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Urban Energy Systems – Nordic cities lead the way in decarbonisation

The world is becoming increasingly urbanised and the Nordic countries are no exception. About 85 per cent of the region’s population of 26 million live in cities and urban areas, with Oslo currently the fastest growing major city in Europe. According to the Nordic Energy Technology Perspectives 2016, the progressive climate plans and energy technology options available in Nordic cities could be important drivers for mitigating climate change and moving the world’s energy systems toward carbon-neutrality.

By Páll Tómas Finnsson

Nordic cities eye carbon-neutral energy systems in near future
Nordic Energy Technology Perspectives 2016 (NETP 2016), published by the IEA and Nordic Energy Research, provides a thorough analysis of the investments and technology development necessary to accomplish the Nordic carbon-neutral scenario (CNS), achieving an 85 per cent reduction of energy-related CO2 by 2050. Due to the rapidly growing urbanisation, cities will play a crucial role in this transition and in global efforts to honour the goals of the Paris Agreement.

“In 2050, around 70 per cent of the world’s population will live in cities,” says Hans Jørgen Koch, Director of Nordic Energy Research. He explains that, in 2013, energy demand in urban areas in the Nordic region accounted for 58 per cent of final energy demand. “It’s simply a fact that more and more of the energy consumption takes place in the cities. This is why urban energy systems are most relevant in our work towards a carbon-neutral future.”

Many of the Nordic capitals and cities have adopted climate plans aiming for carbon-neutrality in the coming decades, setting the bar even higher than the already ambitious national targets. Copenhagen aims to be the first major city in the world to achieve this remarkable milestone, by 2025.

“There’s an abundance of interesting initiatives in Nordic cities to make them carbon-neutral,” Koch says. “One of the three main strategic actions identified by NETP 2016 is to tap into these initiatives to strengthen national decarbonisation and enhance energy efficiency in transport and buildings.”

Focus on buildings, energy supply and transport
The NETP 2016 urban energy system analysis focuses on three key areas fundamental to increasing energy efficiency and reducing emissions in urban areas: buildings, energy supply and transport. All three issues are high on the agenda in the Nordic co-operation’s holistic approach to energy systems, which is based on establishing a strong, secure and decarbonised energy supply that allows people to make sustainable choices with regards to their energy consumption and transport needs.

“Our analysis provides evidence that especially the city level and urban level energy systems could operate as a platform for the implementation of new technology, such as smart grids, smart systems and integrated urban transport systems,” says Tiina Koljonen, research team leader at VTT Technical Research Centre of Finland, who led the NETP 2016 urban energy system analysis.

She explains that the average citizen in Nordic urban areas consumes 30 per cent more energy than the average EU citizen, mainly due to the colder climate and larger heating demand, but CO2 emissions per capita are 50 per cent lower due to a larger share of renewables, district heating, electric heating, geothermal heating and modern biomass in the heating mix.

“Nordic cities have a relatively energy-efficient energy supply because of the combined heat and power production and the district heating systems,” Koljonen says. “They also have a high share of renewables in the global comparison. The electricity system is almost carbon-free, and carbon-neutral energy production will definitely increase to the point where our energy systems become zero net emission or even net emission negative.”

Energy-efficient buildings and combined heat and power
Buildings account for 43 per cent of the final energy consumption in Nordic urban areas. The transition to low-carbon energy systems therefore calls for concerted efforts to increase energy efficiency in buildings, new and old, and decarbonise the energy supply.

“It’s imperative that we speed up the energy retrofitting of existing buildings,” Koljonen says. “EU policies and regulations require us to move toward near-zero energy buildings by 2020 in the case of new buildings and by 2030 for older buildings.”

Much of the building-related greenhouse gas emissions is indirect emissions from power and heat production. Koch identifies continued development of district heating relying on integration of electricity and heat production as an important challenge.

“Further integration of electricity and heat production would mean that a much higher share of the heat supply could be supplied by surplus electricity from intermittent renewable energy resources, for instance wind power,” he explains.

Extensive transformation of the transport sector
According to NETP 2016, there is a need for an extensive transformation of the transport sector in order to achieve the CNS. Transport energy efficiency must be improved, fuels need to be decarbonised and, in line with policies in most Nordic cities, people should be encouraged to switch to public transport, cycling and walking. Approximately 90 per cent of the transport fuels in the CNS would be new transport fuels, notably second-generation biofuels and electricity.

“One of the tools recommended to achieve the CNS is to accelerate the transition from internal combustion engines to electrical engines for cars and light transport vehicles, and to biofuels for heavier traffic,” says Koch.

NETP 2016 features detailed case studies of the Helsinki Metropolitan Region and Oslo, which has become well known around the world for its initiatives to support the transition to electric vehicles. The City of Oslo aims to halve its emissions by 2030, relative to 1990 levels, ensure that all collective transport runs on sustainable fuels by 2020, and become fossil free by 2050.

“We analysed and defined different technical measures in the building sector, transport sector and the energy production sector that could reduce the city’s energy demand and CO2 emissions,” says Kari Aamodt Espegren of the IFE – Institute for Energy Technology. “The real challenge is the transport sector, which is still primarily fossil-based.”

“However, we have a lot of electric vehicles in Norway, and particularly in Oslo. This is thanks to proactive national policies to support the purchase of electric vehicles and build charging infrastructure. Combined with local initiatives giving further incentives to electric vehicle owners, such as free parking, access to bus lanes and exemption from road tolls, these measures are the key to a successful transition to more sustainable transport.”

The NETP 2016 urban energy system analysis focuses on three key areas fundamental to increasing energy efficiency and reducing emissions in urban areas: buildings, energy supply and transport.

“Further integration of electricity and heat production would mean that a much higher share of the heat supply could be supplied by surplus electricity from intermittent renewable energy resources, for instance wind power”

Hans Jørgen Koch, Director
of Nordic Energy Research

“One of the tools recommended to achieve the CNS is to accelerate the transition from internal combustion engines to electrical engines for cars and light transport vehicles, and to biofuels for heavier traffic.”

Hans Jørgen Koch, Director
of Nordic Energy Research

Decarbonising energy systems is economically viable

Decarbonising energy systems is economically viable

The transition toward a low-carbon energy system is often considered a daunting task, both technologically and economically. Nordic Energy Technology Perspectives 2016 (NETP 2016) has estimated the investments needed to attain carbon neutrality in the Nordic region by 2050. The conclusion is that, while achieving the carbon-neutral scenario outlined in the report will require significantly different investment patterns, decarbonising the region will not cost the world.

By Páll Tómas Finnsson

Comparison between two different climate scenarios
The analysis looks at the investments necessary to achieve the Nordic carbon-neutral scenario (CNS), which entails an 85 per cent reduction of 1990 energy-related CO2 emissions by 2050, compared with the costs associated with achieving the less ambitious baseline four-degree scenario (4DS), in which emissions reductions would be only 42 per cent. The differential reveals the additional investment costs of decarbonising the region’s energy system. The analysis is based on the IEA’s Energy Technology Perspectives cost optimisation model.

“To define these investment costs, we’ve looked at each sector – buildings, industry, transport and power – and then estimated which investments are related to the energy system,” says Benjamin D. Smith, project leader of NETP 2016 on behalf of Nordic Energy Research and now Senior Adviser on energy systems at the Research Council of Norway.

The NETP 2016 modelling indicates that the Nordic countries would have to invest an additional USD 333 billion between 2016-2050 to achieve the CNS, or less than one per cent of the expected cumulative GDP throughout the period. It is important to note that benefits such as fuel savings, increased energy security and reduced health costs due to air quality improvements are not included in the analysis due to their uncertainty. However, by most estimates, these benefits would at least offset the additional investment costs and probably generate more savings.

“One per cent of the Nordic countries’ cumulative GDP may sound a lot, but it’s important to keep in mind that these investments are in no way net costs but also have a payback and a multiplier effect on the economy,” says Hans Jørgen Koch, Director of Nordic Energy Research, the Nordic Council of Ministers’ platform for cooperative energy research and policy development.

“What can be misleading with these calculations,” Smith adds, “is that we’re only looking at the actual technology investments, and haven’t included fuel savings given the unpredictability of oil prices. We might even see that fuel savings alone could offset all of the infrastructure costs related to the transition to the CNS.”

Largest additional investment in buildings and transport
According to Smith, the largest investments are required in buildings and transport. Investments in buildings addressed by the analysis include the costs of equipment for heating and cooling, lighting and appliances, as well as costs of improving the thermal envelope of buildings to substantially reduce space heating demand.

“The CNS requires the current rate of improvement in the energy intensity of space heating to double or even triple. Considering that most of the buildings in 2050 are already standing today, we will need a considerable increase in investment in energy efficiency improvement in buildings,” Smith says. Additional investment costs in this category are expected to amount to USD 170 billion, of which around 90 per cent comes from building envelope investments.

Transport investments include the costs of purchasing vehicles and developing infrastructure, including roads and railways, electric charging infrastructure and biofuel filling stations, as well as investments in shipping. Infrastructure investment will amount to an additional USD 195 billion.

“Today we spend a lot of money on gasoline and diesel. To achieve the CNS, we need to transition these costs into investments in emission-free vehicles and in new infrastructure that will enable an electrified transport system and support a modal shift from road to rail, including high-speed rail between the largest cities,” Smith says.

Need for innovation and new processes in the Nordic industrial sector
The analysis of investment costs in the industrial sector focuses on five energy-intensive sectors that account for about 80 per cent of the total industrial energy use in the region: pulp and paper, chemical and petrochemicals, aluminium, iron and steel, and the cement industry. Assuming a similar industrial structure to that of today, investments will be required in innovation to improve energy efficiency and develop new low-carbon production processes and carbon capture and storage (CCS).

The additional investment needed in the sector will amount to around USD 33 billion, which is much less than the differential between the building and transport sectors in the two scenarios.

“The overall additional investment required in industry is much lower than the total investments needed for buildings and transport, but it will be felt more strongly as the costs will be shared between fewer actors, plants and locations,” Smith explains. “These industries compete on the global market, so it’s hard to imagine that this level of investment would take place without some sort of governmental support.”

Investment costs in power sector lower in carbon-neutral scenario
Koch explains that the analysis of the power sector indicates that investment costs would be lower in the CNS outlined in NETP 2016 than in the 4DS scenario.

“This is due to lower infrastructure costs and reduced electricity demand. As an example, investment costs for wind would be lower in the CNS, due to increased global deployment, which would drive down technology costs.”

The NETP 2016 analysis covers the costs of all power plants and decentralised power systems generating electricity, as well as transmission and distribution infrastructure. Investments in power generation are estimated at USD 43 billion less than in the 4DS, corresponding to 18 per cent, while costs related to power infrastructure are expected to be USD 22 billion lower, or 13 per cent lower than in the 4DS.

“In the CNS, you would have more energy efficiency in buildings and in industry, essentially,” Koch explains. “This means that we won’t have to build out as much power generation, transmission and distribution infrastructure. We would save large amounts on both fronts.”

From Nordic Energy Technology Perspectives 2016
“Nordic Energy Technology Perspectives 2016 presents a clear technological and economical pathway for the Nordic region towards a nearly carbon-neutral energy system in 2050. Nordic countries’ success can send a strong signal to the global community that the ambitions of the Paris Agreement from COP21 are achievable.”

“One per cent of the Nordic countries’ cumulative GDP may sound a lot, but it’s important to keep in mind that these investments are in no way net costs but also have a payback and a multiplier effect on the economy”

Hans Jørgen Koch, Director
of Nordic Energy Research

“Today we spend a lot of money on gasoline and diesel. To achieve the CNS, we need to transition these costs into investments in emission-free vehicles and in new infrastructure that will enable an electrified transport system and support a modal shift from road to rail, including high-speed rail between the largest cities”

Benjamin D. Smith, project leader of NETP

Nordic Solutions to Global Challenges – new PMs’ initiative and programme for the 2030 Agenda

The Nordic Prime Ministers have decided to launch a new collaborative programme, Nordic Solutions to Global Challenges, as a direct response to many of the most pressing issues specified in the UN 2030 Agenda for Sustainable Development. The initiative will focus on innovative Nordic solutions for carbon-neutral development, sustainable cities, food and welfare, and gender equality. In addition, a new sustainable development programme is under way, aimed at implementing the 2030 Agenda through extensive stakeholder engagement.

By Páll Tómas Finnsson

Five flagship projects drawing on Nordic core competencies
Nordic Solutions to Global Challenges will promote joint Nordic efforts that contribute to meeting the global demand for solutions to the world’s major challenges. It comprises five flagship projects in three categories: Nordic Green, Nordic Food and Welfare and Nordic Gender Effect, each based on different Nordic core competencies.

“The objective of the new initiative is to promote good examples of Nordic solutions to the global challenges and achieve the UN’s new global Sustainable Development Goals,” says Secretary General of the Nordic Council of Ministers, Dagfinn Høybråten.

Nordic Green – Sustainable cities, climate and energy
Nordic Green, which will be launched at COP22 in Marrakech, consists of two projects: Nordic Sustainable Cities and Nordic Climate and Energy Solutions.

Nordic Sustainable Cities is a continuation of the Nordic Built Cities programme, managed by Nordic Innovation, which has explored development of sustainable, liveable and smart cities through challenge competitions in the Nordic countries and the Faroe Islands. The aim is to demonstrate and export solutions for sustainable urban development in response to the rapid global urbanisation – by 2050, 66 per cent of the world’s population is expected to live in urban areas. Focus will be on building relationships in growth markets with large export potentials for Nordic companies.

“The Nordic countries have built some of the world’s most sustainable, smart and attractive cities,” says Carina Christensen, Managing Director of Nordic Innovation. “In this project, our aim is to showcase and export the solutions that make our cities so exceptional.”

As described in Nordic Energy Technology Perspectives 2016, the Nordic region is in a unique position with its decarbonised energy systems. The objective of Nordic Climate and Energy Solutions is to meet the global demand for these solutions, demand that is expected to rise exponentially following the Paris Agreement. Work to phase out fossil-fuel subsidies, started together with the IISD Global Subsidies Initiative, will also continue in this project. The aim is to develop best practices and a road map for the phase-out of national subsidies for fossil fuels, in co-operation with key Nordic and international organisations.

“We’ve demonstrated that we can come up with ambitious and tangible solutions for addressing climate change that can be shared with the rest of the world,” says Annika Lindblom, member of the Nordic Expert Group for Sustainable Development.

Nordic Food and Welfare – Sustainable food and welfare solutions
The two projects in the Nordic Food and Welfare category are Nordic Food and Nutrition and Nordic Welfare Solutions. The objective of Nordic Food and Nutrition is to use Nordic knowledge to address the world’s acute food problems. Currently, food production is neither economically nor environmentally sustainable, and while two billion people suffer from a lack of nutrition, a further two billion are overweight. The project will build on the experience and research from New Nordic Food and the Nordic Nutrition Recommendations to support more sustainable food production, delivering better value for producers and healthier products for consumers. Building on the success of previous initiatives, Nordic Welfare Solutions will promote innovative solutions aimed at generating a healthy life for all and wellbeing in all age groups.

Nordic Gender Effect
The Nordic Deal – Gender, Business and Work is a flagship project drawing on the Nordic countries’ renowned ability in working towards gender equality. The Nordic model has demonstrated that investment in gender equality yields both sustainability and economic benefits.

The 2030 Agenda for Sustainable Development makes clear that gender equality is a prerequisite for global sustainability. The Nordic countries are forerunners in this area, and targeted investment has been a crucial part of the region’s success. The Nordic Deal – Gender, Business and Work will showcase practical models for gender equality, primarily focusing on the right to parental leave, flexible working hours and affordable, high-quality childcare, as well as Nordic leadership and organisational practices.

New programme for sustainable development in 2017
The Nordic Expert Group for Sustainable Development is preparing a new sustainable development initiative for the Nordic Council of Ministers, addressing the implementation of the UN Agenda 2030 for Sustainable Development. The group is currently conducting a gap analysis to identify potential areas of co-operation and develop a joint Nordic programme for sustainable development. Stakeholder engagement will be extensive, involving both public and private actors and civil society.

“Agenda 2030 is a step forward in that all countries more or less understand that we cannot achieve sustainable development unless our economic models and growth patterns are sustainable,” says Lindblom. “The challenge for developed countries in the coming years is to ensure that all activities addressing sustainable development and green growth are coherent with the COP21 Paris Agreement and the 17 Sustainable Development Goals of the 2030 Agenda.

“It is not enough to just enable implementation of sustainable development in developing countries,” continues Lindblom. “We must also look at ways in which we can improve our own performance and implementation of sustainable development, as well as our climate and development co-operation. The Nordic region shouldn’t miss this opportunity to lead the way in implementing the 2030 Agenda for Sustainable Development to ensure sustained and sustainable growth.”

The Nordic Expert Group for Sustainable Development is now preparing its proposals based on input from the various stakeholders.

“I’m very pleased and excited that we will be launching two highly prioritised initiatives in 2017, aimed at implementing the UN 2030 Agenda,” says Høybråten. “The Prime Ministers’ initiative and the Nordic 2030 programme will be the two main building blocks for our work with sustainable development in the coming years.”

From the 2030 Agenda for Sustainable Development
“We resolve, between now and 2030, to end poverty and hunger everywhere; to combat inequalities within and among countries; to build peaceful, just and inclusive societies; to protect human rights and promote gender equality and the empowerment of women and girls; and to ensure the lasting protection of the planet and its natural resources. We resolve also to create conditions for sustainable, inclusive and sustained economic growth, shared prosperity and decent work for all, taking into account different levels of national development and capacities.”

“The objective of the new initiative is to promote good examples of Nordic solutions to the global challenges and achieve the UN’s new global Sustainable Development Goals”

Dagfinn Høybråten,
Secretary General of the NCM

Building on the success of previous initiatives, Nordic Welfare Solutions will promote innovative solutions aimed at generating a healthy life for all and wellbeing in all age groups.

The 2030 Agenda for Sustainable Development makes clear that gender equality is a prerequisite for global sustainability.

Nordic Green to Scale shows potential of scaling up Nordic low-carbon solutions

Scale-up of fifteen Nordic climate solutions can reduce global emissions by 4Gt

Editor’s note: Article updated after COP22
A global scale-up of fifteen selected Nordic low-carbon solutions, all of which have proven their value in the Nordic countries, could reduce emissions by 4 gigatons every year by 2030 – equivalent to the total annual emissions from the EU. Nordic Green to Scale has analysed the potential of scaling up Nordic climate solutions, including district heating, onshore wind power, biofuels in transport, as well as methods to increase energy efficiency in buildings, better manage manure in agriculture, and reduce methane in oil and gas production.

By Páll Tómas Finnsson

Proven solutions applied to their maximum scale
These Nordic solutions were selected for the Nordic Green to Scale project based on their technological feasibility, scalability, cost, and proven emissions savings. The selection represents a balanced mix of low-carbon solutions from different sectors across all five Nordic countries: energy, transport, industry, buildings and households, and agriculture and forests.

“We’ve explored the potential of using these already applied and proven solutions and applying them to their maximum scale on an international level,” says Janne Peljo, Leading Specialist at Sitra – the Finnish Innovation Fund, which conducted the analysis in co-operation with research institutions in all five Nordic countries and the Nordic Council of Ministers. The results were presented at the joint Nordic Pavilion at COP22, New Nordic Climate Solutions, on 16 November.

The potential for emissions reductions is largest in a global scale-up of combined heat and power production (CHP). If other countries were to follow the example of Finland and Denmark in applying CHP technologies, it would reduce global emissions by 1,171 MtCO2 per year. Matching Denmark’s use of onshore wind power would lead to an annual reduction of 695 MtCO2, while cutting nitrous-oxide emissions in manure management in the agricultural sector could abate around 478 MtCO2 per year. Increasing energy efficiency in buildings, matching the achievements of Sweden, represents a potential to reduce emissions by 430 MtCO2.

“The total net cost of scaling up all fifteen solutions would be just over USD 10 billion by 2030,” says Senior Advisor Oras Tynkkynen, who led the Nordic Green to Scale analysis on behalf of Sitra. “This is of course a large amount, but it’s equal to just nine days of global fossil-fuel subsidies today.”

“The good news is that many of the solutions we need already exist, and that they are both feasible and cost-efficient,” said Annika Rosing, Head of the Nordic Council of Ministers’ Department of Growth and Climate. “The Nordic Green to Scale project enables countries to identify existing solutions to meet and even go beyond their current climate ambitions, and at the same time enjoy the many co-benefits, such as improved air quality and health as well as green jobs.”

“No excuse for not taking action today”
“The main concerns decision makers have about taking climate action is that it’s either too difficult or too expensive to rapidly reduce emissions,” says Tynkkynen. “Our objective is to highlight what the Nordic countries have already achieved in terms of introducing low-carbon solutions and what other countries can learn from their successes.”

Considerable CO2 abatement potential was also identified in the use of biofuels in transport, approximately 423 MtCO2 per year, and in bioenergy for heating. If Canada, Russia and Mongolia used as much bioenergy for heating as Finland currently does, it would reduce emissions by 193 MtCO2 per years.

Other solutions analysed by Nordic Green to Scale were offshore wind power and the application of geothermal power, CCS in oil and gas production and low-carbon energy in the pulp and paper industry, as well as green transport solutions, i.e. the successful policies to promote electric vehicles in Norway and the effects of the high proportion of cycling in Danish cities. The project also analysed the use of residential heat pumps in Sweden and the abatement potential related to reforestation and land restoration efforts in Iceland.

The objective of the Nordic Green to Scale analysis has been to provide a more specific regional perspective on the potentials to cut emissions by analysing solutions from an area with similar climate conditions, economic conditions and overall framework for societal actions.

“As much as we appreciate the importance of innovation and new technology, there’s no excuse for not taking action today and introducing the solutions that are already available,” Tynkkynen says.

In his speech at the release event, Kimmo Tiilikainen, Minister of Agriculture and Environment in Finland, stated that more action is needed everywhere in the world to achieve the targets of the Paris Agreement.

“The Paris Agreement was the result of years of hard work by thousands of people who believe that we can only fight climate change by working together. Now it’s time for action. The global and Nordic Green to Scale studies clearly show that there are plenty of existing low-carbon solutions that we can use to reduce emissions. Not tomorrow, not in the far future, but already today.”

Careful assessment of the global scalability
“These fifteen Nordic solutions vary a lot with regards to scalability and CO2 abatement potential,” says Jan Ivar Korsbakken, Senior Researcher in Climate Economics at CICERO. “We’ve been very careful when assessing the applicability of these Nordic solutions in other areas, as we’re wealthier and more technologically advanced than many countries. A Norwegian solution might therefore not be applicable in a developing country like Malawi.”

To illustrate the importance of evaluating the scale-up potential of each solution, Korsbakken mentions two Nordic success stories as an example: electric heat pumps and the integration of wind energy. The global emissions reduction potential of heat pumps, he explains, is only around 64 MtCO2 per year. The reason is that they compete with other low-carbon technologies, and also that emissions savings are quite small in countries where electricity is produced from fossil fuels. While addressing the global scalability of wind energy, the analysts encountered a somewhat different issue:

“Denmark is a small country with a large wind power potential relative to its surface area. If Canada and Australia were to capture a similar share of their technical potential, they would produce more electricity from wind than they actually consume in total. Therefore, we’ve scaled down the potential in a few countries to ensure a realistic outcome.”

Approach based on the global Green to Scale project
The Nordic Green to Scale project applies the same method as the highly successful global Green to Scale project, run in 2015 in collaboration with eleven international research partners by Sitra, This project identified the potential to reduce current global emissions by a quarter by 2030, simply by scaling up seventeen proven and successful climate solutions from all around the world.

The global Green to Scale project estimated that emissions could, as a median figure, be reduced by 12 gigatons by applying the seventeen solutions. These range from improved energy efficiency in industry, transport and buildings to low-carbon agriculture, reduced methane emissions from oil and gas production, and renewable energy, including wind, affordable off-grid solar power, and bioenergy for heating.

Read more about the Nordic Green to Scale analysis at www.greentoscale.net/nordic

“As much as we appreciate the importance of innovation and new technology, there’s no excuse for not taking action today and introducing the solutions that are already available”

Senior Advisor Oras Tynkkynen, who led the Nordic Green to Scale analysis on behalf of Sitra.

The selection represents a balanced mix of low-carbon solutions from different sectors across all five Nordic countries: energy, transport, industry, buildings and households, and agriculture and forests.

“Simply scaling up the solutions addressed by the global and Nordic Green to Scale projects would take us a long way in closing the emissions gap, bringing global emissions down to the levels that are required for meeting the targets of the Paris Agreement.”

Senior Advisor Oras Tynkkynen

greener future

Green Growth Initiative moves economies toward a greener future

In 2011, the Nordic Prime Ministers launched The Nordic Region – leading in green growth, an initiative aimed at enhancing green growth by building on the region’s positions of strength and innovation capacity. Twenty-six projects in eight strategic priority areas have produced a wealth of knowledge and recommendations on ways to stimulate the green economy in the region and encourage the global community to implement more ambitious green strategies.

By Páll Tómas Finnsson

Environmentally responsible economic growth
Nordic countries have constantly demonstrated an ability to improve economic performance while maintaining a strong commitment to the environment. This remains a prominent feature of the Nordic environmental collaboration, which dates back to the 1970s. The overarching aim of the PMs’ Green Growth Initiative was to increase green growth in the region, improve coordination between the countries, and take the lead in relation to developments in the EU.

The Nordic Region – leading in green growth identified a range of cross-
sectoral areas in which the Nordic countries could exploit their environmental lead in order to realise the growth potential of the green transition,” says Dagfinn Høybråten, Secretary General of the Nordic Council of Ministers. “The progress made has allowed us to strengthen our market position in these areas and influence international environmental and climate policy.”

Based on recommendations made by a Nordic specialist task force, the following priorities were identified: developing Nordic test centres for green solutions; collaboration on education, training and research; flexible consumption of electricity; common green technical norms and standards; green public procurement; new methods and technologies for waste treatment; integration of environmental and climate in development aid; and funding of green investments and companies. The combined budget for the eight areas in the period 2012-2015 was DKK 66 million.

Broad approach to green growth
The projects have addressed a broad variety of topics relating to improving resource efficiency, tackling the major environmental and climate challenges, and creating green jobs in the region.

“We’ve taken a broad approach to green growth, requiring involvement from many different sectors, Nordic working groups, and committees of senior officials,” says Øyvind Lone, Senior Advisor at the Norwegian Ministry of Climate and Environment and member of the Nordic Council of Ministers’ Environment and Economy Group. “This approach was one of the risk factors but, by the end of the initiative, we can say that it’s been a success, as it’s drawn more attention to the individual projects, both in the region and internationally.”

Lone mentions new methods and technologies for processing waste as an example of a sector with great potential for growing the economy and improving the environment. As part of the PMs’ initiative, Nordic experts developed policy recommendations, industry guidelines and a Nordic strategy for improved collection, sorting, reuse and recycling of plastic and textile waste.

“The growth potential is considerable,” Lone says. “As an example, the experts predict that more efficient collection and sorting of textiles could create more than 4000 new jobs in the region.”

Sustainable Nordic building standards influence Europe
One of the goals was to develop common green standards in the building sector in order to remove trade barriers between the countries and create a strong platform for export of sustainable building solutions to the European markets. The Nordic region as a standard maker project brought together the Nordic standardisation organisations and the construction industry to develop common standards for sustainable building renovation and indoor climate. The European Committee for Standardization, CEN, is currently looking at adopting these standards at European level.

Nordsyn has strengthened Nordic collaboration on market control of ecodesign and energy labelling. The project has contributed to more efficient market control by developing knowledge and encouraging increased sharing of market control plans, results and best practices between the Nordic countries and EU member countries.

“The standardisation projects and Nordsyn have demonstrated very clearly that when the Nordic countries speak with one voice, we can influence policy development in the EU,” says Høybråten. “Working together increases our influence and credibility in international policy development.”

Valuable input into climate negotiations
Results from the Green Growth Initiative provided valuable input to the international climate negotiations ahead of the Paris Agreement of December 2015. One key contribution came from a study on the impact of removing fossil fuel subsidies. Commissioned by the Nordic Council of Ministers, IISD’s Global Subsidies Initiative developed a tool to calculate the economic and environmental effect of phasing out fossil fuel subsidies. A modelling of the impact in 20 countries showed that they could reduce emissions by a national average of 11% if they phased out subsidies by 2020. The study showed that, by re-investing 30% of the subsidy savings in renewable energy or energy efficiency, the countries could reduce emissions by 18%.

“This project resulted in new and unique research on the removal of fossil fuel subsidies that was well received at numerous events leading up to COP21 and during the final negotiations,” says Høybråten. “It will be part of our plan for an ambitious Nordic implementation of the Paris Agreement, focusing on Nordic solutions for carbon-neutral development.”

The future role of biorefineries in the Nordic bioeconomy
Another important result was the publication of a comprehensive report on the development of the Nordic bioeconomy, Test centers for green energy solutions – Biorefineries and business needs. Biorefineries are identified as a cornerstone of the new bioeconomy, upgrading organic waste and residual products from primary industries to products of higher value, i.e. food and biochemicals, as well as biofuels and energy. The report refers to opportunities in establishing more biorefineries based on existing technologies, and development of new processes and high-value products, thereby helping the Nordic countries lead the way in biorefining technology.

“The Nordic countries have a lot to offer when it comes to increasing resource efficiency and developing the bioeconomy,” says Lone. “Denmark has a large and dynamic agricultural sector, Iceland, Norway, Denmark and the Faroe Islands are rich in fisheries resources, and the technologically advanced forestry industry of Finland, Sweden and Norway could play an important role in replacing fossil fuels with sustainable biofuels.”

New PMs’ initiative in the pipeline
In conjunction with the COP22 United Nations Climate Change Conference in Marrakesh in November 2016, the Nordic Prime Ministers will be launching a new initiative.

Focus areas will be climate and energy, sustainable urban development, food and nutrition issues, welfare solutions, and gender equality. The initiative will run for three years, between 2017-2019, in collaboration with a number of Nordic institutions and other partners.

The Nordic Region – leading in green growth identified a range of cross-sectoral areas in which the Nordic countries could exploit their environmental lead in order to realise the growth potential of the green transition”

Dagfinn Høybråten, Secretary General of the Nordic Council of Ministers

“The growth potential is considerable”

Øyvind Lone, Senior Advisor at the Norwegian Ministry of Climate and Environment

“The Nordic countries have a lot to offer when it comes to increasing resource efficiency and developing the bioeconomy”

Øyvind Lone, Senior Advisor at the Norwegian Ministry of Climate and Environment

nordic energy co-operation

Former Nokia CEO Jorma Ollila to lay the foundation for future Nordic energy co-operation

Renowned for their regional co-operation on energy, a sophisticated joint electricity market, and a profound and consistent commitment to renewable energy, the Nordic countries are now considering the future of their energy co-operation. The Nordic Council of Ministers has commissioned former Nokia executive Jorma Ollila to carry out a strategic review of the co-operation and identify which collaborative measures should be initiated over the next five to ten years to strengthen co-operation on energy policy.

By Páll Tómas Finnsson

Change in investment patterns in the energy sector
Ollila is to put forward 10-15 concrete proposals that could further boost Nordic energy co-operation. The conclusions will be drawn from a thorough review of current activities as well as input from research and energy sector stakeholders in the Nordic countries and Europe. Ollila, whose previous positions include CEO of Nokia and chairman of Royal Dutch Shell, will present his conclusions in early 2017.

“It’s become clearer than ever that the world needs to shift towards sustainable energy and phase out fossil fuels,” he says. “However, we must realise that this transition will take time and that the world will still be reliant on fossil fuels for many years to come. My task is to identify the ways in which Nordic energy co-operation can contribute to this long-term transition in the most efficient manner possible, both in the region and internationally.”

The project is part of an ongoing reform process of the Nordic Council of Ministers’ activities in selected key sectors, so far covering the labour market/labour relations and the health sector. Previously, the potential for Nordic co-operation on defence and security policy has been under scrutiny, and other sectors will be examined in future analyses.

The review is a timely exercise, as the growing focus on renewables and the outcome of the COP21 negotiations will lead to radical changes in the energy sector. UNEP’s Global Trends in Renewable Energy Investment 2016 report shows that investment in renewables attained a record level of USD 286 billion in 2015, while investment in fossil fuels was USD 130 billion. Also, for the first time, renewables accounted for more than half of the added power-generating capacity last year.

“These changes in investment patterns represent opportunities for the Nordic economies,” says Ollila. “The review will look into how future co-operation should be organised in order to contribute to decarbonisation of the world’s energy systems while maintaining economic growth in the region.”

Input from the entire Nordic and European energy sector
During the coming months, Ollila will interview leading experts and energy sector stakeholders in Europe, e.g. Nordic ministers and officials of the formal Nordic co-operation, energy stakeholders in the Baltic region, Commissioners and senior officials of the European Commission, executives of the International Energy Agency, and other prominent players in the industry. The research behind the Nordic Energy Technology Perspectives 2016, published by the International Energy Agency (IEA) and Nordic Energy Research, will serve as valuable input for the review process.

At the April 2016 session of the Nordic countries’ inter-parliamentary body, the Nordic Council, its Committee for Growth and Development in the Nordic Region presented 31 energy-related areas upon which the Council wishes to focus. The proposals address four main categories: electrification of transport; the transition towards renewable energy; energy efficiency in energy-intensive industry; and energy research.

“In my perspective, the floor for the strategic review is open. I will look at all aspects of Nordic energy co-operation,” Ollila says.

Although wholesale trading of electricity between the interconnected energy markets in Denmark, Sweden, Norway and Finland is considered to be the backbone of Nordic energy co-operation, Ollila emphasises that the entire region, even its most remote areas, will be addressed in the review.

“One important issue is power supply in remote territories that are not connected to the grid and that therefore rely heavily on fossil fuel for power production,” he explains. “Coming up with efficient energy solutions for these areas, notably energy storage, would benefit the climate and create export opportunities for Nordic companies.”

Policy development in a rapidly evolving global context
The EU is also trying to answer the need for a different approach to production and consumption of energy in the coming decades. Since 2015, it has been developing and implementing the so-called Energy Union, with the aim of ensuring security of supply, sustainability and competitiveness. One key focus is to create a fully integrated internal energy market, which in many ways would be similar to the joint Nordic electricity market, often highlighted as a unique example of successful regional co-operation on energy.

The Nordic review will take this European process into account, as well as other relevant frameworks for energy co-operation, such as the UN’s climate negotiations, the Baltic Energy Market Interconnection Plan, the Pentalateral Energy Forum and the Baake Declaration, which aims to promote further European energy market integration. Intensified regional co-operation will be fundamental for Europe’s efforts to create a more efficient energy market, especially with the increased influx of fluctuating renewable energy into the European energy systems.

“Nordic countries have comprehensive knowledge about balancing consumption and production of energy across borders,” says Ollila. “Revisiting the Nordic energy co-operation will enable the region to position itself in the European energy context and assess how this knowledge can best be used in the future.”

“It’s become clearer than ever that the world needs to shift towards sustainable energy and phase out fossil fuels”

Jorma Ollila
former Nokia executive

Sustainable
Development Indicators

Proportion of environmental taxes in total tax revenues
Read more

See also:
Former Nokia boss Jorma Ollila to boost Nordic co-operation on energy
Read more

carbon-neutral

New pathways towards a carbon-neutral Nordic energy system

The International Energy Agency (IEA) and Nordic Energy Research launched Nordic Energy Technology Perspectives 2016 in Stockholm on the 23rd of May followed by national launches in all other Nordic countries. A product of extensive research collaboration between IEA analysts and researchers from the five Nordic countries, the report presents a technological and economic pathway towards a carbon-neutral energy system in 2050. Electricity generation in the region is already 87% carbon-free, but transport and heavy industry represent greater challenges.

By Páll Tómas Finnsson

Detailed analysis based on a carbon-neutral scenario towards 2050
Each year, the IEA publishes Energy Technology Perspectives, which is a long-term analysis of global energy system trends and of technological developments that support the transition towards affordable, secure and low-carbon energy. Based on the Nordic countries’ progress in decarbonising their energy systems, the IEA and Nordic Energy Research entered into collaboration aimed at elaborating on the regional aspects of future energy systems. This collaboration resulted in the initial Nordic Energy Technology Perspectives (NETP), published in 2013.

“The Nordic countries have shown great political leadership in terms of integrating their different energy markets and demonstrating that the transition to low-carbon energy can take place,” says Jean François Gagné, head of the IEA’s Energy Technology Policy Division. “Many lessons can be learned from the Nordic experience.”

NETP 2016 combines the international energy scenarios developed by the IEA with comprehensive national Nordic energy data. It aims to envision the technology and policy development necessary for a cost-efficient transition to a near-carbon-neutral energy system. The five Nordic countries are committed to diverse, but ambitious national climate targets for 2050. These are represented in the analysis by an aggregate Nordic emissions reduction of 85% by 2050, relative to 1990 levels.

NETP 2016 is unique in that it provides detailed analysis of the Nordic energy systems, making it relevant for Nordic policy-makers, and it can be directly compared with the IEA’s global scenarios that shape the debate on energy issues,” says Benjamin Donald Smith, senior advisor at Nordic Energy Research and coordinator of the project.

“Our analysis includes all energy-related activities in the Nordic economies,” says Markus Wråke, head of the Energy unit at IVL – Swedish Environmental Research Institute and analytical project manager for NETP 2016. “We’ve studied energy supply, i.e. heat and power, and the use of energy in the buildings sector, industry and transport. These sectors account for two-thirds of all greenhouse-gas emissions in the region.”

Significant potential for exporting clean energy to Europe
The carbon intensity of Nordic electricity production is very low, at 59 grams of CO2 per kWh in 2013. This is the level the world needs to reach by 2045 in order to keep the global temperature rise below 2°C. According to NETP 2016, the Nordic power system is already 87% carbon-free, and could be fully decarbonised by 2045.

The Nordic carbon-neutral scenario (CNS) envisions, among other changes, a decline in nuclear power (from 22% of Nordic electricity in 2013 to 6% in 2050) and a significant build-out of wind power (from 7% in 2013 to 30% in 2050). One of the driving forces behind these changes will be increased demand for clean energy from the rest of Europe. In the CNS, the Nordic countries could export 53TWh per year and balance European variable renewables, provided that they reduce their own power demand via increased energy efficiency and further strengthen their grid connections.

“We believe that there’s great potential benefit for the Nordic countries to strengthen their position as leaders in clean energy by closer integration both within the region and with the European markets. This would enable the Nordics to be net exporters of clean energy to the EU,” says Gagné.

“This requires that we start incentivising and planning for a more broadly distributed production of heat and power,” Wråke adds. “If we want to replace nuclear and coal power with wind, we need an even more flexible and interconnected system than we have at present. Otherwise, it won’t work.”

Electrification of transport and biofuels for long-distance transport
The biggest source of greenhouse-gas emissions in the Nordic countries is transport, accounting for around 40%. Achieving the CNS would therefore require a drastic cut in emissions in this sector, from 80 million tons of CO2 p.a. to approximately 10 million tons by 2050. Hans Jørgen Koch, Director of Nordic Energy Research, explains that there are two main pathways to decarbonisation of the region’s transport.

“Firstly, there’s the electrification of private cars and lighter freight transport, in particular in the cities. Secondly, we need biofuels for long-distance transport at sea, on land and in the air. The carbon-neutral scenario requires that biofuels comprise nearly two-thirds of total final energy use in transport in 2050.”

Previous research supported by Nordic Energy Research has shown that if the entire Nordic private car fleet was electric, its energy demand could be met by only 7% of the power supply. Ongoing research also indicates that the production of biomass from Nordic forestry could be doubled without imposing major costs.

“The greatest emissions reductions are required in the transport sector, but almost all the pieces of the puzzle are already there,” says Smith. “We have good transport policies, and new technologies in sustainable transport are emerging at a rapid pace. Right now, there is much that can be done to speed up the transition, as Norway has demonstrated with electric vehicles.”

Industry needs new technologies
The region’s second-largest source of emissions is industry, at 28%. NETP 2016 highlights the need for innovation in technology and policy to meet the necessary 60% reduction in direct industrial CO2 intensity.

“Industry is the most worrisome sector, in the sense that we don’t see a clear technological pathway,” says Wråke. This is due to so-called process-related emissions, i.e. in sectors where the production processes themselves release CO2 and other greenhouse-gases. Process-related emissions from iron and steel, cement, aluminium and chemical industries contribute 19% of the Nordic region’s industrial CO2 – which is almost 50% higher than the OECD average.

“We need new technologies for carbon capture and storage in industry,” says Koch. “NETP 2016 identifies innovation in CCS as an important opportunity to address the process-related emissions from these industries, many of which are vital to the Nordic economies.”

Nordic cities to inspire national policy
According to Wråke, one key focus area in NETP 2016 is the role of cities in the transition to low-carbon, highly integrated and efficient energy systems.

“We expect that, between now and 2050, 200,000 people per year will move to Nordic urban areas. This presents an opportunity, because cities offer greater possibilities in terms of energy efficiency and decarbonisation, e.g. in buildings and transport. One overarching conclusion is that national policy should build on the experience of cities in order to realise national priorities and targets.”

Nordic Energy Technology Perspectives 2016 was launched in Stockholm on the 23rd of May 2016, followed by launch events in Oslo (26th of May), in Copenhagen (10th of June), in Reykjavik (13th of June) and Helsinki (16th of June). The report can be downloaded here.

netp

“The Nordic countries have shown great political leadership in terms of integrating their different energy markets and demonstrating that the transition to low-carbon energy can take place”

Jean François Gagné, head of the IEA’s Energy Technology Policy Division

Sustainable
Development Indicators

Share of renewable energy in gross energy supply
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unep
UNEP Head Achim Steiner on emission reduction
greenbonds

Green bonds attract private capital to climate action

Under the COP21 Paris Agreement, developed countries are urged to raise the bar for climate financing. The goal is to provide USD 100 billion annually by 2020 to support climate action in developing countries. Nordic financial institutions and climate experts have been a driving force behind the rapidly expanding green bond market, which will be instrumental in attracting private sector climate funding. The Nordic Governments and Nordic Investment Bank are committed to activating private capital in the battle against climate change.

By Páll Tómas Finnsson

The Paris Agreement highlights the importance of the “provision of urgent and adequate finance, technology and capacity building support by developed country Parties” and strongly urges them to increase their level of financial support. During the COP21 conference, green bonds were identified as a promising source of climate financing for cities, regions and governments around the world, and a key instrument to scale up investments that generate low emissions and resilient growth.

“COP21 demonstrated that there’s a strong will from the global community, including the financial sector, to do what it takes to achieve the climate goals,” says Lars Eibeholm, Vice President and Head of Treasury at Nordic Investment Bank (NIB). The bank hosted a debate on “The rise (and risks) of green financing” at the Nordic Council of Ministers’ pavilion at COP21.

Explosive growth since 2008
The World Bank issued the first green bonds in 2008, underwritten by Swedish corporate bank SEB. Since then, the market has experienced phenomenal growth. In 2015, it raised a record USD 41.8 billion according to the Climate Bonds Initiative, bringing the cumulative value of green bonds to approximately USD 100 billion. Despite this, green bonds only make up a small part of the global debt market, which amounts to more than USD 100 trillion.

“Our idea was to create a financial instrument that would enable institutional investors to put their mainstream portfolios into play in respect to climate change,” says Christopher Flensborg, Head of Sustainable Products and Product Development at SEB and one of the architects behind the initial green bonds. “Supply of government debt was low due to the strong fiscal situation, and there was a growing desire to address climate change.”

Flensborg explains that there is no difference in the financial nature of a green bond and a regular one, as the basic principles regarding financial risk, pricing and return profile are similar. The difference is that the issuer has put in place a framework and a governance structure to ensure that proceeds from the bonds are used to fund climate-focused and environmentally friendly projects. Of the USD 100 billion worth of green bonds, 44 have been issued under frameworks developed in partnership with SEB.

“When you talk about green bonds, you’re talking about products that can be handled by people managing money, but when you talk about green finance, you’re dealing with a philosophy that must be addressed by politicians,” says Flensborg. “There’s a big gap in the political discussion about what to do and how to implement this. The green bond allows such an implementation, which makes it a cornerstone in the way we address climate change in the financial sector.”

Nordic Investment Bank expects to double green bond issuance
The green bond market has largely been developed by supranational organisations, including NIB, an international financial institution owned by the Nordic and the Baltic Countries. Since 2011, NIB has issued green bonds worth approximately EUR 1.5 billion, and the bank estimates that the amount will double in the coming years.

NIB’s green bond programme outlines the bank’s selection process, project assessment and reporting mechanisms, and specifies which projects are eligible for green bond financing.

“Our promise to the investors that buy NIB’s environmental bonds is that the proceeds are used for specific green investments that enhance the environment,” says Eibeholm. “The framework has been evaluated by the Norwegian research institute CICERO, and all projects are assessed by environmental analysts in our Sustainability and Mandate Unit.”

“The green bond requirements are a means to measure the money devoted to green investments and to account for our environmental activities,” says Eibeholm. “For the companies, the green bond is a fantastic vehicle to convey the story of a transition away from fossil fuels towards green energy activities.”

Proceeds from NIB’s green bonds finance loans for environmental projects in the following categories, provided that they meet NIB’s eligibility criteria: energy efficiency, renewable energy, public transport, transmission and distribution systems, green buildings, waste management and wastewater treatment. As an example, energy efficiency projects need to achieve an environmental gain of a minimum of 30%, measured in CO2e, to be eligible for funding.

“In the end, investors are looking at return,” Eibeholm says. “If a CO2 tax were to be implemented, companies with a strong production capacity and low emissions will have a competitive advantage. Heavy polluters and those who haven’t invested in green technology will be left with higher production costs and therefore higher risk. Investors are already taking this into account.”

Greater climate ambitions call for coordinated green bond definitions
With the increased investor interest in green bonds and the climate ambitions of the COP21 agreement, the green bond market is expected to multiply in size in the coming years. This underlines the need for coordinated and transparent definitions of the green bonds and the projects eligible for green bond financing.

Norwegian CICERO, Center for Climate and Environmental Research – Oslo, is the leading provider of the so-called second opinions, independent expert evaluations of the frameworks created by the issuer. The second opinion verifies that the green bond proceeds actually finance green projects.

“In 2015, we introduced a Shades of Green methodology that gives investors a better insight into the green bond market and reflects the projects’ climate ambitions,” says Harald Francke Lund, Senior Advisor at CICERO. “Dark green indicates that a 2050 climate solution is being implemented, while light green is used for projects that will only result in a short-term environmental gain.”

“From an investor’s perspective, climate change represents risk, whether regulatory risk related to carbon pricing and other regulation to reduce emissions or costs linked to climate change,” Lund continues. “Our evaluation indicates how well-positioned the framework is in this risk scenario.”

Another important initiative to increase the transparency of the green bond market is the development of the Green Bond Principles, which are voluntary guidelines for the development and issuance of green bonds. The Principles have already been signed by a large number of the key players operating in the green bond market – issuers, underwriters and investors.

“When you move from a small niche market to a market worth USD 100 billion in just seven years, there’s a big need for harmonisation to make sure that the climate financing strategies are all addressing the same products,” says Flensborg. “The Green Bond Principles pave the way for exponential growth of a harmonised green bonds market in the coming years.”

Nordic commitment to increase climate investment
In a joint Nordic statement issued at the COP21 conference, the Nordic Governments, along with a number of the region’s institutional investors and development finance institutions, committed themselves to further developing financial frameworks and instruments to leverage commercially viable climate investments in developing countries. The five Governments will collaborate with investors on scaling up investments in sustainable infrastructure and technology.

According to the statement, “The focus will be on using public climate finance to promote market-based solutions to the challenges of climate change as well as building the knowledge and confidence of private investors in order to leverage private sector investments in climate projects”.

“COP21 demonstrated that there’s a strong will from the global community, including the financial sector, to do what it takes to achieve the climate goals”

Lars Eibeholm, Vice President and Head of Treasury at Nordic Investment Bank (NIB)

Sustainable
Development Indicators

Proportion of environmental taxes in total tax revenues in the Nordic countries
Read more

christian flensborg
COP21 interview on climate financing

christian flensborg
UNEP Head Achim Steiner on emission reduction

parliamentarians

Parliamentarians to hold governments accountable for COP21 climate commitments

Nordic parliamentarians describe the climate agreement adopted by 195 countries at the Paris Climate Change Conference as the best possible outcome of the international climate negotiations. It is now up to parliamentarians around the world to ensure that each country lives up to its climate commitments, but also to take more drastic regulatory measures to limit the average global temperature rise. The Nordic Council has opted to to serve as a platform for increased co-operation between the Nordic parliaments.

By Páll Tómas Finnsson

Universal agreement based on individual national climate pledges
“The COP21 agreement is a huge victory,” says Hanna Kosonen, member of the Finnish Parliament and chair of the Nordic Council’s Committee for a Sustainable Nordic Region. “For the first time, we’ve reached a universal agreement, supported by 195 countries.”

The agreement is structured differently from previous international climate treaties. While the Kyoto Protocol introduced mandatory targets on greenhouse gas emissions for some of the world’s strongest economies, the Paris Agreement is based on the countries’ INDCs – Intended Nationally Determined Contributions – which outline their intended targets and actions to reduce emissions.

“The nations behind the agreement have acknowledged not only the problem, but also their obligation to resolve it,” says Steen Gade, a long-standing and passionate climate advocate and former member of the Danish Parliament, Folketinget. “However, we already know that the INDCs are not nearly enough to limit warming to 2°, let alone to reach the more optimistic 1.5° goal.”

The submissions of INDCs before the COP21 Conference reflected the ambitions of 187 countries, covering around 95% of global emissions. The overall aim is to keep global temperatures to “well under 2° C” above pre-industrial levels and pursue efforts to limit warming to 1.5°. This latter objective was introduced during the negotiations in Paris in December 2015.

“What’s crucial now is that all countries revisit their commitments and adjust their 2020 and 2030 climate goals to this new ambition,” says Ola Elvestuen, Member of the Norwegian Parliament, Stortinget, and Chair of the Norwegian Standing Committee on Energy and Climate. “This systematic effort to catalyse more ambitious climate action must be anchored in the national parliaments.”

Fantastic opportunity to influence the global agenda
The five Nordic countries, including Norway and Iceland, both of which are outside the EU, have aligned themselves to the EU goal of reducing CO2 emissions by 40% below 1990 levels by 2030.

“Parliamentarians in all countries have a responsibility to keep their governments on track and hold them accountable for the promises made in Paris,” says Ida Auken, member of the Danish Parliament and former Minister of the Environment. “It’s obvious that we need to change tracks to speed up climate development and decouple our economies from emitting CO2.”

According to Auken and Elvestuen, Nordic parliamentarians need to do more than just ensure the collective delivery of the EU targets. They should also use their political influence and the region’s strong environmental reputation to encourage Europe and the rest of the global community to take more drastic measures to prevent climate change.

“Parliaments will play a decisive role in maintaining pressure, ensuring the legitimacy of the climate action among the population, and creating a legal framework strong enough to achieve the goals,” says Elvestuen. “This calls for courage, political craftsmanship and continuity of policy.”

“The COP21 agreement provides a fantastic opportunity for Nordic parliamentarians to influence the global climate agenda and the bigger international processes,” agrees Gade.

Nordic Council encourages international co-operation on climate legislation
At its annual January meetings, the Nordic Council agreed to serve as a platform for increased co-operation between the Nordic parliaments to ensure efficient implementation of the agreement. The Council intends to invite all relevant committees in the national parliaments to participate in a dialogue about the legislative assemblies’ role in forming future climate policy. The Council is also encouraging the five Nordic countries to upgrade their INDCs by 2018 to exceed the EU’s current ambitions, as well as to push for further climate action by other EU countries.

The Nordic Council and the Nordic Council of Ministers have also emphasised the need for more knowledge sharing between countries when it comes to climate regulation. The Global Climate Legislation Study by GLOBE International and the London School of Economics indicates that, since 2007, the number of climate change laws and policies has doubled every five years. The 2015 edition covers legislation in 99 countries that account for 93% of global greenhouse gas emissions. According to Tryggvi Felixson, Senior Advisor at the Nordic Council, the study is a great source of inspiration for parliaments considering climate change legislation.

“It’s evident that government directives alone will not deliver the necessary climate action,” he says. “Legislators must implement a wide variety of legislation aimed at reducing emissions. We want to encourage them to collaborate and draw on climate legislation that has brought good results elsewhere.”

Vested interest in climate development
Kosonen emphasises that Nordic investors and businesses need to stay at the forefront of the development in order to benefit from the massive change in investment patterns that will now occur. The agreement sends a clear signal to companies to shift investments from fossil fuels to low-emissions development.

“It’s our duty to take responsibility, export our sustainable technologies, and support developing countries in their climate efforts, and also to prevent carbon leakage, where carbon-emitting industries move their production to the third world,” says Kosonen. “Moreover, we need to make sure that the emissions trading system works as it was intended when it was created back
in 2005.”

“The agreement shows the world’s investors that we’ve taken a new turn towards sustainability,” says Auken. “This will bring many investment opportunities, as well as opportunities to attract investments to emerging markets and developing countries. However, it’s important that we further clarify and improve the regulatory framework for climate investment.”

The parliamentarians agree that the Nordic countries should maintain their high levels of climate and development aid. Here too, the national parliaments will be instrumental in ensuring public support for long-term climate policies.

“Development aid is not only about helping people in other countries out of poverty,” says Auken. “It’s also a way to ensure that we won’t be faced with new waves of migrants and climate refugees of a magnitude that we cannot manage. We need to show people that it’s in their own interest to help other countries addressing climate change.”

According to Gade, Nordic co-operation already has an institutional infrastructure for climate development in place, suitable for scaling up the countries’ climate work outside the region.

“These institutions have a proven track record, notably the Nordic Development Fund, which has had great success in facilitating climate change investments in low-income areas,” he says. “The Nordic development finance institutions will be a major asset in the work ahead.”

“The nations behind the
agreement have acknowledged not only the problem, but also their obligation to resolve it,”

Steen Gade, former member of the Danish Parliament, Folketinget.

Sustainable
Development Indicators

Gross domestic product in the Nordic countries (GDP)
Read more

Centennial of the first power cable between Nordic countries

Centennial of the first power cable between Nordic countries

In 1915, pioneers in Sweden and Denmark established the first 25 kV power cable between the two countries. This was the very first step towards creating the highly effective joint Nordic electricity market that maintains the balance between power generation and consumption in the region. In 2014, the market, Nord Pool Spot, recorded a traded volume of more than 500TWh for the first time.

By Páll Tómas Finnsson

Closely knit regional power grids
Today, a full century after the first cross-border power cable was laid out, the power grids in Denmark, Norway, Sweden and Finland are closely intertwined. Major interconnectors also connect the region to its European neighbours, i.e. the Baltic states, Germany, Poland and the Netherlands.

These connections and the Nord Pool Spot market enable the countries to trade wholesale power on a daily basis to ensure a balanced and cost-efficient production. The energy exchange has also played an important role in the successful expansion and integration of intermittent renewable energy sources, i.e. wind and solar power, in the Nordic grid.

“The Nordic countries have different natural resources that complement each other well,” says Flemming G. Nielsen, Head of Division at the Danish Energy Agency and former Chair of the Nordic Council of Ministers’ Electricity Market Group. “This provides multiple benefits to the countries when it comes to power production, energy efficiency and security of supply.”

The availability of hydropower from Sweden and Norway has been a valued element of the Danish power system through the years. Previously, it reduced the need for coal fired power production during peak load times and today, it serves as a means to balance the system as it becomes increasingly reliant on fluctuating wind energy. Backup capacity is needed in periods without wind, while Denmark exports large amounts of energy to Sweden and Norway during off-peak hours, allowing them to hold back on production of hydro energy. Denmark aims to meet an ambitious 50% of its electricity demand with wind power by 2020.

“The transformation towards carbon neutrality requires strong grid connections and advanced methods to monitor and balance the system,” says Nielsen. “We’ve gradually expanded the connections between the countries and can now exchange more than 100% of our production.”

Louisiana Declaration envisioned liberalised markets 20 years ago
The initial steps towards a formalised Nordic market were taken when Norway liberalised its national electricity market in 1991, and five years later, Nord Pool was established as a joint Norwegian-Swedish power exchange. Finland joined the exchange in 1998 and was followed by the fourth Nordic country, Denmark in 2000. Since then, Nord Pool Spot has expanded to the Baltic region and Europe, and now operates power markets in nine countries.

The process of liberalising the national Nordic markets was lead by the Norwegian Water Resources and Energy Administration and was met with political support from the entire region. In 1995, the Nordic Council of Ministers put forward the Louisiana Declaration, describing its vision of a “free and open market with efficient trade with neighbouring countries.”

“Since the deregulation, the market has undergone continuous development,” says Joakim Cejie of the Swedish Ministry of the Environment and Energy, Nielsen’s successor as the Chair of the Electricity Market Group. “So far, the main focus has been on strengthening the grid connections and increasing production capacity. Lately, we’ve shifted our focus towards further developing the market design.”

The Nordic Transmission System Operators (TSOs) have been instrumental in the development of the grid infrastructure and the joint Nordic wholesale market. The TSOs collaborate on common grid development plans and own the Nord Pool Spot market together with their Baltic counterparts. Moreover, the TSOs are key actors in balancing supply and demand in the region, as they procure up- and down-regulation of the power production in close interaction with the market’s more than 300 commercial actors.

“What’s unique about the Nordic electricity market is the successful co-operation between all the different stakeholders – producers and retailers, the Nordic TSOs, regulators and political decision makers,” says Cejie. “Summoning political will and courage is the key to developing and operating an efficient electricity market – whether Nordic or pan-European.”

Nordic visions for a more flexible end-user market
With an integrated wholesale market in place, the Nordic energy co-operation is now looking to deregulate the retail market also. Until now, retailers have been faced with legal obstacles preventing them from operating outside their home markets.

“This is a key objective for the Nordic end-user market,” says Cejie. “We want to minimise the thresholds and enable retailers to operate across the borders. A liberalised retail market would lead to increased competition and better value for the consumers.”

Another aspect of empowering consumers to better manage their energy consumption is the development of new technologies, such as smart electric meters, capable of recording consumption on an hourly basis, and smart grid systems that automatically reduce demand during peak usage periods. An example of such technologies is electric car chargers that are programmed to connect to the system when electricity prices are at their lowest, i.e. during the night.

“The market needs to be developed further to handle the increasing amount of renewables coming into the system,” Nielsen affirms. “This requires more advanced steering systems and active consumer participation by means of automation in Nordic homes and in our industry.”

“The consumers are very important, also from a supply perspective,” says Cejie. “You can establish new production to improve the security of supply, but getting consumers to reduce their consumption, especially during peak hours, is a very good substitute. The next step is thus giving consumers the right tools to adjust their consumption to the system load and the electricity prices.”

“The Nordic countries have different natural resources that complement each other well”

Flemming G. Nielsen, Head of Division at the Danish Energy Agency

Sustainable
Development Indicators

Share of renewable energy in gross energy supply
Read more

Proportion of environmental taxes in total tax revenues
Read more

Decarbonised energy systems

Decarbonised energy systems – Nordic countries are where the IEA wants the world to be in 2040

Nordic countries have had more success in decarbonising their electric energy systems than any other region in the world. Remarkably, the countries have made the changeover without sacrificing economic growth. While 2014 marks the first time that global emissions from the electric energy sector may decouple from GDP, the Nordic region has exhibited a steady decoupling since 1997. At COP21, the Nordic Council of Ministers heads a Nordic Pavilion, showcasing a wide range of green solutions from the Nordic countries.

By Páll Tómas Finnsson

Ambitious energy policies have paved the way for decoupling
According to the IEA’s Energy Technology Perspectives, emissions from the world’s electricity production need to be reduced to 100g CO2 per kWh before 2040 so that average global warming can be limited to two degrees relative to pre-industrial levels. The Nordic region is already at that low level by way of ambitious energy and climate policies as well as close political, commercial and technical collaboration in the Nordic electricity markets.

“Nordic energy co-operation is unique and longstanding and the results of this prosperous co-operation are impressive,” says Hans-Jørgen Koch, Director of Nordic Energy Research (NER), the platform for co-operative energy research and policy development under the Nordic Council of Ministers. “As demonstrated in the Nordic Energy Technology Perspectives 2013, Nordic countries are 25 years ahead of the rest of the world when it comes to low CO2 emissions from electricity production.”

Key point: Nordic CO2 emissions per unit of electricity produced are one fifth of the global average in 2015. The world will reach this level in 25 years if it follows the IEA’s 2-degree scenario.

Key point: Nordic CO2 emissions per unit of electricity produced are one fifth of the global average in 2015. The world will reach this level in 25 years if it follows the IEA’s 2-degree scenario.

According to Koch, all five countries have actively used policy frameworks in decoupling CO2 emissions from GDP, notably carbon taxes and renewable energy incentives. The countries benefit from access to complementing natural resources for power production, and have also been known to be early adaptors of renewable energy technologies. To enhance these benefits, the Nordic region has established a well-functioning joint electricity market and a highly integrated grid infrastructure.

“Nordic grid integration optimises efficiency of production and provides security of supply against uncertainties such as dry hydropower years, offline nuclear capacity, or access to electricity markets outside the region,” Koch says. “The joint market and grid development are also instrumental for the integration of fluctuating renewable energy sources in our systems.”

On track towards carbon-neutral energy systems    
During the international climate negotiations, Nordic countries have demonstrated their continuing commitment to decarbonisation of their energy systems. All five countries are – despite their strong position today – determined to drastically reduce greenhouse gas emissions in the coming decades.

Denmark aims to produce its entire power supply from renewables by 2050, which is expected to result in a 75% reduction in greenhouse gas emissions. Norway strives to become carbon-neutral, and Sweden has presented a 2050 vision of sustainable and resource efficient energy supply and no net emissions of greenhouse gasses. Finland’s ambition is to reduce emissions by 80% as part of the international climate change effort, while Iceland, which in 2014 produced almost 100% of its electricity from renewables, aspires to cut emissions by 50-75% by 2050.

For more detailed information about the Nordic countries’ emissions reductions targets, visit www.nordicenergy.org

A mere 30% of the energy-related CO2 emissions in the Nordic countries are from electricity and heating, while the remaining 70% are predominantly from transport, including global shipping – a sector in which Nordic countries are market leading.

“Shipping and industry are vitally important for the Nordic economies and it’s difficult to imagine the level of economic prosperity and welfare we have in the region without them,” says Koch. “In order to achieve the ambitious climate and energy goals set by the Nordic countries, it’s of utmost importance that we reduce emissions in these sectors.”

According to IEA, a near complete decarbonisation of the Nordic energy systems could be achieved by 2050. As part of the work on the upcoming Nordic Energy Technology Perspectives 2016, which will be published by IEA and NER next year, four key opportunities to achieving this goal have been identified.

Nordic GDP decoupled from energy-related CO2 around 1997, beginning the sustained decoupling required to achieve the Nordic Carbon-Neutral Scenario – an 85% reduction of energy-related CO2 from 1990 levels.

Nordic GDP decoupled from energy-related CO2 around 1997, beginning the sustained decoupling required to achieve the Nordic Carbon-Neutral Scenario – an 85% reduction of energy-related CO2 from 1990 levels.

These are: firstly, to further enhance the power and heat supply infrastructure and increase electricity generation from renewables; secondly, to transform energy use in the transport sector, e.g. through modal shifts from combustion-motor cars to electric vehicles and from diesel to biofuels in long-haul land-transport and shipping; and thirdly, to develop energy and climate technologies for energy intensive Nordic industries. The fourth key opportunity is to enhance energy efficiency in buildings, not least through retrofits of the existing building stock.

Need for continued R&D co-operation in energy
Koch highlights the need for continued co-operation in energy research and research-related analysis and scenario building. NER recently concluded a large research programme called Sustainable Nordic Energy Systems 2050 (SES2050) and has just launched three flagship projects that will form the core of the Nordic energy research co-operation in 2016-2020.

“SES 2050 has demonstrated how the electricity sector in the Nordic countries can reduce its emissions to zero,” says Koch. The programme has addressed a wide range of issues, including production of solar energy in northern areas, profitability of new wind-turbines, production of biomass from Nordic forestry, and the use of solar, water and CO2 to produce biofuels or hydrogen.

NER’s three flagship projects will address integration of variable renewable energy through enhanced interaction between markets, energy-efficient and low-carbon transport systems, as well as ways to enable negative CO2 emissions through chemical-looping combustion of biomass. Furthermore, in 2016, NER is launching a research programme on Green Growth together with its sister organisations, NordForsk and Nordic Innovation.

Read more about NER’s flagship projects here.

“The potential of Nordic energy co-operation is not decreasing with increased European, OECD and world-wide energy co-operation,” says Koch. “On the contrary. Further developing our common research activities and electricity markets holds vast opportunities for the region.”

Read more about Nordic events and Nordic Climate Solutions at COP21 at www.norden.org/COP21

“Nordic energy co-operation is unique and longstanding and the results of this prosperous co-operation are impressive”

Hans-Jørgen Koch, Director of Nordic Energy Research (NER)

Sustainable
Development Indicators

Share of renewable energy in gross energy supply
Read more

Developments in greenhouse gas emissions by sector
Read more

Decoupling of environmental pressures, gross energy consumption, ressource use and generation of non-mineral waste from economic growth
Read more

See also:
Pubications from the International Energy Agency:
Tracking Clean Energy Progress 2015

and
Energy Efficiency Market
Report 2015

Read more about Nordic events and Nordic Climate Solutions at COP21 at www.norden.org/COP21
Large opportunities to reduce CO2 emissions and invest in sustainable energy by ending fossil-fuel subsidies

Large opportunities to reduce CO2 emissions and invest in sustainable energy by ending fossil-fuel subsidies

IISD’s Global Subsidies Initiative, commissioned by the Nordic Council of Ministers, has developed a new tool to calculate CO2 emissions reductions achieved from removing fossil-fuel subsidies. Modelling of 20 selected countries shows that emissions could be reduced by an average of 11% by phasing out fossil-fuel subsidies between 2015 and 2020.

By Páll Tómas Finnsson

Four times more subsidies to fossil fuels than to renewables
While the social and economic impact of subsidies is well documented, limited research has been conducted around the environmental linkages and co-benefits of fossil-fuel subsidy reform. As part of the Nordic Prime Ministers’ Green Growth Initiative, the Nordic Council of Ministers therefore commissioned IISD to look into the impact of subsidies reform on CO2 emissions. Special emphasis was placed on supporting reform in emerging and developing countries.

The results have been published in a report entitled Tackling Fossil Fuel Subsidies and Climate Change: Levelling the energy playing field. According to the report, subsidies to the consumption of fossil fuels were estimated at US$550 billion in 2013 – more than four times the level of subsidies to renewable energy.

Initial studies indicated that global emissions could be reduced by 6-13% from the phased removal of fossil-fuel subsidies by 2050. IISD’s new tool, however, provides a more precise indication of the impact of reform on each country’s national emissions. As a result, the data can be included in the countries’ INDCs – Intended Nationally Determined Contributions – in which they declare what actions they intend to take to reduce greenhouse gas emissions under a new global climate agreement. The INDC declarations are key elements of the international climate negotiations leading up to the the COP21 conference in Paris.

“Countries that are either contemplating or already implementing reform need to know the extent of emissions reductions so that they can include the removal of fossil fuel subsidies in their INDCs,” says Laura Merrill, Senior Researcher at IISD’s Global Subsidies Initiative. “For these countries, the data clarifies how the reform will link in with their energy policies and climate change goals.”

Reinvestment in renewables further reduces emissions
IISD’s tool combines internationally available data, i.e. from the IEA, OECD and the World Bank, with national data on the individual country’s energy profile, including the level of fossil-fuel subsidies. The tool has been applied to model the impact of removing fossil-fuel subsidies in 20 countries, including wealthy nations like Saudi-Arabia, Iran and the United Arab Emirates, as well as less developed countries like Bangladesh, Ghana and Morocco.

“These 20 countries, all of which subsidise fossil fuels, could reduce emissions by a national average of 11% by phasing out their subsidies between now and 2020,” says Merrill. “By re-investing 30% of the subsidy savings in renewable energy or energy efficiency, the emissions could be reduced even further, or by an average of 18%.”

According to the study, the cumulative emissions savings across the 20 countries would reach 2.8Gt by 2020 and 6.3 Gt by 2025.

“Our calculations show that the countries would save an average of US$93 per ton of CO2 removed from the system,” says Merrill. “This makes it quite clear that fossil-fuel subsidies is one policy tool that governments can no longer afford to ignore.”

Policy coherence across energy and climate policies
The report also provides more detailed case studies of subsidy reform in Morocco, the Philippines and Jordan. The case studies further analyse the impact of reform, the change in demand as a result of increased prices of fossil fuels, and the subsequent policies put in place. These include carbon pricing and fuel taxation, as well as investment in social welfare and renewable energy.

“Removing subsidies often results in noticeable price changes, and these changes have an effect on people’s behaviour and consumption,” Merrill says. “In the short term, higher fossil fuel prices lead to a reduction in demand, but we’ve also found that an increase in fuel prices increases the level of innovation in renewable energy and energy efficiency.”

Merrill explains that this research from IISD increases the understanding of fossil fuel subsidy reform as a foundation policy that ensures coherence across energy and climate policies. The Nordic Council of Ministers has promoted a similar agenda within the UNFCCC, notably through the work of the Friends of Fossil Fuel Subsidy Reform, a group of countries concerned with the issue, including Nordics and countries from across the globe. The countries are building momentum behind an international communiqué calling for greater transparency, assistance and action on the issue in the lead-up to COP21.

“The key question is how countries go through the process of reform and where they invest the savings,” Merrill says. “Our aim is to encourage policy makers to take emissions reductions from fossil-fuel subsidies reform into account, and to seriously consider reinvestment of a portion of the savings from reform in renewables or energy efficiency.”

The report is available here: Tackling Fossil Fuel Subsidies and Climate Change: Levelling the energy playing field

Infographic describing the findings available here: Infographic

Read related article on the use of economic instruments in Nordic environmental policies

“These 20 countries, all of which subsidise fossil fuels, could reduce emissions by a national average of 11% by phasing out their subsidies between now and 2020”

Laura Merrill, Senior Researcher at IISD’s Global Subsidies Initiative

Together with local partners, the Nordic Partnership Initiative on Up-Scaled Mitigation Action (NPI) is implementing NAMA-readiness programmes in the Peruvian waste sector and the cement sector in Vietnam. The aim is to establish appropriate regulatory, institutional and financial structures to drive a step change towards sustainability in the sectors.

Climate Financing: Nordic Partnership Initiative supports NAMA readiness in Peru and Vietnam

Together with local partners, the Nordic Partnership Initiative on Up-Scaled Mitigation Action (NPI) is implementing NAMA-readiness programmes in the Peruvian waste sector and the cement sector in Vietnam. The aim is to establish appropriate regulatory, institutional and financial structures to drive a step change towards sustainability in the sectors.

By Páll Tómas Finnsson

Showcase of climate action and development
NPI was launched in 2011 with the objective to develop methods to promote climate change mitigation in developing countries. The approach is based on assisting countries in developing National Appropriate Mitigation Actions, NAMAs, which are defined as “large-scale host country driven emission reduction actions, supported and enabled by international and domestic financing, technology and capacity building.”

“The NAMAs typically include emissions reductions activities that the countries also consider as suitable for their development,” says Martina Jägerhorn, Country Program Manager at the Nordic Development Fund (NDF). The NAMA readiness programmes are designed to prepare the countries for successful implementation of these actions, and to enhance their ability to mobilise climate financing.

“The objectives of NPI are to build capacity in our partner countries to enable them to structure and implement feasible NAMAs in these emissions-intensive sectors,” says chair of the NPI project group, Sara Almqvist of the Swedish EPA. “Our ambition is to set an example for the development of sustainable climate action programmes and provide experiences to the international climate negotiations. We want to encourage others to take similar action.”

Sector-wide emissions reductions in Peru’s waste management
Following the COP15 in Copenhagen in 2009, Peru identified better waste management as a climate change mitigation priority. The country’s municipal solid waste management was subsequently chosen as a pilot sector for NPI’s NAMA readiness project and allocated a budget of €2.3 million, financed by the Nordic Environment Finance Corporation (NEFCO) and the Nordic Governments. The project has been carried out in close co-operation with the Ministry of Environment in Peru.

“The waste sector is one of the fastest-growing sectors in the Peruvian economy and a source of significant and growing greenhouse gas emissions,” says Ash Sharma, Special Advisor for Climate Change at NEFCO. “The idea is to provide financial and regulatory incentives to capture more of the value from the waste stream and ensure that all waste is handled in a sustainable manner.”

A key component of the programme is a detailed inventory of Peru’s current waste streams, allowing for more precise assessments of the mitigation actions.

“The data has enabled Peru to calculate the emissions reductions potential and costs linked to each of the mitigation options,” says Almqvist. “Furthermore, the initiative has recommended an institutional arrangement for implementing the NAMA, and analysed methods and systems for MRV – measuring, reporting and verification of greenhouse gas emissions in the sector.”

NPI’s readiness programme has produced a fully-fledged NAMA proposal for the municipal solid waste sector, which is included in Peru’s national post-2020 climate action commitment. The proposal describes potential sources of financing, including the use of market mechanisms as a supplement to domestic and international finance, and suggests substantial policy and regulatory changes. The proposal also identifies three key mitigation actions: landfill gas capture with electricity generation, landfill gas flaring, and composting of organic waste separated at source.

“These technical areas that are being addressed are the biggest contributors to greenhouse gases in the sector,” says Sharma. “The project has identified the particular actions that will make the greatest difference in terms of reducing emissions for Peru, relative to the cost of abatement.”

Need for climate investment in the Vietnamese cement industry
A similar initiative is underway in Vietnam, addressing the highly energy-intensive cement manufacturing sector. The programme is jointly financed by the NDF and the Vietnamese Government, while the implementation is overseen by Vietnam’s Ministry of Construction. The total cost of the NAMA readiness support is €1.6 million.

According to Ulla Jennische of the Swedish Environmental Protection Agency, the sector could drastically decrease its greenhouse gas emissions by improving energy efficiency and switching to alternative fuels. Analysis conducted within the project suggests that the sector’s emissions could be reduced by 138-166 Mt CO2e by 2030.

“In the long-term, emissions reductions from increased energy efficiency would be profitable,” Jennische says. “Despite this, the necessary investments are not being made. It’s difficult to obtain capital and credit for this type of investment in the current environment.”

As in Peru, the partnership initative has collected extensive data on the Vietnamese cement industry, and identified cost-efficient actions to reduce greenhouse gas emissions. Furthermore, the MRV-system developed under the project is an ambitious example of how monitoring, registration and verification can be organised in the context of international development initiatives.

“The MRV-system will allow Vietnam to monitor the sector’s emissions as well as the co-benefits of the climate mitigation actions,” says Jägerhorn. “Our hope is that this will enable Vietnam to attract considerable domestic and international climate financing.”

A draft readiness plan was launched in October 2015 and is currently being reviewed by stakeholders. NPI’s NAMA readiness programme in Vietnam will be finalised by the end of April 2016.

christian friis bach
Under-Secretary-General of the UN Christian Friis Bach on the Nordics and the SDGs

“The waste sector is one of the fastest-growing sectors in the Peruvian economy and a source of significant and growing greenhouse gas emissions”

Ash Sharma, Special Advisor for Climate Change at NEFCO

Read more at www.norden.org/npi
energycoop

Nordic energy co-operation shows the way to carbon-neutrality

The Nordic region constitutes the world’s 12th largest and the EU’s 5th largest economy – an economy that has experienced a prolonged and dramatic decoupling of emissions and economic growth. Part of the reason for this is the common Nordic electricity market and the use of economic incentives to promote sustainable energy.

By Páll Tómas Finnsson

Co-operation between the Nordic countries on energy is unique and longstanding. Clear examples are the close collaboration on developing the joint Nordic electricity market and sustainable energy systems. The Nordics complement each other in terms of energy resources, and over the years there has been a strong political will to expand and integrate energy cooperation in the region.

The Nordic energy co-operation promotes stable and secure energy supplies, sustainable growth, and welfare for the citizens of the Nordic countries. It also helps tackle climate and environmental challenges by promoting sustainable energy and an ever-increasing focus on energy efficiency.

Moreover, it serves as a tool for promoting Nordic positions of strength in the energy sector in the global arena. This helps produce energy solutions that are positive for the environment and climate and enable a transformation towards societies that are either climate-neutral or have very low levels of emissions.

Advanced and integrated Nordic electricity market
The electricity markets in Norway, Sweden, Finland and Denmark together form the joint Nordic electricity market, which is one of the most advanced cross-border energy markets in the world. It has grown from four national markets into one common Nordic wholesale electricity market since 2002. The intention is to complete the market with a common end-user market within a few years.

Market integration has coincided with significant interconnector build-out, which has allowed for a more efficient use of the diverse electricity sources across the region. Norway has primarily hydropower, Sweden hydro and nuclear, and Finland nuclear and biomass power plants. Denmark has coal and natural gas-fired combined heat and power plants. Waste and biomass are also used as fuel and wind energy plays an important role. Iceland relies entirely on hydro and geothermal resources for its electrical energy needs, and is not linked to the rest of the Nordic energy markets.

The Nordic electricity market is becoming increasingly integrated with neighbouring countries and other nearby electricity markets. Nordic countries are currently emerging as the backup or ‘green battery’ for the energy transformation within Northern Europe, thanks to the abundant flow of energy from non-intermittent renewable energy sources like hydropower and the increasing volumes of intermittent renewable energy like solar and wind.

Global carbon intensity of electricity production (gCO2/kWh)

Global carbon intensity of electricity production (gCO2/kWh)

Energy Efficiency in the Nordic Countries
Energy efficiency has been a key enabler in the decoupling of GDP and emissions that has taken place in the Nordic region. Nordic governments have facilitated energy savings through a number of initiatives across multiple sectors. Public research funding for energy efficiency has been substantial and has doubled over the past decade.

Several new technical building codes and product standards, energy efficiency labelling of products, awareness campaigns, as well as innovative tax and incentive schemes, are in place. This collection of initiatives promotes the cheapest and most environmentally friendly energy available, namely saved energy. In addition to more efficient use of resources, energy efficiency initiatives can also improve quality of life through better housing, cities, and air quality, and through reduced emissions of CO2 by displacing fossil energy.

The Nordic countries have also increased the efficiency of their district heating and cooling systems by promoting new and more energy-efficient combined heat and power plants (CHP). These plants, which produce both electricity and heat that is fed into district heating, are essential for widespread and efficient use of renewables.

The Nordic countries remain committed to the efficient transformation of their energy systems to greener systems, by using more renewables like wind, solar and hydropower in their common electricity market, and by using more biomass in their CHP and district heating and cooling systems. Energy efficiency is seen as one of the cornerstones of a sustainable and secure energy system, promoting greater environmental sustainability, competitiveness and supply reliability.

A climate-neutral Nordic region
The Nordic region is a climate front-runner compared to other major economies. The carbon intensity of the Nordic electricity mix in 2015 is where the rest of the world needs to be in 2040, according to the two-degree scenario projected by the IEA’s Energy Technology Perspectives 2014.

The Nordic green battery: Nordic energy export potential

The Nordic green battery: Nordic energy export potential

Individually and collectively, the five Nordic countries have some of the most ambitious energy and climate policy agendas in the world, having set challenging targets and milestones along the road to creating a truly sustainable energy system.

However, this involves great challenges. Nordic co-operation, particularly in terms of infrastructure, research, development and demonstration, is vital if the objective is to be attained at the lowest possible cost. The ways in which the Nordic countries can fulfil their national climate objectives are analysed in the report Nordic Energy Technology Perspectives from the IEA, which indicates that a carbon dioxide-neutral energy system in the Nordic region by 2050 is within reach.

Energy research is important in order to achieve this aim. The Nordic countries have been collaborating on energy research since 1985, and, since 1999, the collaboration has been organised by the Nordic Council of Ministers’ institution, Nordic Energy Research. The current main programme under NER, Sustainable Energy Systems 2050, is focusing on renewable energy, markets, grids, and low-emission transports. Key findings from the programme will be presented at the Sustainable Energy Systems 2050 final seminar in Oslo on 21-22 October 2015.

The Nordic countries’ aim is to continue leading the way when it comes to developing a carbon-neutral economy. Nordic energy co-operation is an important part of this and remains a central feature of energy policies in the Nordic region.

The Nordic electricity market is becoming increasingly integrated with neighbouring countries and other nearby electricity markets.

Sustainable
Development Indicators

Share of renewable energy in gross energy supply
Read more

Proportion of environmental taxes in total tax revenues
Read more

Decoupling of environmental pressures, gross energy consumption, ressource use and generation of non-mineral waste from economic growth
Read more

The Nordic countries’ aim is to continue leading the way when it comes to developing a carbon-neutral economy.

nordicbuilt

Nordic Built Cities – smart, livable and sustainable, the Nordic Way

October 2015 marks the launch of the Nordic Built Cities Challenge, a multidisciplinary innovation competition encouraging the development of new solutions for sustainable, liveable and smart cities. Entering teams are invited to address six carefully selected urban challenges, one in each Nordic country and one in the Faroe Islands.

By Páll Tómas Finnsson

Nordic solutions for more sustainable cities
The Nordic Built Cities Challenge was launched on 7 October 2015. On this date, detailed competition programmes for each of the six urban challenges were made available as well as information about the competition format and selection criteria. The Challenge is the key element of Nordic Built Cities, a programme that explores ways in which the Nordic countries can contribute to more sustainable city development. It is developed and administered by Nordic Innovation.

An expert jury from the Nordic countries, Canada and Germany selected the six challenges from a total of 37 submissions from municipalities and companies around the region, each of which described a particular challenge in a specific urban space. The choice was made on the basis of the Nordic Built Cities Charter, which describes ten principles for liveable, smart and sustainable cities, and an assessment of the development and export potential of the solutions.

“The outcome is a very interesting and diverse portfolio of urban challenges,” says Kristina Mårtensson, Programme Manager of Nordic Built Cities. “They all have in common that they address problems that are highly relevant for sustainable urban development, not only in the Nordic region but also in the rest of the world.”

Interdisciplinary approach to urban development
The six challenges address not only the environmental aspects of urban development but are also very much focused on the liveability of the urban spaces and the wellbeing of those who inhabit them. Also, competing teams are encouraged to use ICT-technology and smart solutions to achieve their goals of more attractive and sustainable cities. The competition is open for all interested parties and the final deadline for submissions is 17 December 2015.

Mårtensson points to the competition proposed by the City of Copenhagen as an example of the need for multidisciplinary collaboration. Like the rest of the city, the site, Hans Tavsens Park and Korsgade in the area of Nørrebro, has been badly affected by heavy rainfall in recent years. Furthermore, the district is faced with social and cultural issues that the City also wants to address.

“The challenge has two perspectives,” says Mårtensson. “One is to develop innovative technical solutions to handle heavy rainfall and the other is to contribute to the social revitalisation of the area. The teams will need to combine different competences to come up with the right solutions.”

To enhance this multidisciplinary approach, Nordic Built Cities will award grants to a number of teams that are composed in an unconventional way or have been able to demonstrate innovative cross-border cooperation. Also, Nordic Innovation will organise events to enable participants to find relevant partners, including a matchmaking meeting in Stockholm on 5 November 2015.

Malmö aims for affordable sustainability
Providing affordable and sustainable housing is another universal challenge for cities in the Nordic region and in Europe. The challenge in Malmö, Sweden, seeks ideas to how Sege Park, an old hospital area, could be turned into a showcase for sustainable urban development and a climate-smart lifestyle. The City of Malmö has issued a sustainability plan for the area that describes its ambitions concerning energy self-sufficiency, mobility solutions and the community’s benefits of the site’s green spaces.

“The challenge is to find solutions to how we can build climate-smart neighbourhoods at a reasonable price for the people who live and work there,” says Project Manager Linnea Uppsäll of the City of Malmö. “Our aim is to have solutions that contribute to meeting the IPCC’s goal of not exceeding a CO2 load of two tons per person per year. We hope to see interesting solutions for sharing of space and other resources in the challenge proposals.”

“The Nordic Built Cities Challenge gives us access to ideas and knowledge from Nordic and international urban developers that we might not have reached otherwise,” Uppsäll says. “Therefore, we’re expecting a high level of innovation from the competition.”

Smart and innovative solutions around the region
The Finnish challenge focuses on transforming the Kera area in Espoo, a rapidly growing city close to Helsinki, into a 20-minute neighbourhood. This means that residents should be able to commute everywhere in the city and into the centre of Helsinki within 20 minutes, using public transport.

“The aim is to use smart technology and intelligent solutions to change this old industrial site into a modern and sustainable residential area,” says Mårtensson. “Emphasis is on reusing or recycling the existing structures and buildings in order to create an attractive urban environment, based on the concept of circular economy.”

The remaining challenges revolve around urban spaces in Norway, Iceland and the Faroe Islands. The Norwegian challenge is about revitalising Trygve Lies Plass, a transport hub located in a suburb of Oslo. The entries are expected to address the development of green mobility and climate adaptation solutions, and at the same time contribute to a social and cultural boost to the area.

In Iceland, the municipality of Kopavogur is looking for ideas to transform Karsnes harbour area into a pedestrian-friendly and liveable community with mixed land use of flexible housing, recreational areas and services. Lastly, Runavik in the Faroe Islands aims to establish sustainable family homes on a steep terrain in the municipality. A key objective is to take nature, urban farming and self-sufficiency into account, combined with the values of living in an urban community.

Read more about the six urban challenges of the Nordic Built Cities Challenge

Finalists will be showcased internationally
For each of the six challenges, a local jury will select up to four finalists that will be announced on 3 February 2016. Each of these teams receives a prize of NOK 300,000 and will get the possibility to further develop their solution together with the challenge owner. The final winners of the local competitions will be announced on 17 June 2016.

“Furthermore, some of the municipalities look upon the competition as a procurement process,” says Mårtensson. “The teams could therefore win the local contract and get the opportunity to showcase their solutions, both on the site and internationally, which is our key objective.”

All finalists will be eligible for the Nordic Built Cities Challenge Awards, amounting to a total of NOK 1.2 million. The evaluation of the solutions will be based on criteria in three categories: the ten principles of the Charter, the level of innovation, and development and export potential. According to Mårtensson, these criteria reflect the overall aim of the Nordic Built Cities programme as well as the Nordic countries’ approach to sustainable urban development.

“We’ve been able to combine the environmental and social aspects and develop cross-disciplinary solutions that focus on attractive and liveable urban spaces,” she says. “This holistic thinking is embedded in the way we plan and build. The approach in itself has considerable export potential.”

“They all have in common that they address problems that are highly relevant for sustainable urban development, not only in the Nordic region but also in the rest of the world.”

Kristina Mårtensson, Programme Manager of Nordic Built Cities

textile reuse
Video: The Nordic Built Cities Challenge: Phase 1

Sustainable
Development Indicators

Urban population exposure to air pollution by ozone and particulants
Read more

Read more about the six urban challenges of
the Nordic Built Cities Challenge

Read more on nordicbuilt.org

clearben

Clear benefits from co-operation on ecodesign and market surveillance

The EU aims to increase energy efficiency by 20% by 2020. Ecodesign and energy labelling are important means to achieve this goal, and combined, they are expected to contribute with half of the total reduction in energy use. Since 2013, the Nordic countries have collaborated within the Nordsyn-project to ensure transparent implementation of the European Ecodesign and Energy Labelling Directives and coherent market surveillance of energy-related products.

By Páll Tómas Finnsson

Ecodesign plays an increasingly important role in Europe
The European Ecodesign Directive compels producers of energy-related products to take account of energy consumption and lifecycle impact on the environment in the design of their products. It was initially applied in order to reduce the consumption of energy and other resources by household appliances, while the current Ecodesign and Energy Labelling Directives address a wider range of energy-related products.

“Ecodesign and energy labelling have proven to be the most powerful tools to increase energy efficiency in Europe,” says Danish Nordsyn representative Bjarke Hansen of the Danish Energy Agency. “Thanks to these two regulations, European energy consumption has been reduced by more than 5% compared to a situation without the regulations, and they will continue to play an important role.”

At the time of Nordsyn’s launch, the European Commission was aiming for a 5% reduction by way of ecodesign and energy labelling, but as this goal has already been exceeded, the ambitions have been doubled.

“The Commission is now relying on ecodesign and energy labelling to reduce energy consumption in Europe by 10% by 2020,” says Lovisa Blomqvist, Nordsyn’s project manager. “Ecodesign will account for 85% of these savings and the remaining 15% will come from energy labelling. Together, they will contribute half of the European ambition of using 20% less energy by 2020.”

According to Blomqvist, the success of ecodesign lies in the detail.

“The environmental and energy efficiency requirements for each product are based on extensive studies into market data and technological status of the product group,” she says. “This allows us to introduce specific requirements for everything from light bulbs and smaller electrical appliances to large transformers and professional refrigeration systems.”

Consistency in market surveillance throughout the region
The purpose of Nordsyn is to strengthen Nordic cooperation on market surveillance of the energy-related products subject to the two Directives. Since 2013, all the Nordic market surveillance authorities have participated actively in the project, aiming to ensure consistent implementation of the legislation.

“Our cooperation is a means to implement the rules in a transparent manner in all the Nordic countries and thus ensure that suppliers won’t experience differences in interpretation between markets,” says Hansen.

It is the responsibility of the market surveillance authorities in each country to monitor if producers of energy-related products live up to the ecodesign and energy labelling requirements. Their role is to make sure that producers have access to all the information necessary to comply with the regulation, gather technical documentation and test if the products meet the ecodesign requirements.

“Product testing and document control are quite costly,” says Blomqvist. “As we’re often dealing with the same products, it makes sense to share test results and other information in the Nordic countries and in Europe.”

Detailed guidelines concerning strategic Nordic products
Blomqvist and Hansen agree that Nordsyn has provided a valuable opportunity to develop the Nordic countries’ market surveillance methods. The countries have pooled their resources to produce guidelines, fact sheets and information materials, with particular focus on products of Nordic strategic interest. Also, Nordsyn has produced guidelines for technical documentation and conducted several analytical projects, including a study on the efficiency of market surveillance.

Recently, heating products have been prominent in the group’s activities, as new EU rules on ecodesign and energy labelling for boilers, heat pumps and water heaters came into effect on September 26, 2015.

“Due to our cold climate, this is a product group of great interest to the Nordic countries,” says Hansen. “We also have a long tradition for research into ventilation in buildings, and therefore, the region boasts many of the leading European and global ventilation companies. These are just a couple of the key product groups we’ve addressed in Nordsyn.”

Recommendations for the European Commission
Throughout the project period, the Nordsyn-group has been part of the European dialogue on market surveillance and interpretation of the ecodesign and energy labelling legislation, including the biannual ADCO-meetings. The group has put forward recommendations to the European Commission regarding improved data sharing and market surveillance of more complicated energy-related products.

“Ecodesign is now used also for products that are more difficult to monitor, i.e. motors, boilers, transformers and professional refrigeration systems,” says Blomqvist. “Many of these products are practically impossible or very expensive to take to a laboratory and must therefore be tested at the producer’s site or even after installation at the end-user’s site. This calls for new market surveillance methods and new types of sanctions.”

“We also need to put better structures in place for European cooperation and develop more efficient databases and platforms to share materials,” Blomqvist continues. “The Nordsyn Effect project has shown a prevented energy loss worth €28 million in the Nordic countries for a market surveillance cost of €2.1 million. Nordsyn has shown that it’s cost efficient to share test results, document controls and other material, and we believe that increased cooperation would greatly benefit the market surveillance in Europe.”

“The environmental and energy efficiency requirements for each product are based on extensive studies into market data and technological status of the product group”

Lovisa Blomqvist, Nordsyn’s project manager

Sustainable
Development Indicators

Decoupling of environmental pressures, gross energy consumption, ressource use and generation of non-mineral waste from economic growth
Read more

“We also need to put better structures in place for European cooperation and develop more efficient databases and platforms to share materials”

Lovisa Blomqvist, Nordsyn’s project manager

reachout

Nordic countries reach out to advance international climate negotiations

Action on climate change is a top priority in the Nordic countries, as are the ongoing international climate negotiations. The Nordic contributions to the UNFCCC negotiation process include scientific input, outreach activities, innovative climate financing and development work – all combined with ambitious emissions-reduction targets.

By Páll Tómas Finnsson

International climate agreement at COP21 in Paris
After failing to sign a legally binding global climate agreement at the COP15 conference in Copenhagen in 2009, the international community has worked intensively toward reaching such an agreement at COP21 in Paris in December. In the meantime, more and more scientific evidence emerges of human impact on the climate, including the release of IPCC’s extensive fifth assessment report of the state of knowledge on climate change.

“The key objective of this agreement is to keep the world on a trajectory towards low-carbon development so that we can keep the global temperature rise as far as possible below 2°C compared to pre-industrial levels,” says Anna Lindstedt, Swedish Ambassador for Climate Change and Sweden’s chief negotiator.

One of the key differences between the negotiations in 2009 and now is that all countries involved have committed to delivering their own emission-reduction targets – the so-called Intended Nationally Determined Contributions (INDCs). The EU countries, including Denmark, Sweden and Finland, have pledged to reduce their greenhouse-gas emissions by 40% by 2030 relative to 1990 levels. Iceland and Norway have aligned themselves with the EU targets.

“It’s encouraging that so many countries are preparing or have already presented their INDCs,” Lindstedt says. “Even the smaller, more vulnerable countries, such as the Marshall Islands, are aiming for considerable emissions reductions and climate-resilient development.”

She explains that although the INDCs are promising, they alone will not suffice to put the world on track to keep global warming below 2°C.

“What we need now are ambitious INDC targets and an agreement that works as a mechanism to raise ambition over time,” she says. “We have until 2020 to sort out the details before the agreement enters into force, but it’s very important that we have a core agreement in place that can be signed and ratified as soon as possible.”

Complex issues call for reliable scientific input
The climate negotiations are based on research into observed climate change and its causes, the risks and impacts of climate change in the future, and ways in which the global population can react in order to ensure sustainable development. Two working groups under the Nordic Council of Ministers have played a key role in feeding scientific findings and Nordic climate-change knowledge into the negotiation process.

The Climate and Air Pollution Group (KOL) has funded a range of projects that have produced input into the IPCC reports, which are key documents in the negotiations. Projects funded by KOL include research on very specific scientific themes, e.g. emissions of short-lived climate pollutants, peatlands and climate change, and comparison of CO2 fluxes in Denmark and the Arctic.

“One of the main benefits of our work is that we bring together Nordic and international researchers from different scientific environments in order to analyse important questions pertaining to climate change,” says KOL’s chair, Katja Asmussen of the Danish Environmental Protection Agency. “Our approach fuels knowledge sharing and strengthens the scientific findings. That’s the reason why so many of our projects have fed into the IPCC work that forms the scientific basis of the entire COP21 negotiations.”

KOL also supports initiatives aimed at raising public awareness of climate change. A good example is Global Weirding (www.globalweirding.is/here), an interactive platform that visualises the findings from the latest IPCC report in an innovative and entertaining way. In addition to the project’s more serious aspects, Nordic stand-up comedians spice things up with jokes about global warming.

“This demonstrates the great variation between our projects’ target groups,” says Anna Maria Gran, KOL’s co-ordinator. “Some might only be of interest to a narrow group of specialists but can potentially have a great impact, for example when they’re used by experts involved in international negotiations, while others address the general public.”

Outreach to other nations and negotiating groups
The negotiations also involve the Nordic working group for global climate negotiations (NOAK), which was established in the lead-up to COP15 in Copenhagen. The group commissions studies on climate issues of mutual interest to the Nordic countries that could also be beneficial elsewhere. NOAK has addressed issues such as forestry and climate, public and private climate financing, international co-operation on the third world, and so-called flexibility mechanisms, i.e. carbon-emissions trading and investment in emissions-reducing activities in other countries.

“NOAK has a very clear and specific mandate, which is to support the global climate negotiations and contribute to an ambitious and binding new agreement,” says Outi Leskelä, co-ordinator of the NOAK working group. “This means that our work should not only benefit the Nordic countries, but also the international community.”

With COP21 approaching, outreach activities have become an increasingly important activity for the group. At each negotiation session, NOAK hosts outreach events together with the Nordic chief negotiators, allowing them to enter into direct dialogue with other countries, e.g. China, Russia, Brazil and the USA, as well as some of the key negotiating groups, e.g. the Alliance of Small Island States (AOSIS), Least Developed Countries (LDC) and the Independent Association of Latin America and the Caribbean (AILAC).

“We’ve focused our efforts and resources on working more directly toward other negotiating groups,” says Peer Stiansen, chair of the NOAK working group. “This includes commissioning studies to better understand their negotiating position and organising bilateral outreach meetings with the Nordic negotiators. We now see that these groups approach us to discuss specific issues, which goes to show that these activities advance the general talks.”

Trust in Nordic co-operation
According to chief negotiator Anna Lindstedt, the Nordic contributions to the negotiations are based on close co-operation between the countries’ chief negotiators, who report regularly to each other on the progress of the UNFCCC negotiations and other relevant international meetings and events. Lindstedt agrees with Stiansen that the Nordic countries enjoy the trust of the other negotiating groups, which is vital in the complex negotiations.

“We’re transparent, we have no hidden agendas and we serve as a good example in terms of our own policies and the transformation of our energy systems towards renewables,” she says. “Moreover, there’s the solidarity aspect – we support countries that are poorer and more vulnerable in their efforts to fight climate change. The Nordics are among those that have pledged the highest amount per capita to the Green Climate Fund, which will be instrumental in the implementation of the INDCs and the climate agreement.”

“A key part of moving forward is acknowledging and demonstrating that you can develop your economy and still choose low-carbon and climate-resilient development,” Lindstedt says. “This is where the Nordic countries can lead by example.”

comedians on climate change
Comedians on
Climate Change

“We’re transparent, we have no hidden agendas and we serve as a good example in terms of our own policies and the transformation of our energy systems towards renewables”

Anna Lindstedt, Swedish Ambassador for Climate Change

Sustainable
Development Indicators

Decoupling of environmental pressures, gross energy consumption, ressource use and generation of non-mineral waste from economic growth
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solcelle

Nordic climate financing – a global effort

Securing funding that supports low-emissions and resilient development around the world – not least in developing countries – is crucial in order to limit global warming to 2°C. Three Nordic financial institutions – NDF, NEFCO and NIB – commit significant sums to everything from grants for climate-change and development projects to loans and capital investments. The focus is on both environmental and financial viability.

By Páll Tómas Finnsson

Strong commitment to environmental mandate
The Nordic Development Fund (NDF), the Nordic Environment Finance Corporation (NEFCO) and the Nordic Investment Bank (NIB) all meet the need for climate financing in different ways.

At one end of the spectrum is NDF, a joint Nordic development-finance institution that provides grants for climate-change activities in low-income countries in Africa, Asia and Latin America. Then there is NEFCO, which invests in green-growth projects in Russia, Ukraine, Belarus and Georgia, as well as climate initiatives around the world. At the other end of the spectrum, NIB provides loans and capital investments on commercial terms, mainly in the Nordic and Baltic regions.

“The common characteristic is that we take our environmental mandate very seriously,” says Per Lagerstedt, Senior Environment Analyst at NIB. “All three institutions have extensive environmental expertise when it comes to assessing and evaluating projects in terms of their environmental benefits and risks.”

NIB promotes direct improvements to the environment
The largest of the three organisations is the Nordic Investment Bank (NIB), which is jointly owned by the Nordic countries, Estonia, Latvia and Lithuania. Its declared vision is to contribute to a sustainable and prosperous Nordic-Baltic Region.

“Our role is to work towards improving both competitiveness and the environment in the member states,” says Lagerstedt. “All the projects we enter into, including those outside our member countries, must pursue this mandate.”

The environmental focus means that a large share of the bank’s portfolio is climate-related, but Lagerstedt emphasises that NIB only enters into projects that comply with its financial policy and are consistent with sound banking principles.

“Basically, this means that we don’t take on too much risk and the client must be able to pay back the loan,” he explains. The only exception to this rule is when the member countries, the bank’s owners, provide state guarantees for certain high-risk environmental projects of mutual benefit, e.g. in Russia or Ukraine.

Many of NIB’s climate projects are related to the generation of renewable energy, such as wind farms, hydropower projects and solar-power facilities. The bank also finances waste-to-energy plants, biofuel plants and new energy-saving technologies. In addition, NIB has participated in energy-efficiency programmes, albeit mainly outside the member states. Public transport, in particular train transport, and larger infrastructure and transmission projects are also prominent.

“Investment in transmission projects often makes it easier for investors to invest in new renewable energy plants,” says Lagerstedt. “Moreover, we see a need for a much larger transmission capacity in Europe in order for us to be in a position to implement the EU2020 goals.”

Strict rules apply to which projects qualify for NIB’s green bonds and financing under its environmental mandate.

“The basic rule for all environmental projects is that the environmental situation must improve, in absolute terms, after implementation,” Lagerstedt explains. “For example, if you want to enlarge a factory that produces wood pulp, it’s not enough to state that following our modernisation programme, each ton of pulp will emit less and consume less energy. If the factory’s total emissions are larger after the project than before, it doesn’t qualify as an environmental project. This is an important principle.”

NEFCO – a one-of-a-kind financial institution
The Nordic co-operation’s climate financing is not solely limited to the Region itself, but is also oriented towards enabling social, environmental and economic progress in other areas. NEFCO, for instance, was established 25 years ago, in the wake of the Soviet Union’s demise, as a vehicle to engage more actively in environmental issues in the neighbouring region to the east.

“A lot of outdated technology needed to be replaced, and most of the pollution in the Baltic Sea came from this area,” says NEFCO’s Communications Manager, Mikael Sjövall. “We could either invest more and more money in upgrading waste-water treatment plants and industrial facilities in the Nordic countries, or shift our focus towards the neighbouring region, where we could, more cost-efficiently, prevent harmful substances from damaging the environment.”

Similar principles apply to the current climate issues. Sjövall states that such issues cross national boundaries, and therefore, developed countries must live up to their responsibility to develop and finance new international climate solutions.

As a consequence, alongside its activities in Russia, Ukraine, Belarus and Georgia, NEFCO now makes more active efforts to pursue climate investment on a global scale. Moreover, NEFCO’s carbon facilities are at the forefront of ensuring emissions reductions as part of the UN’s emissions-trading system. In 2014, its carbon procurement facility, NorCap, successfully acquired 19 million carbon credits for the Norwegian Government.

NEFCO’s climate portfolio comprises projects related to renewable energy, energy efficiency, more efficient material use, and initiatives aimed at replacing harmful substances with environmentally friendly alternatives in production. In 2014, 154 new projects were approved by NEFCO, worth €89 million in total.

“NEFCO is the only international financial institution in the world that exclusively finances environmental investments,” says Sjövall. “All of our projects result in emissions reductions. At the initial stages, we look at the emission-reduction potential and assess how costly it would be compared to Nordic shadow prices. This dimension is present in all project preparations and in the handling and administration of our clients’ project enquiries.”

NEFCO’s participation is conditional upon involvement from at least one Nordic business or organisation, which means that Nordic expertise is strongly represented in its portfolio. As an example, Sjövall points out that Sweden and Finland are at the forefront of using logging residues for renewable energy, Denmark is a world leader in wind energy, and Norway and Iceland possess valuable hydropower expertise.

“Each Nordic country has key strengths in certain sectors,” he says. “By pooling these resources, we’re in a much better position to support Nordic companies in their internationalisation efforts and to promote transfer of Nordic environmental technology to global markets.”

Climate and development in the world’s poorest countries
The Nordic Development Fund (NDF) provides financial support to a wide range of mitigation and adaptation efforts in some of the world’s poorest countries in Africa, Asia and Latin America. NDF’s capital is allocated from the development budgets of the Nordic countries. It is the only Nordic finance institution focusing on climate change and development in low-income countries.

The projects focus on three key areas: infrastructure, including energy, transport, urban development, water management and climate resilience; national resources, such as water resources management, sustainable land use and forestry and coastal zone management; and climate capacity building in the partner countries. Most of the funding is done through co-financing with multilateral development finance institutions and Nordic bilateral development organisations and agencies. NDF’s contributions range from €2 – 5 million. In 2014, a total of €38.9 million was awarded to 14 new projects worldwide.

“NDF has successfully developed innovative financing arrangements to catalyse additional financing from other development finance partners and the private sector,” says Hannu Eerola, Country Programme Manager at NDF. “The fund has also showed the ability to pilot interventions that have a high level of risk, which enables the testing of new approaches and technologies in order to develop high-impact solutions to climate change.”

International partnerships through the Nordic Climate Facility
One of NDF’s financing instruments is Nordic Climate Facility (NCF). Each year, NCF launches a €4 million call for proposals on a selected theme related to climate change in developing countries. In 2015, the call focused on climate resilience in urban and private-sector contexts.

“We were looking for projects addressing urban adaptation, which is one of the more complex issues we’re facing,” says Eerola. “Despite the issue’s complexity, we received 65 project applications, 30 of which were shortlisted. In the end, eight projects will receive funding.”

NCF’s objective is to transfer knowledge and climate technology, but also – and equally importantly – to build partnerships with local partners in developing countries. The calls for proposals are open to all types of organisations – consultants, companies, NGOs, universities, etc. – but to be eligible for support, all applicants must team up with a local partner. To increase their ownership of the projects, these local partners are required to finance at least 10% of the project’s budget.

The Nordic Climate Facility has funded a wide scope of projects since it was established in 2009. In 2013, an independent evaluation of the mechanism highlighted its ability to combine innovation, private leverage and partnerships in a cost-effective manner.

“The Nordic countries have been faced with our own climate problems, so we are able to offer many innovative approaches, new technologies and solutions,” says Eerola. “Providing applicants with the opportunity to test and pilot their products and solutions in these countries can upscale their activities considerably.”

“Our mitigation projects address energy efficiency, renewable energy and low-carbon development, while the adaptation projects have dealt with issues such as climate resilience in urban or rural environments,” he continues. “These projects will help the countries and partners to build climate resilience and participate in mitigation activities.”

“Our role is to work towards improving both competitiveness and the environment”

Per Lagerstedt, Senior Environment Analyst, NIB

textile reuse
Connie Hedegaard on Nordic climate investment

Sustainable
Development Indicators

Proportion of environmental taxes
in total tax revenues
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“NEFCO is the only international financial institution in the world that exclusively finances environmental investments”

Mikael Sjövall, Communications Manager, NEFCO

“The Nordic countries have been faced with our own climate problems, so we are able to offer many innovative approaches”

Hannu Eerola, Country Programme Manager at NDF

Fact sheet: Nordic action on climate support
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biorefineries

Key role for biorefineries in the circular bioeconomy

Biorefineries are highlighted as a key element in meeting the global need for better use of bio-resources in a Nordic project aiming to identify existing biorefineries in the region, main obstacles and opportunities for further collaboration. With the right incentives and regulatory framework in place, the Nordics could develop more efficient technologies and conversion processes, create a stronger market for healthy and sustainable bio-based products and spur job growth across a large variety of sectors.

By Páll Tómas Finnsson

Population growth and climate change both call for new solutions
One of Europe’s leading biotechnology scientists, Professor Lene Lange from the Technical University of Denmark (DTU), has led a Nordic effort to map bioeconomy-relevant test facilities in the region. The mapping was conducted within one of the Nordic Council of Ministers’ green growth projects, Nordic Test Centres. Lange explains that the entire global community needs to make better use of its biological resources in order to feed and fuel the world in a more sustainable way.

“We must take better care of the world’s resources and exploit them more efficiently and sustainably,” she says. “For the sake of the climate, we need to use nature’s own degradable and renewable resources to substitute for the fossil resources and synthetics that we rely on today.”

“From the perspective of Nordic development we should move fast forward, developing new technologies for making not just fuel but also higher value products as food and feed ingredients by upgrading crop residues, food processing side streams and bio-waste.”

According to the UN, the world’s population passed the 7 billion mark in 2011 and is expected to reach 8 billion in 2024. Demand for food, feed and fibre is expected to double by 2050, and this will put enormous pressure on the globe’s scarce agricultural resources.

“The population growth means that we need to get more out of the land available for agriculture,” Lange explains. “Less than 50 per cent of everything we harvest currently ends up as feed or food. This shows that there is a lot of residue, waste materials and side streams that are not being exploited to their full potential. Another resource with great potentials for biorefinery upgrade is the seaweed biomass and by-products from fishery.”

Biomass conversion into higher value products
The term biorefinery embraces all facilities that convert and upgrade biomass into valuable products – food and feed ingredients, bio-materials, bio-chemicals and bio-fuel, while the alternative downgrading use of biomass is to burn it to produce bioenergy for electricity and heat. Biorefineries therefore encompass everything from artisan dairy companies to large, automated bio-fuel production facilities. The key challenge is to get the highest possible value out of the biomass in a sustainable manner.

“In most parts of the world, including Europe, focus has almost exclusively been on converting biomass bioenergy: biofuel for renewable transport energy and combustion for heating and electricity. The last is the lowest value you can get out of the biomass,” Lange explains. “All the Nordic countries, however, have also taken more ambitious steps towards upgrading bioresources to produce e.g. more feed and food.”

Recovering and refining more proteins from the available biomass is important for meeting the rising global demand for protein rich animal feed and food. Due to a limited supply in Europe, a significant share of the protein that is fed to the region’s animals comes from imported soy protein from South America.

“Approximately 72 per cent of all arable land is currently used for producing animal feed,” Lange says. “By producing protein-rich feed from our biological side streams, waste streams and crop residues, we could free up land for producing more food and conserve biodiversity.”

Broad Nordic bioeconomic expertise can make a difference
Whereas many countries focus mainly on the so-called yellow biorefinery, processing wheat, straw, corn stover and wood, the Nordic countries also possess vast expertise relevant for the blue bioeconomy, which entails marine bioresources, green biotechnology, upgrading grass, clover etc., and biorefineries for upgrading agro-industrial side streams, often referred to as grey biotechnology. Along with better exploitation of bio-waste from municipal waste sources, these areas represent some of the biggest potentials for developing new technology, processes and bio-based products.

“This is where Nordic expertise could really make a difference,” says Lange. “Not only in our own countries, but also to encourage better and more sustainable use of natural resources all around the world.”

Changes to regulation to remove obstacles for developing the new bioeconomy
Most Nordic countries are developing national strategies and initiatives to develop their bioeconomies, but a common Nordic strategy would allow the countries to reap even more benefits from a strong, circular bioeconomy.

“First and foremost, it’s a driver of increased employment in everything from farming and transportation to scientific research and engineering,” she affirms. “We therefore need to create framework conditions and incentive structures that allow the biorefineries to seize the many opportunities available.”

”The obvious upside of working together is that we could bypass bottlenecks in upscaling the processes, update the regulatory framework and access a larger market,” she continues. “Taking a new bioproduct from the lab to pilot scale and demonstration level is very costly. A Nordic approach would mean that these upscaling facilities could be used by many more participants. We can share facilities without necessarily sharing results, hereby allowing for both common research and industrial competition.”

Lange mentions EU’s bio-fuel blend-in directive, requiring all fuel to include a certain percentage of biofuel, as an example of a well-designed incentive to create and stimulate a market for new bio-based products. She also emphasises that the regulatory framework needs to be adjusted to remove obstacles for companies wanting to utilise the bioresources in innovative ways.

“We’ve seen examples of new, safe and sustainable feed or food products being rejected because of an out-dated regulatory framework,” she says. “As an example, excess gelatine from production of sweets cannot be moved into the feed sector, as it’s only approved for human consumption.

“It doesn’t make sense from a food and feed safety point of view, it’s only because of the traditional silo mentality in the regulatory framework. This has to be rethought.”

Europe to invest in the bioeconomy
Professor Lange urges the Nordic countries to use their experience and bioeconomy expertise to influence EU-regulation and make way for a transition towards a more circular economy. She also encourages Nordic stakeholders to participate in international consortia on the development of the bioeconomy, notably within the EU’s new €3.7 billion public private partnership programme, the Bio-Based Industries (BBI) Joint Undertaking.

“One of the outcomes we hope for is that the Nordic bioeconomy priorities, including the blue bioeconomy, the green biorefinery and higher value products from the yellow biorefinery, will be well represented, and that we’ll initiate and be part of many of the granted consortia,” says Lange. She adds that the Nordic countries should encourage the EU to include biorefinery investments in Jean-Claude Juncker’s €315 billion strategic investment plan for Europe.

“In my opinion, biorefineries should be among the prioritised infrastructure investments in the Nordic countries and in the EU, because they can deliver most efficiently on all parts of the vision for a smarter, more sustainable and more inclusive Europe.”

new nordic business models
New Nordic Business Models for a Circular Economy

Sustainable
Development Indicators

Development in municipal waste generation and in municipal waste management by treatment method
Read more