Unintended Consequences of National Climate Policy on International Electricity Markets—Case Finland’s Ban on Coal-Fired Generation

Abstract

Finland has adopted a high profile in climate change mitigation. A national target of achieving carbon neutrality by 2035 has been declared. As a part of this, the use of coal for energy purposes has been banned from May 2029 onwards. The Nordic electricity market was a world fore-runner in creating a liberalized, multi-national electricity market in the 1990s. At present, the electricity systems of Finland, Sweden, and Norway are already very low-carbon. The Baltic countries Estonia, Latvia, and Lithuania joined the Nordic market about a decade ago. Estonian electricity production is the most carbon-intensive of all the EU countries due to the extensive use of domestic oil shale. Especially Lithuania still suffers from capacity deficit created by the closure of the Soviet time nuclear reactor Ignalina in Lithuania. This paper presents the ambitions of the EU and national level energy and climate policies and models the multi-national impacts of Finland’s forthcoming closure of coal-fired generation. We also take into account Sweden’s planned decrease in nuclear generation. We find that these national-level policies have an impact on the Baltic countries as reduced import possibilities and increasing electricity prices, and the expected rise of the EU CO2 allowance prices amplifies these. We further find that the abandonment of coal and nuclear power plants increases the net import and increases CO2 emissions in neighboring regions.

High-Temperature Geothermal Utilization in the Context of European Energy Policy—Implications and Limitations

“…Furthermore, Zhang et al [20] demonstrate how simply a different leak rate, within typical leak range, may lead to a natural gas plant reaching a higher emissions rate than a coal plant. Farsaei et al [21] also point out the implications that national energy policies aiming at reduced GHG emissions by closing down the most GHG intensive energy systems, can have significant impacts on wider regions with strongly connected international energy markets. Policies that fail to take these impacts into account may lead to unwanted adverse effects of increased emissions in the region due to increased import of GHG intensive electricity from other markets instead.…”

F.A. Hayek, Complexity Pioneer

“…This of course applies to all bureaucratic organizations. To cite one concrete example among many, the abandonment of coal-fired and nuclear-powered energy use in one country can increase CO 2 emissions in neighboring countries and regions, as well as lead to higher energy prices for consumers (Farsaei et al 2020). In the case analyzed by the paper, a specific government intervention in the Finnish energy market did succeed in reducing emissions, but on a broader view it led to deleterious longer-term consequences for the wider Baltic region.…”

Investigating Winter Temperatures in Sweden and Norway: Potential Relationships with Climatic Indices and Effects on Electrical Power and Energy Systems

“…Furthermore, a possible reduction in electricity generation in Norway and Sweden will also impact the neighboring countries. The results of modeling the multi-national impacts of Finland's closure of coal-fired generation and Sweden's decrease in nuclear generation showed reduced import possibilities, increased electricity prices, and the expected rise of the EU CO 2 allowance prices in the Baltic countries [75]. In Nordic countries, CO 2 intensity is expected to decrease due to the planned structural changes in the energy systems.…”