Finland’s Programme for Purchasing Emission Reductions
Within the Kyoto Protocol, Finland is committed to reducing its emissions to the 1990 level by the end of 2012. Most of the emission reductions required by this target are implemented through domestic measures. Like other industrialized nations, Finland can also carbon credits reductions through the Kyoto project mechanisms. These emission reductions cover some of the reduction needs specified in the Kyoto commitments.
The carbon credits originate in projects established in other industrialized countries or developing countries for reducing greenhouse gas emissions. For instance, the projects may apply to renewable energy, energy efficiency, transport or waste management.
Finland is committed to reducing its total emissions to the 1990 level during the Kyoto commitment period 2008–2012. At annual level, this commitment means emission reductions of about 11 million carbon dioxide tonnes (Mt CO2 eq.), i.e. a total reduction of about 55 million carbon dioxide tonnes between the years 2008 and 2012. In accordance with the acquisition strategy updated in early 2008, Finland strives to acquire about 7 Mt of CO2 emission units through the Kyoto flexible mechanisms during the period 2008–2012.
In Finland, most of the reductions required are implemented through domestic measures. However, some of the emission units needed to meet the target are acquired by applying the Kyoto flexible mechanisms. For implementing and monitoring these acquisitions, the government has established a programme for purchasing carbon credits.
The Kyoto Protocol contains three market-based flexible mechanisms: clean development mechanism (CDM); joint implementation (JI); and international emissions trading. The flexible mechanisms promote the cost-effective attainment of reduction obligations. By means of flexible mechanisms, industrialized countries committed to binding emission targets under the Kyoto Protocol can implement some of their reductions in some other country. Owing to the global nature of greenhouse gas emissions, it is of no importance where in the world emission reductions take place.
A CDM/JI pilot programme was carried out in Finland in 2000–2006. Its purpose was to create new administrative procedures, to gather practical experiences of the implementation of projects and to develop CDM preparedness in both the target country and Finland. Thanks to the early launching of the pilot programme, Finland – alongside with countries such as Sweden and Denmark – was one of the pioneering countries in the piloting of CDM and JI projects. The total budget of the pilot programme was EUR 20 million.
In Honduras, Finland has four small-scale hydropower projects identified during the pilot programme. Of these, the Rio Blanco small-scale hydropower project was the world’s first small-scale CDM project registered by the CDM Executive Board. Agreements on three bioenergy projects and one wind power project in Estonia were concluded within the JI mechanism. In addition, within the pilot programme, investments were made in two carbon funds: the Prototype Carbon Fund (PCF) of the World Bank and the Testing Ground Facility (TGF) in the Baltic Sea Region.
After the pilot programme came to an end, the government established a new programme for purchasing emission reductions (2006–). The bilateral project agreements and investments that had been made during the pilot programme were transferred under this purchase programme. The purpose of the purchase programme is to acquire carbon credits for Finland through the Kyoto flexible mechanisms in a cost-effective manner, while at the same time considering the benefits that these potential projects would have in terms of development policy and climate policy.
In Finland, the Ministry of Employment and the Economy is responsible for the general coordination of administration for the Kyoto mechanisms. The Ministry of the Environment is responsible for the administration of joint implementation projects and international emissions trading. Responsibility for the administration of the clean development mechanism is vested in the Ministry for Foreign Affairs.
The purchase programme is supported by a Kyoto mechanism consultant hired for a term of two years at a time. The consultant identifies bilateral projects and carries out the practical work associated with the projects. The mechanism consultant in 2006–2009 was the Finnder Team within the Finnish Environment Institute (SYKE). The consultant for 2010–2011 is GreenStream Network Plc, an enterprise providing services in the environment sector.
For acquisitions during the Kyoto commitment period of 2008–2012, the government’s programme for purchasing carbon credits has a total budget of EUR 50 million. In addition, the Ministerial Working Group on Climate and Energy Policy decided in 2008 to grant EUR 30 million for the acquisition of carbon credits arisen after 2012.
Emission reductions are acquired by means of both CDM and JI mechanisms. Acquisition takes place by signing bilateral project agreements directly with project developers and by making investments in carbon funds. At present, all assets available in the purchase programme are tied to the bilateral purchase agreements and carbon fund investments already made.
During the CDM/JI pilot programme, Finland was committed to purchasing emission reductions from four small-scale hydropower projects in Honduras and from three bioenergy projects and one wind power project in Estonia. After the pilot programme ended, Finland has signed agreements on the purchase of emissions reductions within three CDM projects: a landfill gas project in Jordan; a solar cooker project in China; and a programmatic project based on household biogas digesters in China. Within the framework of a joint acquisition agreement signed with two Finnish carbon funds (Fine Carbon Fund and Future Carbon Fund) managed by GreenStream Network Plc, Finland is committed to purchasing emission reductions from a project portfolio consisting of six CDM projects in South Africa.
After the pilot programme ended, Finland has signed one purchase agreement concerning JI projects: today, the Rouste wind power project in Estonia is included in the portfolio of Finland’s bilateral projects.
Apart from emission reductions, the projects included in Finland’s portfolio of bilateral projects are expected to produce local development benefits and to promote sustainable development in the host countries. For instance, in the CDM project carried out in Ningxia, China, 19,000 solar cookers are distributed to the local population in Ningxia. Thanks to the project, the local population can replace their coal-based cooking methods with the use of solar power. Not only does the switch to solar cookers reduce global greenhouse gas emissions; it also improves the local environment and air quality and offers an inexpensive way for people to do daily household chores requiring hot water or the heating of food.
Brief descriptions of the CDM projects::
Ninqxia Federal Solar Cooker Project (pdf, 22 kB)
Reduction of Methane Emissions from Ruseifeh Landfill (pdf, 192 kB)
Small-scale Hydropower Projects in Honduras (pdf, 180 kB)
Hunan Household Biogas Digester Programme (pdf, 188 kB)
Related press releases:
Finland also acquires carbon credits in accordance with the Kyoto flexible mechanisms by investing assets in various carbon funds. During the period 2008–2012, Finland purchases carbon credits, for instance, through the following funds: the Prototype Carbon Fund of the World Bank; the Asia Pacific Carbon Fund of the Asian Development Bank; the Testing Ground Facility of NEFCO; and the Multilateral Carbon Credit Fund of the European Bank for Reconstruction and Development. Investments in the first three funds are monitored and managed by the Ministry for Foreign Affairs, while investments in the latter two funds are managed by the Ministry of the Environment.
In addition, in 2009, Finland joined the Future Carbon Fund of the Asian Development Bank and the Nefco Carbon Fund of NEFCO. These investments will produce carbon credits for Finland for the period after 2012. The Ministry for Foreign Affairs manages the investment made in the Future Carbon Fund, while the investment in the Nefco Carbon Fund is managed by both the Ministry for Foreign Affairs and the Ministry of the Environment.
Related press releases:
- Ministry of the Environment: Finnish Carbon Procurement Programme (Finnder)
- Emissions trading, Kyoto mechanisms and climate change mitigation (SYKE-CCM)
- The Ministry of Employment and the Economy (MEE): Kyoto mechanisms
- The Ministry of Employment and the Economy (MEE): Emission Trading
- The Asian Development Bank: Carbon Market Initiative - The Asia Pacific Carbon
- The World Bank: Carbon Finance
- NEFCO: Financing Instruments
- The European Bank (EBRD): Multilateral Carbon Credit Fund
- GreenStream Network
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