  based  on  the  European  Patent  Office  PATSTAT 
database15. Private investment as estimated by JRC SETIS. Detailed methodology available from the JRC16.) 

6.3. 

Competitiveness 

In  2014,  the  real  unit  energy  costs  (RUEC)17  in  Finland  (21.8)  were  above  those  at  the  EU  average 
(15.3), almost three times more than those in the US but below those in Japan and China. This can be 
partly explained by the specialisation of Finland in energy intensive industries.  

The  electricity  prices  paid  by  industrial  customers  in  Finland  are  below  the  EU  average  and  in  line 
with  OECD  countries.  Conversely,  gas  prices  for  industrial  consumers  are  well  above  the  EU  and 
OECD  averages.  However,  the  impact  of  such  high  prices  is  mitigated  by  the  relative  low  share  of 
natural gas into final energy consumption in industry. 

(source: ECFIN) 

                   (source: Eurostat and IEA) 

14 http://www.iea.org/statistics/RDDonlinedataservice/  
15 https://www.epo.org/searching-for-patents/business/patstat.html#tab1  
16 https://setis.ec.europa.eu/related-jrc-activities/jrc-setis-reports/monitoring-ri-low-carbon-energy-technologies  
17   This indicator measures the amount of money spent on energy sources needed to obtain one unit of value 

added. 

21 

 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
                                                            
                              Energy Union – Finland 

Regarding the competitiveness in wind and solar energy, Finland is performing quite well in the wind 
sector  due  to  a  comparative  advantage  in  key  components  of  wind  turbines  such  as  blades, 
gearboxes and generators. However, this is not the case for solar PV, as Finland exports less solar PV 
panel  components,  when  compared  to  its  total  exports,  than  other  countries.  Although  not 
necessarily  directly  linked  (as  a  country  could  specialise  in  exporting  a  technology  that  is  not 
deployed on its territory), this is in line with the fact that solar PV is not a major energy option for 
Finland.  The  relative  trade  balance18  confirms  that  Finland  is  a  net  exporter  of  wind  components, 
above the EU average. 

(source: UN comtrade) 

7.  Regional and local cooperation 

Finland is part of the Baltic Energy Market Interconnection Plan (BEMIP), the first High-Level Group 
launched  in  2009  by  the  Commission  and  Denmark,  Sweden,  Poland,  Finland,  Estonia,  Latvia, 
Lithuania,  Germany  and  Norway  (observing  status).  BEMIP’s  main  objectives  are  to  develop  an 
internal  and  regional  energy  market  between  the  EU  Member  States  in  the  Baltic  Sea  region  and 
integrating it fully into the EU's energy markets thus increasing security of supplies.  BEMIP projects 
have  been  part  of  the  European  Economic  Recovery  Plan  (EERP)  and  the  Trans-European  Energy 
Networks  Programme.  BEMIP  projects  have  also  been  funded  through  the  EU's  structural  funds, 
including  the  European  Regional  Development  Fund  (ERDF)  and  the  Cohesion  Fund  (CF).  Many 
infrastructure projects are supported through CEF co-funding amounting to EUR 534.3 million. In the 
framework  of  the  societal  challenge  for  secure,  clean  and  efficient  energy  of  the  Horizon  2020 
programme, EUR 16.9 million are allocated to participants from the Baltics to stimulate research and 
innovation in this field. 

Finland is also part of Nordic Cooperation together with Denmark, Iceland, Norway, Sweden, as well 
as the Faroe Islands, Greenland, and Åland. As part of the modernisation and reform process towards 
a 'New Nordic Region', it was decided to commission strategic reviews of all sectors. On 27 October 
2015, the energy ministers agreed to commission a strategic review of co-operation in their sector. 
The objective is to ensure effective co-operation now and for the coming 5 to 10 years. The report on 
this review was released in June 2017. 

18 The RTB indicator for product "i" is defined as follows: RTBi =
exports and Mi imports. 

Xi−Mi
Xi+Mi

 where Xi is the value of product's "i" 

22 

 
 
 
                                                            
                              Energy Union – Finland 

The electricity markets of Norway, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania together 
form  the  Nordic  and  Baltic  electricity  market.  The  common  electricity  market  combines  the 
wholesale markets in the Nordic and Baltic countries, creating the price signals to produce electricity 
where the price is lowest. The Nordic Council tasked the Nordic NRAs (NordREG) to develop a truly 
common Nordic electricity market. Many steps have been taken to transform the nationals market to 
allow 'Nordic' consumer's access to supplier from other Member States. Recent measures include the 
development and progressing implementation of the supplier centric market processes and of data-
hubs.19 

The Nordic Energy Technology Perspectives 2016 presents technology pathways towards a near-zero 
emission Nordic energy system by 2050. The analysis is presented around the Nordic Carbon-Neutral 
Scenario  which  results  in  85  %  reduction  of  emissions  by  2050  (compared  to  1990  levels).  The 
analysis  is  performed  by  Nordic  Energy  Research  in  cooperation  with  the  International  Energy 
Agency. 

The EU macro-regional strategy for the Baltic Sea Region in which Finland takes part can be used as a 
basis  for  regional  cooperation  on  energy.  European  Territorial  Cooperation  –  'Interreg'  –  under  EU 
cohesion policy also provides further opportunities for cross-border, transnational and interregional 
cooperation, including in the Energy Union areas. 

Cities and urban areas have a key role in the energy and climate challenge. The Urban Agenda for the 
EU,  established  by  the  Pact  of  Amsterdam  in  May  2016,  better  involves  cities  in  the  design  and 
implementation of policies, including those related to the Energy Union. It is implemented through 
Partnerships, in which the Commission, Member States, cities and stakeholders work together on a 
number  of  important  areas,  including  on  Energy  Transition,  Urban  Mobility,  Air  Quality,  Climate 
Adaptation and Housing. Finland is participating in the partnerships on Urban Mobility, as member, 
Energy  Transition,  with  the  city  of  Vaasa  as  member,  and  Air  Quality,  with  the  city  of  Helsinki  as 
member. 

By 2016, in the context of the Covenant of Mayors, the sustainable energy action plans delivered by 
10 Finish municipalities had been assessed. Overall, these 10 municipalities cover about 1.6 million 
inhabitants  representing  around  29  %  of  the  total  population.  Overall,  these  municipalities 
committed to reducing GHG emissions by 24.4 % by 2020 (as compared to 1990 baseline), a lower 
percentage  reduction  than  at  EU  level.  In  addition,  1  city  (covering  0.14  million  inhabitants)  has 
committed to conduct a vulnerability and risk assessment and develop and implement an adaptation 
plan. Two more cities are signatories of the Covenant of Mayors, with 2030 greenhouse gas emission 
reductions and adaptation objectives.  

(source: JRC 2016. Notes: SEAP=sustainable energy action plan, GHG=greenhouse gas emissions) 

19 NordREG Report – 2016, Published: 2016-07-29 

23 

 
 
 
                                                            
                              Energy Union – Finland 

8.  Cohesion policy and EU-supported clean energy investments  

EU  cohesion  policy  makes  a  key  contribution  to  delivering  the  Energy  Union  objectives  on  the 
ground, including investment possibilities to implement energy policy objectives in Finland which are 
complemented  by  national  public  and  private  co-financing,  aiming  at  optimal  leverage.  It  also 
ensures integrated territorial solutions to energy and climate challenges, supports capacity building 
and provides technical assistance. 

is 

investing  some  EUR  77  million 

Over  2014-2020,  cohesion  policy 
in  energy  efficiency 
demonstrations in public infrastructure and in SMEs as well as in smart electricity distribution grids in 
Finland. Cohesion policy is also investing significantly in R&I and in SME competitiveness  in Finland, 
based on the regional strategies for smart specialisation. For Finland, the strategies include a focus 
on energy efficiency improvements in activities, production, products/services of enterprises as well 
as research and innovation on energy efficiency, renewable energies and material efficiency. At this 
stage,  at  least  EUR 88  million  is  foreseen  for  investments  in  R&I  and  adoption  of  low-carbon 
technologies in Finland, but this might increase further in line with the evolving content of the smart 
specialisation  strategies.  A  further  estimated  EUR  8  million  is  invested  in  supporting  the  move 
towards an energy-efficient, decarbonised transport sector. 

(source: DG REGIO) 

For  example,  the  research  project  on  future  energy  storage  solutions  in  marine  installations 
(FESSMI), running from November 2015 to October 2017 and co-financed by the European Regional 
Development  Fund  (ERDF),  investigates  and  develops  new  energy  efficient  solutions  for  marine 
vessels  taking  full  advantage  of  hybrid  technology  and  battery  energy  storages.  In  addition,  the 
project also investigates support infrastructure, which allows vessel energy storage interaction with 
on-shore grid and renewable resources. The optimal operation of such interlinked energy system also 
requires  a  system  for  information  management  and  monitoring  both  in  harbour  and  on  vessels, 
which is also studied in this project. The research methods include system modelling and simulation, 
performance analysis of different system alternatives in various operation conditions and small scale 
laboratory demonstrations. The total project cost amounts to EUR 432,000. 

As  another  example,  the  central  aim  of  the  North  Karelia  towards  oil-free  and  low-carbon  region 
project,  running  from  September  2015  to  August  2018  and  co-financed  by  the  European  Regional 
Development Fund (ERDF) is to reinforce the forerunner status of North Karelian municipalities and 
SMEs in introducing energy efficient, renewable energy, low-carbon and cleantech solutions. The aim 

24 

 
 
 
                              Energy Union – Finland 

is  to  achieve  a  notable  reduction  in  fossil  energy  consumption  and  greenhouse  gas  emissions  in 
target  properties  already  during  the  project  implementation.  Demonstrations  and  communication 
have  a  significant  role  in  the  project.  A  target  has  been  set  for  the  reduction  of  greenhouse  gas 
emissions: a 80 % drop by the year 2030. 

EU's  innovative  financial  instruments  have  been  used  in  Finland  to  finance  energy  efficiency  and 
renewable energy projects. In particular, Finland is benefitting from the European fund for Strategic 
Investments.  First,  various  projects20,  have been  signed to  support  the  financing  of  new  near-zero-
energy  buildings  in  the  Helsinki  metropolitan  area  as  well  as  in  other  urban  areas.  Second,  some 
projects have been signed to support infrastructure investment (such as the Infranode I investment 
platform  to  support  investment  in  local  infrastructure  in  the  Nordic  countries,  or  the  Quaero 
European Infrastructure Fund). Third, a project has been approved (with Elenia Oy) that  concerns a 
replacement  programme focused on improving security of  power supply for electricity  networks in 
central Finland.  

Through  its  support  to  sustainable  transport  systems,  the  Connecting  Europe  Facility  (CEF)  also 
contributes to the goals of the Energy Union. Following Finnish participation in CEF – Transport 2014-
2015 Calls, the Finnish action portfolio comprises 26 signed grant agreements, allocating EUR 107.9 
million of actual CEF Transport Funding to Finnish beneficiaries (state-of-play February 2017)21. The 
transport  mode  which  receives  the  highest  share  of  funding  is  maritime  (61%  of  actual  funding). 
Finland  is  active  in  actions  aiming  to  integrate  better  maritime  transport  in  the  logistics  chain,  by 
improving the operational efficiency of ports and vessels as well as developing new technologies and 
promoting  alternative  fuels,  which  aim  to  reduce  the  environmental  impact  of  this  mode  of 
transport. In the area of alternative fuels for road transport, Finland works towards identifying and 
studying the optimal solutions for the development of an LNG/L-CNG network and supply chain.22 

20   VVO  Near  Zero  Energy  Buildings;  SATO  Energy  Efficient  Buildings;  Tripla  Near-Zero  Energy  Building 

project with EFSI financing alone reaching over EUR 350 million 

21   Note  that  European  Economic  Interest  Groups  and  International  Organisations  are  excluded  from  the 

analysis. 
22   Source: INEA  

25