Renewable Energy and Climate Policies : Studies in the Forest and Energy Sector

‪This dissertation examines the impacts of energy and climate policies on the energy and forest sectors, focusing on the case of Finland. The thesis consists of an introduction article and four separate studies. The dissertation was motivated by the climate concern and the increasing demand of renewable energy. In particular, the renewable energy consumption and greenhouse gas emission reduction targets of the European Union were driving this work. In Finland, both forest and energy sectors are in key roles in achieving these targets. In fact, the separation between forest and energy sector is diminishing as the energy sector is utilizing increasing amounts of wood in energy production and as the forest sector is becoming more and more important energy producer.‬ ‪The objective of this dissertation is to find out and measure the impacts of climate and energy policies on the forest and energy sectors. In climate policy, the focus is on emissions trading, and in energy policy the dissertation focuses on the promotion of renewable forest-based energy use. The dissertation relies on empirical numerical models that are based on microeconomic theory. Numerical partial equilibrium mixed complementarity problem models were constructed to study the markets under scrutiny. The separate studies focus on co-firing of wood biomass and fossil fuels, liquid biofuel production in the pulp and paper industry, and the impacts of climate policy on the pulp and paper sector.‬ ‪The dissertation shows that the policies promoting wood-based energy may have have unexpected negative impacts. When feed-in tariff is imposed together with emissions trading, in some plants the production of renewable electricity might decrease as the emissions price increases. The dissertation also shows that in liquid biofuel production, investment subsidy may cause high direct policy costs and other negative impacts when compared to other policy instruments. The results of the dissertation also indicate that from the climate mitigation perspective, perfect competition is the favored wood market competition structure, at least if the emissions trading system is not global.‬ ‪In conclusion, this dissertation suggests that when promoting the use of wood biomass in energy production, the favored policy instruments are subsidies that promote directly the renewable energy production (i.e. production subsidy, renewables subsidy or feed-in premium). Also, the policy instrument should be designed to be dependent on the emissions price or on the substitute price. In addition, this dissertation shows that when planning policies to promote wood-based renewable energy, the goals of the policy scheme should be clear before decisions are made on the choice of the policy instruments.‬Väitöskirja tarkastelee energia- ja ilmastopolitiikan ohjauskeinojen vaikutuksia metsä- ja energiasektoreihin. Työtä on motivoinut huoli ilmastonmuutoksesta ja erityisesti Euroopan unionin asettamat ilmasto- ja energiapoliittiset tavoitteet. Suomessa metsä- ja energiasektori ovat avainasemassa näiden tavoitteiden saavuttamisessa. Työn tavoitteena on määrittää, kuinka energia- ja ilmastopolitiikan ohjauskeinot vaikuttavat metsä- ja energiasektoreiden toimintaan ja vertailla eri ohjauskeinojen vaikutuksia keskenään. Ilmastopolitiikan ohjauskeinoista työssä keskitytään päästökauppaan. Energiapolitiikan ohjauskeinoista tarkastellaan erilaisia metsäpohjaista uusiutuvaa energiaa tukevia instrumentteja. Väitöskirjan menetelmänä on mikrotaloustieteeseen perustuva numeerinen mallinnus ja sovelluksissa keskitytään Suomen tilanteen tarkasteluun. Väitöskirjan osatutkimukset käsittelevät puun ja turpeen yhteispolttoa, nestemäisen biopolttoaineen tuotantoa ja ilmastopolitiikan vaikutuksia massa- ja paperiteollisuuteen. Väitöskirjan tulokset osoittavat että puupohjaista uusiutuvaa energiaa tukevilla ohjauskeinoilla voi olla odottamattomia negatiivisia vaikutuksia. Jos syöttötariffi on käytössä päästökauppajärjestelmän kanssa, niin tietyissä tuotantolaitoksissa uusiutuvan energian tuotanto saattaa laskea, kun päästöluvan hinta nousee. Biopolttoaineen tuotannossa investointituen käyttö aiheuttaa valtiolle korkeita tukimaksuja ja muita negatiivisia vaikutuksia muihin ohjauskeinoihin verrattuna. Työ osoittaa myös, että ainakin alueellisten päästömarkkinoiden tapauksessa täydellinen kilpailu on ilmastonäkökulmasta kannatettavin puumarkkinamuoto. Johtopäätöksenä voidaan esittää, että puupohjaisen uusiutuvan energian tukimuotona kannattaa käyttää keinoja, jotka tukevat suoraan uusiutuvan energian lopputuotantoa (esimerkiksi tuotantotuki tai syöttöpreemio). Väitöskirjan tulosten perusteella tukitaso on suositeltavaa sitoa päästöluvan hintaan tai lopputuotteen substituutin hintaan. Väitöskirja osoittaa myös, että uusiutuvan energian tukipolitiikkaa suunniteltaessa tulisi politiikan tavoitteiden olla selkeitä ennen kuin ohjauskeinoista päätetään

Would turkeys vote for Christmas? New entrant strategies and coopetitive tensions in the emerging demand response industry

To enter a market and scale up, entrant firms often need to cooperate with their incumbent competitors, so they are in coopetition with them. Our goal is to increase the understanding of the antecedents of coopetition and the ways in which new entrant firms navigate coopetitive tensions with incumbents. Moreover, we are interested in the impacts that coopetition has on the value creation and value appropriation of new entrant firms. So far, most literature on cooperation and coopetition in energy markets has provided the perspective of the incumbents. To study the issues empirically, we interviewed 15 demand response (DR) entrants. These firms operate in Finnish energy markets, providing automated DR services, in which Finland is a forerunner country. According to our results, collaboration between new entrant DR firms and energy incumbents was needed in order to establish the new markets. In addition, cooperation with incumbents was beneficial to DR entrants since they were able to gain new customers and increase the efficiency of their resource use due to, for example, common technological development activities. We found that the structure of energy markets was an important factor in shaping the market entry of DR entrants. According to our results, new entrants can enter electricity markets without much cooperation with the incumbents, but cooperation is necessary in natural monopoly district heating markets. As new EU regulations will enhance automated DR services, the results of this study have relevance in other EU Member States where automated DR markets have not yet been established.Peer reviewe

Enhancing climate change mitigation ambition after Paris : Messages from economic literature

The Paris Agreement starts a new era in global climate policy. The agreement includes a landmark target of limiting global warming to well below 2°C degrees. Since the initial contributions of the Parties do not fulfill that target, additional ways and mechanisms to increase climate change mitigation ambition are required. Increased cooperation and decreased costs of mitigation that result from enhanced policy can help to achieve the current contributions and also increase the ambition of future targets. The objective of this report is to bridge the realities of the UNFCCC negotiations and theoretical academic understanding of increasing the climate change mitigation ambition. Especially we focus on the fields of environmental economics and international environmental agreements. We have analyzed the possibilities which the Paris Agreement opens up for increasing the ambition of climate change mitigation in the form of (1) cyclical improvements, (2) market mechanisms, (3) technology transfer and information sharing, and (4) low-carbon investments and finance to increase the ambition of climate mitigation. We find that the implementation of the Paris Agreement requires increased multilevel cooperation between Parties. Also, the Parties’ climate change mitigation targets and actions should be clearly formulated and comparable. In order for the global ambition enhancements to be measurable, a trustworthy review process is necessary. In addition, new international market and non-market mechanisms are needed. We also find that for their role to be optimal, UNFCCC’s key means of implementation require strengthening. The Green Climate Fund could play an active role in enhancing the maturity and market growth of low-carbon investment instruments. The Climate Technology Centre and Network could help to advance the Parties’ technology cooperation as well as technology transfer to developing countries. The Paris Agreement itself is a significant step towards more ambitious global climate policy. However, the implementation of the agreement will define how well its objectives are met. Upcoming negotiations can help to shape future climate policy design towards a positive cycle of increasing climate change mitigation ambition

Business model innovation in demand response firms : Beyond the niche-regime dichotomy

Demand response (DR) is an innovation emerging at the intersection of the energy and information and communications technology sectors. This paper aims to investigate the drivers of—and differences in—business model innovation (BMI) behaviours of firms operating in these two interacting industries. Results from 22 semi-structured interviews with representatives of Finnish DR companies show that external drivers of BMI include regulation, competition, and the demise of the telecom industry following the fall of Nokia. Whereas technology start-ups and companies from adjacent industries are motivated by entrepreneurial opportunities, incumbent energy companies are driven by the threat of losing their existing customers and need to increase efficiency. The BMI behaviours observed do not fall neatly into the often-used dichotomous categories of niche/new entrant and regime/incumbent, as firms show behaviours from both extremes. To overcome this binary thinking, we propose a morphological box model that represents the extreme states of firm BMI while allowing for flexibility

Digitalisation in wind and solar power technologies

Highlights • Digitalisation and ICT solutions are impacting on wind power and solar PV technologies. • The prominent RES technologies with ICT solutions control, manage and optimise electricity production. • Wind power patent data shows a straightforward technology convergence trend with ICT. • Basic inventions in solar PV have increased more rapidly than solar PV ICT solutions. • Digitalisation in wind power and solar PV has been driven by the US, Germany, Denmark and Japan.Smart energy transition includes a widespread deployment of clean energy technologies and intelligent energy management with information and communication technologies (ICTs). In this paper, the smart energy transition is studied from the viewpoint of the technology convergence of renewable energy sources (RESs) and ICTs. Two important, fast-growing and weather-dependent renewable energy generation technologies: wind power and solar PV (photovoltaic) are studied. This paper provides technology convergence analyses of RES and ICT inventions based on international patent data. Digitalisation is changing the whole of society, and according to the results, this transition can also be seen in the studied renewable energy generation technologies. The digitalisation of RES production covers technologies that control, manage and optimise electricity production in different intelligent ways. Differences between wind power and solar PV technologies are found: in the case of wind power, the development from virtually no ICT solutions to partial technology convergence with the ICT sector is straightforward. However, in the case of solar PV, the development of basic technologies has been even faster than the development of the solar PV ICT solutions, which may indicate the immature nature of solar PV technologies during the studied years. The digitalisation of the renewable energy sector poses challenges for RES companies in following and predicting ICT development and opportunities for innovations and collaborations with ICT companies. This conclusion can also be expanded to society and policy levels because focusing on only a narrow field when planning innovation policy instruments can negatively impact the country's competitiveness

Muted by a crisis? COVID-19 and the long-term evolution of climate change newspaper coverage

The reasons for the emergence of environmental issues in public debate have been widely studied, while the reasons for the disappearance of environmental issues from the public agenda are researched to a far lesser extent. This article presents how the newspaper coverage of climate change has evolved in Finland. The study is based on long-term (1990–2020) data from the leading national-level newspaper. The climate coverage has been characterized by an increasing overall trend and remarkable fluctuations in the intensity of debate. The monthly coverage of climate change had four distinctive peak periods. The drops from peak levels are explained by several factors, such as the end of a specific news event or policy process (e.g., international climate policy meetings), lack of weather anomalies (e.g., normal winter weather and snow coverage), silence of key influencers (policy-makers, business elite), and news competition together with reporting fatigue following abundant climate coverage. The first months of the intense phase of the COVID-19 pandemic in 2020 showed a deep, but not unprecedented drop in climate coverage from the preceding peak level. The persistence of anthropogenic climate change, gradual mainstreaming of climate concerns across different societal sectors, and recent policy debates around so-called green or sustainable recovery suggest that climate coverage is not likely to be muted in the near future

Burning roots : Stakeholder arguments and media representations on the sustainability of tree stump extraction in Finland

Highlights • Bioenergy is an important part of renewable energy portfolio. • Sustainability of forest-based bioenergy is debated. • The arguments in the media and among experts adhere to different framings. • Climate impacts stand out in the media discussion of stump energy use. • The results show that science contributes to public discussion and concern.The sustainable use of forest resources is an intensively debated topic, raising environmental, socio-cultural and economic concerns. The debate culminates around forest bioenergy. The bioenergy debate has been characterized by a strong polarisation between different perspectives on environmental impacts. In particular, the claims about carbon sequestration have been contrasted with other ecological impacts. This article focuses on the debate over the use of tree stumps as a relatively novel source of forest bioenergy. To shed light on the constellation of the different arguments and actors in the debate on the sustainability of forest bioenergy, we conducted an empirical qualitative analysis of Finnish argumentation on tree stump removal, using media and interview data and relating the emerging sustainability arguments to the dimensions debated in the EU biofuel sustainability policy. The analysis shows the variation of views across Finnish expert stakeholders and the fora where the arguments are made. Climate impacts dominate the media discussion, while other sustainability dimensions are covered in expert discussion. Our findings have implications for the interpretation and use of scientific arguments in energy debates, in particular regarding environmental sustainability

Accelerating clean energy solutions in buildings with the governmental programme : Policy recommendation

Suomen kasvihuonekaasupäästöistä noin kolmasosa on peräisin rakentamisesta, rakennusten käytöstä sekä rakennusmateriaalien valmistamisesta. Jotta päästöt saadaan Suomessa riittävän nopeasti vähenemään, rakennusten puhtaiden energiaratkaisujen vauhdittaminen on välttämätöntä. Tähän voidaan päästä kiristämällä määräysten tasoa ja luomalla kannustimia uusien ja korjattavien rakennusten päästöjen vähentämiseksi

Taloudellisten kannusteiden käyttö vähähiilisen rakentamisen ohjauksessa : TALO-hankkeen loppuraportti

Rakennetun ympäristön osuus Suomen energiankulutuksesta ja kasvihuonekaasupäästöistä on tällä hetkellä huomattavan suuri. Yleisen arvion mukaan rakennuksissa käytetään lähes 40 prosenttia kokonaisenergian kulutuksesta, ja rakentaminen, rakennusten lämmitys ja sähkönkäyttö aiheuttavat yli 30 prosenttia kasvihuonekaasupäästöistä Suomessa. Rakennusmateriaalien osuus rakennuksen elinkaaren aikaisesta hiilijalanjäljestä arvioitiin aiemmin vähäiseksi käytön aikaisiin päästöihin verrattuna. Rakennusmateriaalien tuotannosta aiheutuneiden päästöjen vaikutus on kuitenkin sitä merkittävämpi, mitä energiatehokkaampia rakennukset ovat ja mitä enemmän rakennuksissa hyödynnetään ympäristön uusiutuvia energialähteitä. Myös energiantuotannon päästöjen vähentyessä rakennusmateriaalien päästöjen vaikutus korostuu. Ympäristöministeriön tavoitteena on, että rakennuksen elinkaaren aikaisia kasvihuonekaasupäästöjä ohjataan lainsäädännöllä vuoteen 2025 mennessä. Tässä selvityksessä arvioidaan neljän taloudellisen ohjauskeinon vaikutuksia vähähiilisen rakentamisen edistämisessä. Ohjauskeinoja arvioidaan mahdollisen raja-arvo-ohjauksen rinnalla vähähiilisen uudisrakentamisen edistämisessä ja itsenäisinä keinoina vähähiilisen korjausrakentamisen edistämisessä. Rakennustyypeistä tässä selvityksessä arvioidut taloudelliset ohjauskeinot kohdistuisivat asuinkerrostaloihin. Uudisrakentamisen arvioidut ohjauskeinot ovat: (1) valtion avustus, (2) kiinteistöverosta vapauttaminen, ja (3) lisärakennusoikeuden myöntäminen. Tuen saamisen kriteerinä on erittäin vähähiilinen rakentaminen. Erittäin vähähiilisen asuinkerrostalon kriteeri määritettiin tässä tarkastelussa elinkaarisen hiilijalanjälkilaskennan perusteella. Korjausrakentamisen arvioitu ohjauskeino on avustus asuinkerrostalojen vähähiilisiin korjauksiin. Avustuksen kriteerinä olisi käytönaikaisen energiankulutuksen päästöjen voimakas lasku. Selvityksen tulosten perusteella valtion tuki erittäin vähähiiliselle uudisrakentamiselle ja asuinkerrosten vähähiilisten korjausten avustukset saisivat aikaan vähähiilisiä asuinkerrostaloja ja korjausrakentamisessa kohtuuhintaisia päästövähennyksiä. Sen sijaan kiinteistöverosta vapauttaminen viideksi vuodeksi ei ole riittävä kannuste rakentaa erittäin vähähiilisiä asuinkerrostaloja. Lisärakennusoikeuden myöntäminen puolestaan on tulosten mukaan riittävä kannuste rakentajalle, mutta sen käyttöönoton laajuus perustuisi kuntien halukkuuteen ottaa ohjauskeino käyttöön