Impact of the eu emissions trading directive on the energy and steel industries in Finland

Abstract

This chapter discusses the impact of the European Union (EU) emissions trading that is studied using a stochastic electricity price model for the Nordic electricity markets and the TIMES energy systems model to describe the development of the Finnish energy economy. The results of the models at various CO2 emission allowance price levels are used in the interpretation of the emissions trading impacts on energy and steel sector companies. The most important way to lower CO2 emissions in the energy sector in Finland is fuel changes in the direction of lower net carbon emissions. Energy companies whose production capacity is more flexible in respect of fuel type and production volumes have the best possibilities to adapt to the market changes caused by emissions trading. Growing industrial sectors, like the steel industry in Finland, cannot keep their emissions at the present level, or lower them, by changing process fuels or by improving energy efficiency. The country-specific emissions commitments and global markets of energy or emission-intensive products do not fit well together.