Regional effects of bioenergy production in Finland

Abstract: Great hopes have been attached to bioenergy in the current discussion on climate and energy policies. Finnish
national climate and energy strategy sets the share of renewables in energy use up to 38%, and a significant amount
of this should be covered by biomass based energy. In 2020 forestry is set to contribute 24 TWh and agriculture 4-5
TWh to energy production.
It is also seen that bioenergy may fare well in regional aspects as well, since the bioenergy resources in the remote areas
are considerable, except for the northernmost regions of the country. However, these regional aspects have gone without
investigation before this study.
The first two chapters of this report set the empirical framework for the study with detailed description of the bioenergy
production potentials in Finnish regions. The first chapter describes the potentials in forestry, and the second in agriculture.
The potentials are divided to theoretical, techno-economic and willingness-to-supply based potentials. It can be
seen from the data on the potentials that the use of the mere side-products of agriculture and forestry in energy production
is sufficient as a complementing factor, although it is clearly insufficient as a complete energy solution. the eastern
and central parts of the country have greatest potentials in forestry, while southern and western parts fare better with
their agricultural potentials.
The third chapter is a general equilibrium analysis based on the data on the potentials described above. The regional
CGE-model was used to analyse the impact of increased use bioenergy potential. RegFinDynBio-model, based on the
recursive dynamic regional model RegFinDyn, was employed for this task. The model includes 20 regions (Finnish
regions at NUTS3-level) and 38 industries. Bioenergy is produced by two industries, agriculture and, and fossil energy
by four industries (coal, oil, gas and peat).
Simulations were constructed by three degrees of increase in bioenergy production. The first one represents conservative
increase in bioenergy production, the second one the targets set in the climate and energy strategy, and the third one
the full exploitation of the techno-economic potential. Seven scenarios were constructed to describe the policy environment.
By these scenarios, the features of the emissions trading system (emission permit price, quota reductions and
industry coverage) and relationship of emission trade and carbon tax can be evaluated.
The results for the whole country proved that our model was well comparable with earlier studies. Increase in bioenergy
use will lower the levels of GDP and employment marginally but will, nevertheless, help to achieve the emission reduction
goals. However, the regional results showed how unevenly the costs were distributed. The regions that beforehand
seemed to be the most promising ones fared the worst. Southern Ostrobothnia was the sole exception, which is due to its
export income from bioenergy. The greatest difficulties are seen in Kainuu, where the extra costs caused by bioenergy
will make it even harder for the economy to adjust. Eastern Uusimaa shows significant losses as well, but they can be
traced back to the region’s economic structure, which is heavily dependent on fossil energy refining. Some regions that
use gas as energy source are seen to gain marginally because of their more diverse energy production system and thus
better ability to adjust.
Keywords: bioenergy, regional economy, agriculture, forestry
ISBN 978-952-10-6090-8 (paperback)
ISBN 978-952-10-6091-5 (pdf)
ISSN 1235-2241