Energy, Policy, and the Environment: Modeling Sustainable Development for the North

Studies In Human Ecology And Adaptation Series Editors: Daniel G. Bates Hunter College – City University of New York, New York, New York Ludomir R. Lozny Hunter College – City University of New York, New York, New York

For further volumes: http://www.springer.com/series/6877

Marja Järvelä    Sirkku Juhola ●

Editors

Energy, Policy, and the Environment Modeling Sustainable Development for the North

Editors Marja Järvelä Department of Social Sciences and Philosophy, University of Jyväskylä Jyväskylä, Finland [email protected]

Sirkku Juhola Centre for Urban and Regional Studies School of Engineering, Aalto University Helsinki, Finland [email protected]

ISSN 1574-0501 ISBN 978-1-4614-0349-4 e-ISBN 978-1-4614-0350-0 DOI 10.1007/978-1-4614-0350-0 Springer New York Dordrecht Heidelberg London Library of Congress Control Number: 2011935143 © Springer Science+Business Media, LLC 2011 All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)

Acknowledgements

This book arose from the collective desire of the authors to tackle the politicization of the renewable energy issue in the North from the point of view of local and regional sustainable development. The early kick off for launching the idea was inspired by the Energy and Environment - Competing Powers? conference held in Jyväskylä, Finland in November 2007. The conference addressed the potential ­tensions between the growth of the renewable energy sector vis-à-vis its possibly problematic environmental impacts. We wish to express our sincerest gratitude to the prestigious keynote speakers Professor Michael Redclift, Professor Joyeeta Gupta, and Professor Frede Hvelplund for creating a very lively intellectual atmosphere at the conference and thus providing a solid basis for further discussion. We also extend our deepest gratitude to the many experts that joined this event by contributing academic papers and speeches in the workshops and during the final roundtable discussion. We also thank all those who contributed to this volume, many of whom participated in the conference. It took a couple years to collect the variety of local experiences presented in this book that have emerged from the politically, economically and technologically highly diversified energy sector in Europe. The articles draw from many completed and ongoing empirical research projects, mostly independently implemented in various research institutes and universities, and we thank all institutions for their support. In general terms, this book can be considered an extension of the research project Sustainable Development and Pioneering Small Scale Rural Entrepreneurs (SUSMARU) 2007-2009, funded by the Academy of Finland and directed by one of the editors of this volume Professor Marja Järvelä. The main part of the editing work has been undertaken at the Department of Social Sciences and Philosophy at University of Jyväskylä. The close connection of the editing process to the project SUSMARU and its host department has guaranteed the intellectual and technical infrastructure to carry on the editing work on a steady basis. Part of the editing work has also been carried out at the Centre for Urban and Regional Studies, School of Engineering at Aalto University, Finland. The on-going research of the other editor, Dr Sirkku Juhola, has contributed to the key themes of the book in terms of socio-technological changes at the local and regional scale. v

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Acknowledgements

The key themes discussed in this volume further contribute to the Nordic Centre of Excellence for Strategic Adaptation Research (NORD-STAR), which is funded by the Norden Top-level Research Initiative sub-programme ‘Effect Studies and Adaptation to Climate Change’. We also want to thank all of those who have participated in editing the his manuscript, especially Anna and Lisa Jokivirta. Liisa McDermott was helpful in the early stages of the editing process. We are very thankful to the Studies in Human Ecology and Adaptation Series editors, Daniel G. Bates and Ludomir R. Lozny for their valuable comments and input that helped us to finalize the manuscript. We also thank the editorial team at Springer for their excellent support and co-operation throughout this process. Jyväskylä, Finland Espoo, Finland

Marja Järvelä Sirkku Juhola

Contents

Part I  Energy, Policy and the Environment in the North   1 Introduction: Energy, Policy and the Environment: Modeling Sustainable Development for the North................................ Marja Järvelä and Sirkku Juhola   2 Climate Change and Energy Issues in the North.................................. Marja Järvelä, Sirkku Juhola, and Margareta Wihersaari   3 Farewell to Self-sufficiency: Finland and the Globalization of Fossil Fuels........................................................................................... Timo Myllyntaus   4 Trends in EU Energy Policy 1995–2007................................................. Susanna Horn and Angelina Korsunova   5 The Legacy of the Oil Industry in Tomsk Oblast: Contradictions Among Socio-Economic Development, Political Legitimacy and Corporate Profits........................................... David Dusseault

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Part II  Challenges of National Energy Policy and the Environment   6 Innovative Democracy and Renewable Energy Strategies: A Full-Scale Experiment in Denmark 1976–2010................................. Frede Hvelplund

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  7 Disregarding Wind Power: Introduction to Finnish Feed-in Tariff Policy................................................................................ 115 Miikka Salo

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  8 Climate Change Mitigation and Adaptation in Swedish Forests: Promoting Forestry, Capturing Carbon, and Fueling Transports........................................................................... 133 E. Carina H. Keskitalo, Jenny Eklöf, and Christer Nordlund Part III  Modeling Local Sustainable Development for the North   9 Energy Policy or Forest Policy or Rural Policy? Transition from Fossil to Bioenergy in Finnish Local Heating Systems................ 155 Taru Peltola 10 Bioenergy Production and Social Sustainability on Finnish Farms..................................................................................... 173 Suvi Huttunen 11 Energy Sustainability: The Role of Small Local Communities........... 193 Pia Laborgne Index.................................................................................................................. 215

Contributors

David Dusseault  Russian Energy Policy, Aleksanteri Institute, University of Helsinki, Helsinki, Finland [email protected] Jenny Eklöf  Department of Historical, Philosophical and Religious Studies, Umeå University, Umeå, Sweden [email protected] Susanna Horn  School of Business and Economics, University of Jyväskylä, Jyväskylä, Finland [email protected] Suvi Huttunen  Department of Social Sciences and Philosophy, University of Jyväskylä, Jyväskylä, Finland [email protected] Frede Hvelplund  Department of Development and Planning, Aalborg University, Aalborg, Denmark [email protected] Sirkku Juhola  Centre for Urban and Regional Studies, School of Engineering, Aalto University, Helsinki, Finland [email protected] Marja Järvelä  Department of Social Sciences and Philosophy, University of Jyväskylä, Jyväskylä, Finland [email protected] E. Carina H. Keskitalo  Department of Social and Economic Geography, Umeå University, Umeå, Sweden Forestry in Rural Studies Unit, Department of Forest Management, Swedish University of Agricultural Sciences, Umeå, Sweden [email protected]

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Angelina Korsunova  School of Business and Economics, University of Jyväskylä, Jyväskylä, Finland [email protected] Pia Laborgne  European Institute for Energy Research/KIT, Karlsruhe, Germany IWAR, Technical University of Darmstadt, Darmstadt, Germany [email protected]; [email protected] Timo Myllyntaus  Department of Finnish History, University of Turku, Turku, Finland [email protected] Christer Nordlund  Department of Historical, Philosophical and Religious Studies, Umeå University, Umeå, Sweden Swedish Collegium for Advanced Study (SCAS), Thunbergsvägen 2, Uppsala, Sweden [email protected] Taru Peltola  Finnish Environment Institute, Joensuu, Finland [email protected] Miikka Salo  Department of Social Sciences and Philosophy, University of Jyväskylä, Jyväskylä, Finland [email protected] Margareta Wihersaari  Department of Biological and Environmental Science, University of Jyväskylä, Jyväskylä, Finland [email protected]

Part I

Energy, Policy and the Environment in the North

Chapter 1

Introduction: Energy, Policy and the Environment: Modeling Sustainable Development for the North Marja Järvelä and Sirkku Juhola

Keywords  Energy policy • Sustainable development • Environmental policy • Northern energy region

Energy, Policy and the Environment Climate change is unequivocal (IPCC 2007) and it has brought questions of energy and the environment to the forefront. It is unclear to what extent the traditional environmental concern and environmental policy suffice in addressing issues such as climate change while global greenhouse gases continue to increase at a steady rate, as does the depletion of fossil fuels. Ensuring the availability of energy is the key to maintaining current levels of well-being in societies and growth in the global economy. Given that production and utilization of energy and the environment are inherently interlinked, energy policies and changes in economic structures, which focus on alternative modes of energy production, sustainability, innovation, safety and cost efficiency, are crucial in putting into action global climate and energy policy as well as economic policy. Similarly, crucial tasks in environmental policy are the sustainable utilization of natural resources and the conservation of natural and human-made habitats. As the limits of fossil fuel-based growth become more apparent, new configurations are expected to appear in the public and private domains that prioritize concerns over energy and environment alike. Countries in the North certainly have high demand of energy resources. Energy supply has traditionally been dependent on the regional natural resources, such as wood for heating and rivers for hydropower production. More recently, in the era of

M. Järvelä (*) Department of Social Sciences and Philosophy, University of Jyväskylä, Jyväskylä, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_1, © Springer Science+Business Media, LLC 2011

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globalization, the situation has changed considerably and imported sources of energy now play an important role in the energy consumed in Northern countries. Particularly, oil and nuclear energy have taken an important role and these new sources of power production have led not only to novel technologies but also to complex entanglements of public and corporate action. The national energy sector in all countries has opened up to trends of globalization since the oil crises in the 1970s. Although these trends are also visible in the North, it is important to ask whether there is an emerging Northern dimension in terms of energy production and use, and environmental policies across these countries.

The Northern Energy Region The economic structures of the Northern countries in Europe, Scandinavia and Finland in particular are in the process of changing from very energy intensive conventional heavy industries to industries focusing on knowledge-intensive new information and communication technologies. This structural change is slow, and the Nordic countries in particular still have the highest proportion of electricity-intensive industries such as the paper and pulp industry, steel industry, ferroalloys and aluminum smelting plants (Borup et  al. 2008). Historically, these industries have been able to expand because of relatively low electricity costs, creating a situation where these cost-sensitive industries have become closely interwoven to the energy industry, and thus have a high interest in environment policy that relates to energy production. There are three issues that are particularly relevant when identifying and discussing a Northern energy region, issues related to the ways in which energy demand is created and how energy is consumed. Firstly, the cold winter climate creates conditions that require high investments and permanent costs of heating. For example, the exceptionally cold winter in Finland in 2010 was attributed, alongside increased industrial production, as the reason why total energy consumption rose by 9% (Statistics Finland 2010). Secondly, it is recognized that Northern societies are predominantly “high-tech” societies and are among the top energy consuming countries in the world (Borup et al. 2008). The heavy industrial sectors, however, remain the main consumers of energy within all countries in Northern Europe. Thirdly, high standards of living are related to the abundant use of energy, in addition to the high heating costs. Domestic consumption of electricity in the capital regions in the Nordic countries, for example, amounts to almost 50% in Oslo and over 30% in other capital regions (Borup et  al. 2008). Moreover, and also related to the high standard of living, traffic is responsible for a major share of energy consumption, and this is especially relevant in the sparsely populated industrialized areas of the North, where public transport is limited. It is perhaps due to this impact on the environment and natural resources that the levels of environmental awareness in the North have also been relatively high in

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the past. For example, Nordic countries have been among the first to introduce environmentally related energy taxation in terms of fossil fuels already in the 1990s (Vehmas et al. 1999; Sairinen 2003). In addition to utilizing more traditional policy instruments and regulation, the Northern countries, and communities within, have been at the forefront in finding sustainable alternatives to solve conflicts arising from the rise in energy needs and their interest in protecting the environment. This trend has been observed since the Rio Summit almost 20  years ago. A study of Swedish municipalities shows how some municipalities had adopted even more ambitious targets for local sustainable development than those set at the national level (Eckerberg and Forsberg 1999). More recently, as the challenges of climate change have become more acute, initiatives for low-carbon societies are increasingly put forward as objectives that reconcile the competing interests of energy and environmental policy, and ensure the transition towards more sustainable societies. For example, the city of Copenhagen has stated its aim to be the first carbon-neutral capital city by 2025 (City of Copenhagen 2009). Similarly, Norway has pledged to become a carbonneutral society by 2030 by increasing the use of renewable energy sources and taxing fossil fuels, while supporting the use of climate friendly vehicles through taxation (Nordic Energy perspectives 2010). Countries in the North have taken different pathways in the past, and continue to do so with differing policies in attempting to achieve these ambitions. Overall, countries in the North do have the potential to come up with solutions that can be utilized on a wider scale in order to ensure more sustainable future pathways within Europe and globally. These solutions emerging from the North cover the wide range of renewable energy production, including wind and hydro power, bioenergy, photovoltaic and geothermal, as well as new ways to improve energy efficiency through technology in the construction, transport and production sector. However, as this volume demonstrates, progress has by no means been uniform and rapid. Moreover, technological and innovation capacity are not sufficient on their own in bringing about social change on the scale that is required. Thus, the question arises whether it is possible to speak of a Northern dimension in the search for sustainable energy solutions, and how these transitions take place and under what conditions? This book attempts to find answers to this question by bringing together a collection of case studies that discuss the historical developments of energy policy in the North and the supra-national political context within which current policy decisions on energy and the environment are made. Furthermore, contributions in this volume highlight the importance of national level decision making and to what extent these structures constrain or enable changes in energy production towards more sustainable strategies and away from fossil fuels. Finally, this book brings together examples of new emerging initiatives that break the traditional models of energy production in the North and demonstrate the possibility of sustainable local solutions. In order to do this, this book brings together a selection of national level and local case studies from Northern Europe as well as two case studies from Russia and Germany.

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Similarities and Diversity in the Northern Energy Region of Europe During the twenty-first century, similarities in energy production and supply across the Northern countries in Europe have emerged as a result of the existence of similar local natural resources and by the development of technological skills and facilities to exploit these resources. Meanwhile, due to the variety in natural resources, along with varying degrees of modernization, industrial structure and policy-driven choices, national energy infrastructures have also developed in different directions over recent decades. For example, in the 1990s, Norway was almost exclusively relying on hydropower, while Denmark predominantly relied on coal, with Sweden and Finland utilizing mainly a mix of nuclear, hydro and coal (Amundsen et al. 1999). However, nations and sub-national regions have towards the end of twenty-first century become less and less dependent on their own natural resources, as they have been able to purchase energy resources from elsewhere, namely from globalizing markets. Simultaneously, there has been an important shift in the socio-economic organization and delivery concerning the energy infrastructures taking shape, driven by the liberalization of the energy markets. Similarities have begun to multiply, taking place in a framework of globalizing market-driven economies, and contributing to the ­displacement of nationally based infrastructures in energy production. However, in the long run, the opportunity to acquire energy assets from global markets has not been an immediate guarantee for economic growth, as energy markets have grown increasingly competitive. Furthermore, the intensive use of imported energy resources has increasingly been considered to contribute to an undesirable dependency, accumulating the susceptibility to global driving forces and volatile prices, further compounded by concern over the depletion of non-renewable energy resources (particularly oil). Last but not least, the threat of climate change has played a major role in challenging some of the “modern” ways of solving energy issues in many Northern countries. Thus, similarities and differences across the Northern energy region have started to appear, with an increasing mix of energy policies, focusing on ways to diversify local energy production or secure the supply of imported energy resources. Even though not all nations in the Northern energy region of Europe belong to the European Union, it is obvious that the EU has become a major player in shaping energy policy in Europe and in the North. EU decision makers have directly acknowledged the political inter-linkages between energy and the environment, and as a result, ambitious targets have been set to promote energy efficiency both in industry and across households (Commission of the European Communities 2008). The aim is to achieve a 20% reduction in emissions through increasing the share of renewable energy to 20% while simultaneously saving 20% on energy consumption through energy efficiency. This official policy also highlights, more than before, the security of supply of energy within the Union, considering the currently quite significant energy imports from Russia to the EU Member States. Although this move towards security of supply is to some extent related to the presumed vulnerabilities

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of the supply chain from Russia towards EU countries (see Orttung et al. 2008), it is also true that the ambitious targets of the EU in climate mitigation are paving pathways to joint efforts of Member States in promoting regionally sustainable development and low-carbon economies. Even if the EU is aiming at coherent cross-sectoral policy with a strong emphasis on energy efficiency and societal low-carbon targets (COM 2007), it is evident that the Northern energy region in Europe will remain highly diversified with regards to its energy generation, use and supply. Firstly, important players such as Russia and Norway will follow their own policies based on abundant natural energy resources, with both having important stakes in the energy sector as net exporters of energy. Secondly, among the EU-27 countries, there are vast differences in energy selfsufficiency, natural resources, as well as in the level of eco- and energy-efficient technologies in both production and consumption. Thus, the societal transformation towards more sustainable energy supply does not only involve new investments in industry and technology; it also requires major political debates concerning what development trajectories should be encouraged by national and local policies (e.g., nuclear power vs. renewable energy). Finally, the EU energy policy in itself is not promoting a unidirectional policy to promote a single sustainable energy model in its energy system reform. Rather, all possible sustainable paths enabled by different forms of energy production are to be applied, in parallel, in order to reach the best possible result for enhancing low-carbon economies and to secure the social wellbeing of EU citizens.

Modeling Sustainable Development in the North: Local Initiatives, Societal Driving Forces and Barriers Globalization has been perceived as both an opportunity and a threat to local economies, and this also applies to Northern Europe. Arguably, many source-related options and technological alternatives to produce and deliver energy efficiently have emerged from Northern Europe. Issues relating to the cost and sustainability of energy systems, as well as the security of supply, market-based production, and delivery of energy all contribute to the transnational integration of the energy sector and to an emerging tension between global and local energy supply systems. On the one hand, there is the potential for huge investments in high-tech ­large-scale production units, alluding to a great trust in economics of scale, and in some cases also to interests in exporting energy products. On the other hand, technological development and the need for alternative sources of energy have allowed new concepts of small-scale production to emerge. Drawing on local energy supplies, these new small-scale energy production systems are often regarded as having many benefits, in terms of security, eco-efficiency and long-term local ­sustainability. Indeed, small-scale production may be more sensitive to local needs than largescale energy systems that provide for transnational markets.

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Energy systems can be described as either centralized or distributed. In the industrial North, these early distributed systems were displaced by centralized ­systems during the modernization process of the twentieth century. From this ­perspective, the current alternative small-scale production of renewable energy supply could be, to some extent, a process of learning from past experiences. However, significant changes over the twenty-first century, with regards to the structure of industries, available technologies, political interests and everyday life and living standards in households, have posed new challenges to the energy systems, for which new solutions are needed. The pace of many of these changes has even accelerated during the new Millennium. Hence, any alternative distributed energy production system has to be adapted not only to the local circumstances but also to the overall development goals of the societies and local communities in a globalized world. In Northern Europe, politicization of the energy sector is related to the environmental impacts of production and end use. In these societies, where energy is consumed abundantly, new alternatives are in high demand, motivated by the need to reduce greenhouse gas emissions and the more general political will to promote sustainable development in local communities. Sustainable development, as a general policy program, has been a legitimate goal (or process) since the Rio Summit, and these days, renewable energy production is increasingly a prevailing practice in many localities and an integral part of national energy strategies. As a result, ambitious goals to increase the production of renewable energy for export opportunities are often related to renewable energy technologies, such as windmill components, solar panels and pellet boilers. Yet, even though the EU strategy for promoting renewable energy is often considered ambitious in the global scale, some of the Northern European countries might consider the average EU target (20%) for 2020 quite moderate. This is because some of the Nordic countries, for example Sweden and Finland, are already above the average EU target in terms of renewable energy. In spite of the relatively high share of renewable energy in the overall energy production in many industrialized countries of Northern Europe, the advances in this sector may nevertheless encounter a considerable number of barriers. On a political level, physical planning systems as well as different energy policy instruments can impede the implementation of renewable energy strategies. A study of the planning of wind power in the Nordic countries revealed that institutional conditions that govern technology deployment are key to understanding why the uptake of wind power has been slower in Sweden in comparison to Norway or Denmark, see Pettersson et al. (2010). Similarly, different policy objectives within the energy and environmental policy sectors can create conflicting aims and result in contradictory policy instruments. For example, the utilization of forest-derived bioenergy can be in line with forest policy, but at the moment, this is not the case in the Nordic and Baltic countries, with forestry legislation not being used as a tool to enhance the use of biomass for energy (Stupak et al. 2007). In addition, short-term economic efficiency can also be seen as a reason for slow uptake of renewable energy in relation to fossil fuels that continue to remain more economical. Renewable energy, as it is currently produced, is most often produced on a small scale and distributed locally, and it seldom reaches, by its own means, a

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competitive price level in its initial stage in competitive markets. Moreover, lack of innovation in technical devices can be a barrier in introducing alternative and more local distributive systems. Furthermore, the applicability to local communities may pose complex challenges, as uptake of new innovations is rarely a straightforward process. As a result, there seems to be a clear gap between the technological potential and the actual distributed energy production systems based on renewable energy production and local delivery.

Outline of the Volume This volume discusses the dilemma of energy production and consumption in relation to the need to limit environmental impacts. The challenge presented by climate change is increasingly forcing countries to move towards more sustainable energy systems, prompting shifts towards low-carbon or carbon-neutral societies. This volume explores the tension between different scales of energy systems, from the global to the national and local, highlighting the increasingly complex nature within which energy is produced and consumed in the North. This makes the Northern experience highly relevant in terms of drawing lessons on how these systems can be reoriented to address the balance between the production and consumption of energy and sustainable living environments in a globalized world. In order to find answers to these questions, this book brings together a selection of case studies that highlight the diversity in energy-related issues. This volume addresses the questions of energy and the environment in the North in the European and global context, and further examines the historical developments, views on energy taxation and effects of EU energy policy in the region. The case studies in this volume discuss the range of energy policies in the Northern countries, focusing on their enabling and constraining factors with regards to transitioning towards energy systems based on renewable energy. Furthermore, this book explores the tension between environment policies and those that focus on the energy sector. The book also provides an analysis of different of renewable energy sources in the local context, concentrating on forest products and biofuels, and the socio-economic opportunities and limitations associated with these. The points of view of small ­communities – and what they can offer to the current developments in energy ­systems – are discussed, as is the perspective of rural bioenergy producers. This volume is divided into three sections, with each section bringing together a collection of articles that address a set of questions related to energy and environmental policy in the North. The first section, titled Energy, Policy and the Environment in the North discusses these themes in relation to the North, and also places the Northern region in a wider context and discusses the trends that have contributed to the current systems of energy production and consumption in the North. The Northern region presents an interesting case since demand for energy has increased steadily in the region, as these countries have become more developed. Simultaneously, different countries have responded to these challenges in different ways by employing energy strategies based on alternative non-renewable and renewable energy sources.

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In examining the development of societies in the North, it becomes clear that economic growth and production and consumption of energy are closely intertwined. Järvelä, Juhola and Wihersaari discuss this in their contribution (Chap. 2), highlighting how these trends have resulted in high greenhouse gas emissions in the Northern region, presenting a challenge that societies in the North are now engaging with. These high emissions consequently require measures to mitigate emissions and further steer the societies towards low-carbon futures. Such transitions are likely to require technological innovation in terms of energy production, as well as more structural transformations in terms of societal structures, in order to tackle the challenge of climate change, and not to distance the problem into the future. Myllyntaus further discusses the pathways into energy dependency in the Nordic context (Chap. 3), discussing the trends from localized energy production to a more globalized network of energy systems. Although these countries have, as discussed earlier, responded to the challenge of increasing energy demand in different ways, it is clear, according to Myllyntaus, that industrial and agricultural policy, and later on energy policy, have had profound impacts on the way energy is produced and consumed, diluting the diversity and converging the pattern of energy use in industrialized European countries. The Northern energy region is naturally influenced by the wider pressures of globalization and political processes that affect how energy is produced and consumed. The European Union plays a major role in the North, although not all countries are members of the Union. The developments in EU energy policy reflect back to the energy policies adopted in these countries, harmonizing the way in which energy policy is conducted. Horn and Korsunova (Chap. 4) examine the trends in EU energy policy over a decade (since the mid-1990s), demonstrating how concerns over security of supply, diversification of energy sources and energy efficiency have dominated the preparatory acts within the European Commission. Security of ­supply and import dependency due to lack of sufficient indigenous energy sources has been a concern that has driven the EU to consider the role of supplier countries and those countries within the transit routes of energy products in its own energy policy. The role of Russia – both in relation to the Northern region as well as in relation to the EU on the whole – has become increasingly complex, as discussed by Dusseault (Chap. 5). Russia’s resource wealth is not only unparalleled in the EU; it is also unevenly distributed within the Russian Federation. Competing interests and strategies are a source of socio-economic well-being in Russia, and hydrocarbons have become a tool of political legitimacy for policymakers as well as a source of profit for businesses. These expectations and inter-relationships also reverberate across the EU as well as to the Northern countries that import energy from the Russian Federation. The second section of this volume, Challenges of National Energy Policy and the Environment, focuses on the national context within the Northern energy region, and the role that national level structures and policies play in enabling or constraining the ability to transition to a low-carbon energy system. According to Hvelplund (Chap. 6), in addition to technological innovations, changes are required in terms of knowledge and organization of societies, as well as in the infrastructure and public regulation. Innovative democracy at the national level in Denmark has enabled

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grassroots organizations to develop renewable energy, particularly wind power and energy conservation technologies, which have been employed on a large scale. An analysis of the implementation of wind power in Finland by Salo (Chap. 7) further supports these conclusions. The wind power sector has been slow to develop in Finland, and this marginalization can be at least partially explained by the power structures of the energy sector that have not supported the introduction of feed in tariffs. This has slowed down the development of the sector and the utilization of new renewable energy sources. The complexity of national level decision making has also been observed in Sweden in terms of utilization of forests as carbon sinks and as a source of biofuels. Keskitalo, Eklöf and Nordlund (Chap. 8) discuss the national level policy developments that have taken place in Sweden related to climate change mitigation, utilization of biomass and forest policy. The authors conclude that recent policy developments will have implications to forest users as new focus is being placed on forests as energy sources, and this can eventually lead to changes in established environmental protection targets, highlighting how energy and environmental policy are interlinked. Furthermore, this case shows how competing policy interests affect the transition to renewable energy use. The third section of this volume, Modeling Local Sustainable Development for the North, moves the focus of analysis to the local level and discusses the potential for local level, distributed energy systems. This section brings together three case studies that model sustainable development in the North, both in terms of energy production and energy efficiency. In terms of bringing about distributed local energy systems, it is crucial to understand how these changes take place. Peltola explores how this change happens in terms of bioenergy heating business in Finland (Chap. 9). According to Peltola, changes are possible within rigid technological systems that are laden with institutional, economic and technological momentum and these changes can lead to an increase in the share of renewable energies. Huttunen also discusses the potential for rural bioenergy production in Finland as a model for localized energy production and examines the social aspects related to energy systems (Chap. 10). The three cases of biogas, biodiesel and heat entrepreneurship demonstrate that localized models of energy production can be socially sustainable, making them potentially desirable also from the point of view of rural development. Finally, Laborgne examines the potentials for energy efficiency strategies and their implementation in small communities in Germany (Chap. 11). Taking a complementary view (i.e. energy efficiency in terms of energy production and consumption), the case studies demonstrate how transitions can be made by paying attention to local networks and local development strategies.

References Amundsen, E., Nesse, A., Tjøtta, S. (1999). Deregulation of the Nordic power market and environmental policy. Energy Economics, 21, 417–434. Borup, M., Dannemand Andersen, P., Jacobsson, S. & Midttun, A. (2008). Nordic energy innovation systems –Patterns of need integration and cooperation. Roskilde: Nordic Energy Research. City of Copenhagen. (2009). Copenhagen climate plan. The short version. Copenhagen: The Technical and Environmental Administration, City of Copenhagen.

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COM (2007)1. 2010. An energy policy for Europe. Environment and energy, Europe in figures – Eurostat yearbook 2010. Brussels. Commission of the European Communities. (2008). 20 20 by 2020. Europe’s climate change opportunity. Brussels: Commission of the European Communities. Eckerberg, K., Forsberg, B. (1999). Implementing agenda 21 in local government: The Swedish experience. Local Environment, 3(3), 333–347. IPCC. (2007). Climate change 2007: The physical science basis. Contribution of Working Group I to the Fourth Assessment. Report of the Intergovernmental Panel on Climate Change. Cambridge: Cambridge University Press. Nordic Energy Perspectives. (2010). Towards a sustainable Nordic energy system. 20 Perspectives on Nordic Energy. 10 opportunities and challenges. Mölndal: PR-Offset. Pettersson, M., Ek, K., Söderholm, K. & Söderholm, P. (2010). Wind power planning and permitting: Comparative perspectives from the Nordic countries. Renewable and Sustainable Energy Reviews, 14(9), 3116–3123. Orttung, R., Perovic, J., Pleines, H. Schröder, H. (ed.) (2008). Russia’s energy sector between ­politics and business. Forschungsstelle Osteuropa Bremen Arbeitspapiere und Materialien. No. 92 – February 2008. Sairinen, R. (2003). The politics of regulatory reform: new environmental policy instruments in Finland. Environmental Politics, 12, 73–92. Statistics Finland. (2010). Energy supply, consumption and prices 2010, 4 th Quarter. Energy 2011. Statistics Finland. Stupak, I., Asikainen, A., Jonsell, M., Karltun, E., Lunnan, A., Mizaraitė, D., Pasanen, K., Pärn, H., Raulund-Rasmussen, K., Röser, D., Schroeder, M., Varnagirytė, I., Vilkriste, L., Callesen, I., Clarke, N., Gaitnieks, T., Ingerslev, M., Mandre, M., Ozolincius, R., Saarsalmi, A., Armolaitis, K., Helmisaari, H.-., Indriksons, A., Kairiukstis, L., Katzensteiner, K., Kukkola, M., Ots, K., Ravn, H.P. & Tamminen, P. (2007). Sustainable utilisation of forest biomass for energy—Possibilities and problems: Policy, legislation, certification, and recommendations and guidelines in the Nordic, Baltic, and other European countries. Biomass and Bioenergy, 31(10), 666–684. Vehmas, J., Kaivo-oja, J., Luukkanen, J. & Malaska, P. (1999). Environmental taxes on fuels and electricity – some experiences from the Nordic countries. Energy Policy, 27(6), 343–355.

Chapter 2

Climate Change and Energy Issues in the North Marja Järvelä, Sirkku Juhola, and Margareta Wihersaari

Keywords  Climate change • Energy • The Nordic countries

Introduction: Distancing Climate Change Highly industrialized societies are mostly responsible for the emerging anthropogenic climate change. There are different ways to measure this responsibility (e.g., whether based on causal contribution or strict responsibility, see Müller et al. 2007). However, regardless of the specific method applied to measure the impact, presently, the USA and the EU are the global leaders in green house gas emissions with countries such as China, India and Brazil following closely behind. Globally, GHG emissions are still increasing among the highly industrialized countries, particularly in the USA – a country that never ratified the Kyoto Protocol. However, the EU has managed to curb its emissions, compared to 1990 levels, even if its relative burden still remains high. There are also considerable regional differences within Europe with regard to successful mitigation measures. Within the Nordic countries, national differences are also quite evident. Denmark and Sweden have curbed their emissions, while in Finland and in Norway (not a member of the European Union), total GHG emissions are still on the rise. In the existing environmental social scientific literature, climate change mitigation has often been described as a great political failure, especially when compared to the reduction of CFC emissions accomplished with the support of the Montreal Protocol. In all fairness, most observers, however, adjust their comparison by acknowledging that from the angle of the political process, climate change mitigation

M. Järvelä (*) Department of Social Sciences and Philosophy, University of Jyväskylä, Jyväskylä, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_2, © Springer Science+Business Media, LLC 2011

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is much more complex than the simple reduction of CFC emissions and involves multiple conflicting interests that are especially sensitive in relation to economic growth and global economic stakes (see e.g., van Ierland et al. 2003; Elliott 2004). Moreover, based on complex modeling and computing, the global and regional impacts of climate change are still often perceived to be ambiguous, which leaves the skeptics a considerable margin to maneuver (Weart 2003). In particular, the interests of nations in the global North and South tend to differ, hindering attempts to conciliate the diverging views on mitigation. Therefore, in the international arena, the whole process of mitigating climate change seems to reflect a general attitude of pushing the issue towards a possibly more favorable future (Gupta 2010). This can be considered displacing the risk of global warming to the next generation, who are likely to be more prepared to tackle the issue and mitigate climate change more effectively. Simultaneously, mitigation of climate change has been more determinately attached to issues of energy production and consumption. This tendency brings the policies and eventual conventions to a political field of more concrete operations. Still, in 1990s, energy supply was not perceived to be the core problem globally, whereas recently, a great variety of influential actors have expressed growing ­concerns over the depletion of non-renewable natural resources, such as oil (see e.g., Roberts 2004). Moreover, the burning of fossil fuels implies GHG emissions. Therefore, alternatives for power production are a top priority, and energy saving has finally entered the political scene in regard to finding effective paths of transition to a new “energy age” (Roberts 2004). It is clear that there is no short-term solution to a corporate transition into the new energy age. However, the EU has recently established general target areas where the development towards the new energy age should be endorsed (Commission of the European Communities 2008). Nordic countries, most of them members of the EU, are wealthy nations and consequently consume great amounts of energy. This applies to both industries and private consumption. The intensive energy use is partly concomitant to particular industrial structures (e.g., paper industry), yet much of the capacity is needed in order to meet the substantial heating requirements of housing stock, mandated by the relatively cold climate. So, where do Nordic nations stand in relation to the recent targets set by the EU in energy production and consumption? This chapter discusses the regional assets and societal preconditions of energy ­supply and management in the North from the point of view of climate change ­mitigation. In particular, policy alternatives will be reflected upon with regard to the issue of distancing mitigation. While Finland is the primary region of focus, exemplifying comparisons are made within Nordic regions and beyond. Furthermore, the question of whether Finland is taking full responsibility and contributing efficiently to the European scheme of climate change mitigation will be examined. The chapter is structured as follows: First, the present situation at a global level is addressed in order to compose an overview of current trends on the expected development of GHG emissions and economic growth and, further, to introduce the targets of reducing GHG emissions. The global context provides an important background for discussing Nordic energy issues with regard to climate change. Second, the intertwining of economic growth, climate change mitigation and energy issues in

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the North are discussed in more detail and any signs of structural transitions towards a new energy age or carbon neutral society are identified. Third, some technological issues related to energy production alternatives in the Nordic context are examined and the likelihood of technological innovations solving at least a portion of mitigation problems is considered. Fourth, some aspects of the society at large in terms of socio-economic and socio-cultural transitions related the eventual reorganization of everyday life and the civil society are highlighted. All these paths are pursued with the intention of finding both helpful assets and socially determined barriers with regard to mitigating climate change by applying energy related policies. Finally, the trend of society to distance climate change mitigation to future generations is revisited and conclusions on some prospects contributing to future mitigation are drawn.

Current State of Global Emissions Carbon dioxide emissions differ in many ways from other airborne emissions that have already been successfully mastered by mutual agreements. The time frame from awareness to political agreements has taken a long time: As early as 1827, the French scientist, Joseph Fourier explained that our atmosphere functions much like a greenhouse and in 1896, the Swede, Arrhenius predicted both that anthropogenic carbon dioxide emissions will strengthen the natural greenhouse effect and even quite accurately how much the average surface temperature on Earth will increase if the carbon dioxide concentration in the atmosphere is doubled. Many scientists presented more robust scientific knowledge in the 1950s, and politically the issue was handled on a global level in Stockholm 1972. The time span from initial awareness to the first agreements (Rio de Janeiro 1992; Kyoto Protocol 1997)1 took almost 100 years to reach. However, there are still credible scientists questioning climate change and whether the growing atmospheric carbon dioxide concentration has any influence or definitive role in the increase of the observed average temperature on Earth. The time required for the reduction of emissions to result in reduced environmental problems also differs for carbon dioxide emissions, compared with many other airborne emissions. Even if all anthropogenic carbon dioxide emissions were to cease today, it would take decades before the CO2 concentration in the atmosphere decreased to the levels prior to industrialization. In addition, it would take hundreds of years before one of the most obvious environmental impacts – the increase in the average global surface temperature – was restored.

The reference is made to the Framework Convention on Climate Change, adopted in Rio de Janeiro in 1992 at the United Nations Conference on Environment and Development (UNCED), and to the Kyoto Protocol linked to the United Nations Framework Convention on Climate Change adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005.

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Flue gas emissions containing fossil carbon dioxide cannot technically be cleaned up in the same way as sulfur dioxide or nitrogen dioxide emissions, for example, as an inverse reaction from CO2 to C would consume more energy than released in the combustion process. Technically, CO2 can be separated, concentrated and stored but this creates new challenges, such as additional costs and increased energy consumption. Storing emissions may formulate new kinds of environmental problems, especially if the solutions fail to be permanent. In principle, energy-related carbon dioxide emissions can be tackled in several ways. The main three principles introduced so far generally include reducing energy consumption, conserving energy by making energy production, distribution and end use more efficient and replacing the assortment of fuel utilization towards fuels with lower or no fossil carbon content. Most of the approaches to date have focused on measures not affecting our lifestyles – and ones that do not drastically influence the price of energy. Regardless of the expanding efforts to reduce GHG emissions, they seem to grow inexorably. On a global scale, the rate of acceleration seems to be inevitably related to the intensity of economic activity. Anticipated economic growth in Asia, in particular, is estimated to contribute remarkably to the future CO2 emissions (see EIA 2010).2 The only countries where major reductions have been experienced are the post-socialist nations, as they already underwent a major economic and industrial transition in the 1990s. The aggregated results from Russia, Poland and Romania in particular have made a considerable contribution to the reduction of GHG emissions by extensively closing down factories with obsolete and outdated production technology. The overall global record of the 1990s was nevertheless clearly undesired, since a 6% rise was estimated in worldwide GHG emissions from 1999 to 2000. More recently, emissions from the EU-25 have increased by 18 million tons (0.4%) between 2003 and 2004 (EEA 2006). However, towards the end of the decade, CO2 emissions started to curve downwards in EU-27. According to official EU sources, this was first due to warm weather and higher fuel prices and then to lower CO2 emissions from fossil fuel combustion in the energy, industry and transport sectors.3

The Emerging Energy Issue in Climate Policy Context The dependency between the economic growth and increasing power production has been considered alarming enough to evoke a new climate policy initiative that is more focused on moral responsibilities and on the mutual linkages of prevailing productive practices, economic performance and diverging welfare standards of the populations in different parts of the world (see e.g., Müller et al. 2007, Ekholm et al. 2008). It is clear that most nations continue to strive for improved economic accomplishment regardless of their current level of development. Nevertheless, the

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­objective of limiting the average increase in global temperature to less than 2°C compared to pre-industrial levels has been increasingly acknowledged as a new target of climate policy. This target has been estimated to suffice in limiting major impacts of climate change and the likelihood of massive and irreversible disruptions to the global ecosystem. The EU, in particular, promotes this objective and has launched a strategic program to endorse multifold implementation policies within this framework (see EU Commission 2007/2008). In order to limit the temperature increase to 2°C, major societal transitions are needed in the energy industry and other industries, in transport, in other services and even in overall patterns of consumption. The new sense of urgency reflected in current/recent climate policy strategies no longer tolerates distancing as a dominant socio-political strategy with regard to climate change. Technological innovations are certainly important in mitigation strategies. Yet, considering the acceleration of GHG emissions in some high-tech countries (e.g., Canada, Australia and Spain),4 it seems evident that a high standard of technology as such does not suffice in curbing emissions. More specific policies relevant to regional contexts are also needed in order to efficiently address the major sources of emissions. Regardless of the growing sense of emergency, an important feature of the architecture for the new energy era is the long-term policy in relation to energy and climate change. This is an important contrast to the increasingly market-orientated policy that has the tendency to exempt long-term visions and regulation in favor of short-term benefits. The main targets of climate policy are now set towards the years 2020 and 2050, implying a serious effort of looking more analytically to the future with not only technological development models but with social scientific tools as well. Until now, this has primarily resulted in economic extrapolation that is indeed the epistemic legacy from the postwar period and this trend seems to have been revived. However, it has been concluded time and again that global uncertainties in economic development are huge and that applying the very limited scope of technological innovation related to regional economic industrial structure predicting innovation by extrapolation is very unlikely to succeed. This is due to the intensified globalization of industries and to the consequent rapid changes in the division of labor. Nevertheless, it seems reasonable, even considering the prevailing circumstances, that constructing scenarios as accurately as possible to show what likely pathways will lead towards the most legitimate climate policy targets is important. From a social sciences standpoint, this highlights the need to shift the emphasis from analyzing societal trajectories, as was common in the past, towards explaining the present with reference to possible futures. Most scenarios presenting some alternative paths for future development start by defining trends of economic development, generally implying economic growth of at least 2–3% each year, on a global scale (see Fig. 2.1). Of course, considerable regional differences are expected to appear in the rate of economic growth. Nevertheless, in total, these scenarios imply the need for an increased commercial

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Fig. 2.1  World GDP 2000–2050 (Source: VTT Technical Research Centre of Finland)  http://www. vtt.fi/files/news/2009/energy_visions_seminaari_040609/koljonen_visions_tiedotustilaisuus.pdf

energy supply, especially until the year 2020. Certainly, most of these estimates account for some restructuring to occur in the economic performance of different countries. In particular, China, India and Brazil are expected to continue their economic growth. In fact, the EU has already raised the argument that Europe’s role will devolve into a minor one towards 2020, while the emerging new powers need to acquire better control of their expanding economies. Hence, with an increasing sense of urgency connected to the climate issue, the politicization of the energy sector will most likely intensify (Barysch 2008; Shaffer 2009). Of course, controversies have already arisen with regard to decisive choices of securing energy supply, such as nuclear power, the location of hydropower plants, building dams, etc. Additionally, in the North, it is important to mention potential or actual tensions relating to the utilization of energy in forestry residues, agricultural fields and the location of windmills (e.g., Upreti 2004; Field et al. 2008; Varho 2007). Thus, the ambitious targets of the EU climate policy are very likely to stir up at least some of these tensions, since people tend to be quite sensitive about what is locally acceptable when restructuring familiar territories and landscapes. Nevertheless, economic growth is still considered to be a legitimate goal, even for people in the North. This is true regardless of the fact that on a global scale, the citizens of Nordic countries have generally already reached a remarkably high standard of living (see also Bucholz et al. 2007; Lutzenhiser et al 2002). This standard of living implies very high per capita energy consumption that can be difficult to curb with mitigation measures. In the following chapters, a closer look is given to the economic structure and the prerequisites of economic growth in the Nordic countries in particular. CO2 emissions are focused upon, as they are at the core of climate policy.

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Economic Growth and Energy Consumption in the Nordic Countries The Nordic countries are known for their stable economic development that has continued more or less since World War II (although the 1990s recession affected all the countries, especially Finland). To date, reductions in energy consumption have been achieved during a shorter time period in countries that have undergone an economical crisis, for example. However, Finland, as well as Sweden recovered rapidly and vigorously from the most recent financial crises. Norway followed a somewhat different path because of their strong dependency on oil prices, as they had already experienced a relatively moderate downswing in late 1980s, due to falling oil prices (Honkapohja 2009). In Denmark, the average growth rates have been quite similar to Sweden’s, although they have remained somewhat lower since the turn of the century (Moser et al. 2004). Denmark has succeeded in slowing down the growth of energy consumption more successfully than other Nordic countries by increasing energy prices. In spite of this, Finland was ranked first in competitiveness by the World Economic Forum in 2005, while other Nordic countries were included in the top ten.5 This highlights the commendable performance of these economies by conventional standards. Moreover, the Nordic countries show exemplary social development with high HDIs (Human Development Index) and impressive scores in good governance and public facilities.6 It has been claimed that the successful development is very much based on the unique Nordic combination of a competitive economic system and welfare state, contrasting the common belief that a high level of public spending prevents economic growth (e.g., Giersig 2008; Stephens et al. 2003). High standards of technology and innovation have been at the core of industrial development strategies during recent decades. When characterizing national economies, the Nordic attribute of small open economies is often used to highlight their strong dependence on exports (e.g., Maskell et al. 1998). With regard to the globalization of the world economy, this obviously has its benefits and vulnerabilities (e.g., Moser et al. 2004). In order to maintain their high level of competitiveness, it is evident that Nordic countries cannot rely solely on traditional assets such as labor and capital. Instead, they must invest in progressive technologies and create new products, including those contributing to enhanced energy efficiency in the core industries and the transition towards sustainability of the energy sector itself. Nevertheless, it seems that fluctuations in final energy consumption are still mostly related with economic growth. In other words, until now, accelerated economic growth has also translated to higher energy consumption, as clearly shown by the Finnish case (Fig. 2.2). As indicated by Fig. 2.2, the reverse side also shows that a serious down swing of the economy reduces energy consumption quite effectively.

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Fig. 2.2  Changes in GDP, final energy consumption and electricity consumption 1995–2009 (Source: Statistics Finland)

According to many economic indicators, industrial production is not, in fact, the dominant sector of many advanced economies today. With regard to employment, Nordic countries are clearly “service industry societies.” However, the production of material goods still has great importance in these economies, not only in relation to their capacity of generating intense economic value but also because of their conspicuous role as end users in the energy supply chain. In Finland, industries producing goods consume about half of the total energy supply, whereas transport and households use 20% and 25%, respectively (Statistics Finland 2010). Similar to Finland, Norwegian industries clearly consume the greatest share of energy, whereas in Sweden and Denmark, the share of industries is considerably lower (ca. 40%). Household energy consumption is relatively high across all Nordic nations (ca. 20%) due to a cold climate and high standard of housing. However, the most recent records indicate consumption growth in the transportation sector, rather than housing. Due to the high levels of energy consumption, the interest of different industries in the Nordic countries is great in terms of both energy security and the price of energy. Moreover, there is also an important public interest in alternative energy sources and modes of energy production. This applies emphatically to the energy demand of Nordic industries but also to other kinds of energy consumption. Moreover, energy security and energy prices are often used to argue competitiveness of different industrial branches, vis-à-vis the globalization of the businesses. In particular, there are doubts that the unconditional GHG emission reduction targets of 20–30% by 2020 are simply too challenging and specific amendments are needed to secure flexibility and maneuvering room for big production units (cf. Reinaud 2008). By changing the mix of energy sources utilized, for example, emissions can and already have been successfully reduced. An emissions trading scheme can encourage power plants to substitute fossil fuels with biomass at a price level where

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the income from selling emission permits is higher than the additional costs of using alternate energy sources (e.g., wood chips). From the industries’ energy demand point of view, Finland and Norway are particularly under stress in trying to meet international emission reduction targets, since an important share of their industries belong to the energy intensive trade. Paper and pulp industries in particular belong to this category, as well as the highly productive basic metal industry in Norway. Even Denmark and Sweden host a quite considerable proportion of the energy intensive industry, such as the chemical industry (Denmark) and the chemical forest industry, in particular (Sweden). As previously mentioned, however, these two countries have already succeeded in reducing their GHG emissions following the turn of the century and it is reasonable to expect that they would be capable of maintaining this ongoing strategy. As a legacy of industrial society from the twentieth century, the Nordic countries conceive themselves highly dependent on their extractive industries. However, there have already been important changes in their economic structures, modified by both the emerging ICT and biotech industries that produce considerably less GHG emissions than traditional industries. Secondly, the service sector tends to take the lead in current economic development, which could also contribute to lower GHG emissions. However, these structural changes might not solve much of the problem, since there are reasons to believe that the Nordic countries – as regionally powerful actors – may suffer from strong path dependency and do everything in their power to hold on to the success of their traditional extractive businesses. This may signify that the ameliorating eco-efficiency of traditional industrial businesses (such as the wood products industry) gain priority over structural transitions towards a more ICT-based economy. After all, ICT businesses may prove to be more volatile in the framework of the global economy than traditional extractive industries. Therefore, safeguarding the interests of traditional sectors could help to address the interests of specific industrial sectors and foster the conditions needed for the development of the welfare state. Presently, there is a globally identified tendency to find means to combine economic growth with less energy consumption. Indeed, it has been argued since the 1970s that economic growth can be feasible by zero energy growth (Lutzenhiser et al. 2002, 234). Therefore, it is not a surprise that Nordic countries, both jointly and separately, express interest in following a new pathway to economic growth and social well-being that will not increase energy consumption and the associated environmental impacts. However, “clean” energy with regard to its climate impact is a greater concern at present than reduction (e.g., electricity consumption), as such (see e.g., Nordic Energy Perspectives 2010).

Technology, Innovation and Investment Today, depending on measurement, energy production yields about one half of global GHG emissions. However, there may be major regional differences as to the extent of the eco-efficiency of the power production, depending on both the energy

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source and the production methods, even within one country. For example, Brazil, which has used its abundant water resources extensively – and not always without political controversies – for electricity production, has been cited as an example of having one of the cleanest energy production matrices in the world. However, its agriculture and forestry sector yield abundantly to global GHG emissions making Brazil the third largest emitter of total GHG in the world (IEA Statistics 2010). Obviously, the types of economic sectors contributing to the total regional GHG emissions depend on the region’s economic structure and availability of energy resources. Among the Nordic countries, Norway has enjoyed a particularly advantageous position due to its abundant hydropower resources. Simultaneously, Finland increasingly builds its carbon neutral energy program by generating additional nuclear power with some additional measures to increase renewable energy sources, mainly in the form of bioenergy (Ministry of Employment and Economy, Strategy 2008). This relates to the fact that each country is striving for at least some degree of self-sufficiency in national power production and consequently, needs to strive towards building the most eco-efficient and carbon neutral technologies possible. Technological innovation is mostly source- and context-specific and therefore there is clearly no single program to endorse the eco-efficiency of power production. Moreover, it has been estimated that the end users of energy have the potential of contributing one half to the overall effort to increase the eco-efficiency of energy consumption by the year 2020 (Hirvonen 2003). This has been acknowledged by EU decisions makers on a policy level and has been clearly stated in the Energy Policy Action Plan as: “No one element of the policy provides all the answers,” referring to both different sources of energy generation and to a wide variety of measures to promote energy efficiency in both power production and consumption (see EU Commission 2007, 5). Moreover, the EU seeks to introduce a balanced strategy between energy generation using renewable sources and other low-carbon technologies. It is interesting, however, that nuclear power has been assigned such a significant role as part of the effort to achieve the climate policy target. Upholding the technological lead of the business in a particular field is considered an important industrial policy. Therefore, it seems that the EU is encouraging a high concentration energy system investment policy, whereas it is less clear how small streams of the great variety of renewable energy modes fit into mitigation efforts. For example, the EU Commission report never once uses the word “distributed” in reference to energy systems (c.f. Elliott 2000, 262) There are major differences between the Nordic countries with regard to sources of power production. In Finland, nuclear power from domestic power sources contributes almost one third of the total electricity supply, while Norway, on the other hand, has no nuclear power plants. However, the figure is even higher for Sweden, where over 40% of all domestic electricity production comes from the nuclear power sector. Nevertheless, Sweden also has a high share of hydropower and nuclear and hydropower together comprise as much as 90% of their total domestic electricity production. The historical irony here is that since 1960, Sweden considered nuclear power to be an “addition to hydropower” and claimed they would pursue a phase-out strategy regarding nuclear power production. However, in early 2009, the

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Swedish Government agreed to start replacing its old nuclear plants – a decision that has certainly been considered abortive to the phase-out strategy. In fact – as in Finland – Sweden has declared it “unrealistic” to plan future economic growth and in particular, growth with pursuit of climate policy targets, without the help of “carbon neutral” nuclear power production. Maintaining or even increasing the utilization of nuclear power, which does not contribute any direct carbon dioxide emissions, is considered an area of great interest or even necessity in many countries, such as Finland. It is regarded as a means to ensure stable electricity prices for industry and in this way, it possesses more methods to keep national carbon dioxide emissions stable. Imported electricity is also advantageous, as the emission burden of the electricity is allocated to the exporting country. This might present a moral concern if the exporting country uses outdated technology or fuels with high emission coefficients. This issue has not generated any considerable discussion in Finland although electricity imported from Estonia is produced by utilizing oil shares. Denmark is an interesting example of a country that does not have the traditionally familiar renewable energy sources of water and wood, as other Nordic countries do. Nevertheless, a law was passed by the Danish Parliament, already in 1985 that prohibits the production of nuclear energy in Denmark. Ever since, Danish energy strategy has emphasized renewable energy sources and they became early developers and investors in wind power. As a consequence, the share of renewable power production is relatively high (ca 15%) even though wind power production alone remains at quite a low level and not much higher than Sweden’s. Nevertheless, Denmark has gained important visibility as the new generation “windmill country” because during the pioneering phase, it used windmills around the country and was even successful in exporting similar wind turbines around the world (Elliott 2000, 263). Moreover, Denmark is also peculiar among the Nordic countries in that it has been described as “fully dependent” on imported energy because of its considerable use of power produced in neighboring countries. Considering the variety of power sources and differences in industrial structures, it is clear that there are major variances in perspectives regarding the development of feasible low-carbon energy production strategies between the Nordic countries, even if the discussion is limited to the restricted perspective of domestic energy or electricity production. Nevertheless, in European and global perspectives, there are similarities and continuity that integrate Nordic industries, prospects for innovation and investment under a common profile. Some of these are related to specific industrial sectors, while some outreach conventional occupational divides. From the climate mitigation perspective, the most outstanding similarity is that, overall, industries in the Nordic countries are among the most energy intensive in the world due to the large share of forest, metal and chemical industries. These sectors account for as much as 75–80% of the total industrial electricity consumption (including agriculture but not including services) (see Nordic Energy Perspectives 2010). Upon closer comparison, Denmark stands apart by its larger share of food and agricultural production, while differences between the other three nations appear mainly as alternations between the respective shares of metals ver­sus paper and pulp production.

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Consequently, the most important challenge of innovation and investment lies with these particular sectors. Much of the industrial activity within these branches is concentrated into big industries that have progressively reorganized their basic structure into multinational companies due to economic globalization pressures and in order to increase their competitiveness. Therefore, their expected contribution to climate policy is likely to rely increasingly more on market-based measures, such as emissions trading schemes. It is also questionable whether these industries have much interest in distributed energy systems, unless they are able to create energy efficient and self-sustaining systems at the plant level. This has been partly accomplished by the Finnish paper industry (black liquor), for example. Another chance for a progressive contribution to climate change by these big players of the North may be found in technological innovation, by creating new marketable products having the side effect of reducing GHG emissions in the production process. Meeting the challenges of climate change with mitigation measures, such as proposed by the EU, implies major reorganization in all societies, regardless of their current standard of industrial development. As Fred Cottrell (1955) noted in his famous early contribution to the sociological understanding of the links between modernization and power production, the shift from low-energy to high-energy forms of society depend upon several specific societal features. Among these are the societies’ geophysical resources and conditions, their development of conversion technologies and social organization, their values governing expenditure and reinvestment of energy and their capacity to appreciate the energetic nature of their interactions with their environments (Lutzenhiser et al. 2002). It is therefore evident that each country has its own capacities and challenges to contend with when pursuing low-carbon strategies. Understandably, developing nations claim that industrial countries in the North should be the first to act, since they have contributed most to the problem. Simultaneously, current decisions, especially in the major newly industrialized countries, are historically decisive in the success of mitigation policy (e.g., Elliott 2004, 83). Since the majority of mitigation capacities seem to be driven by more advanced technologies, an important prospect for eventual North-South cooperation involves the pursuit of cost-optimal, low-carbon development trajectories. The EU has set challenging national targets for the future utilization of renewable energy. Increasing the utilization of nuclear power will probably make these targets even more difficult to reach. Future nuclear development in Finland is of particular interest in this respect. On July 1, 2010, the Finnish Parliament approved the construction of two more nuclear power plants. Simultaneously, a significant portion of Finland’s current bioenergy is produced and consumed by the forest industry. Considering the problems and closures this sector presently faces, it will not be easy to attain the national targets set for renewable energy. Obviously, the choice between nuclear power and renewable energy (including the eventual combination of both) is important, even from a global climate policy viewpoint. Even if Nordic countries do not belong among the big players of climate policy, they at least strive to display an active role on the international scene, such as in development co-operation

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(like the Clean Development Mechanism, CDM), future climate negotiations and the general framework of North-South cooperation regarding energy issues. Furthermore, it is evident that – even in high-tech countries – some sectors of economic activity are considered more flexible than others with regard to technologically driven climate change mitigation. In the EU, reforming the energy sector has recently been politically confirmed to be as a priority, with a rather strong emphasis placed on small-scale renewable energy production (Directive 2009/28/ EC). In this respect, there are high hopes to increase low-carbon electricity generation and the use of alternative energy sources in cost-effective ways, even if it implies huge investments and a reorganization of industrial activity, transport and other infrastructural facilities. Renewable energy strategies in the Nordic countries pose an interesting dilemma, particularly those that cannot be subcontracted to one of the big industries. On one hand, one should not be too skeptical about the role of small producers, e.g., in the energy sector itself, since a rich diversity of small and middle size entrepreneurs who are active in Nordic business already exists. Family farms, for example, are already experimenting on renewable energy production alternatives that yield both energy self-sufficiency on farms and local markets. One interesting alternative concerns heat produced by farms at the local level that can be purchased and consumed by public offices or private households (Järvelä et  al. 2009). Even if these small productions have many societal barriers to overcome (e.g., Walker 2008), such activities create an alternative energy market for the average consumer and moreover, they provide new alternatives for public energy consumption that are relevant to the promotion of specific regional and rural policies.

Anticipating Transformations in Public Policy and Civil Society According to Nordic tradition, it is important to involve public authorities, townships and the state in processes of major social reform. Indeed, it is true that there is a growing understanding of climate change mitigation from a multidisciplinary perspective, indicating mitigation is not only a technological projection of the “next generation” but also a civil society matter (e.g., Adger et al. 2005). Even if the prospects for reducing emissions within the energy sector are most remarkable, climate change touches common people to a greater degree than ever before. A conspicuous manifestation of this is evident in the myriad of ecological footprint indicators, discussions and emergencies called forth by the mass media. Consequently, even lifestyles will increasingly become critically examined in the Nordic countries. However, the eventual pursuit of a more eco-efficient lifestyle does not come as a novelty to citizens in Nordic countries, since – inspired by the target of sustainable development  – they have already been relatively well-organized with respect to bending their daily practices towards a more eco-efficient model. However, energy consumption with a low-carbon target may involve many new challenges and complexities that are difficult to solve at the household level (e.g., Moisander 2007).

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While the public administration in Nordic countries has increasingly introduced welfare state measures during the last few decades, it is to some extent puzzling how  public authorities can influence civil society involvement in climate change mitigation. Namely, the welfare state as such has traditionally focused primarily on mitigating immediate social emergencies (e.g., unemployment and poverty) and on building comprehensive social insurance and social service schemes (Sipilä et  al. 2009). Moreover, globalization and the current economic crisis, together with liberal ideology embodied through new public management strategies, place enormous pressure on the welfare state and traditional, socially consolidating policies. As a consequence, integrating climate policy driven energy strategy with general public policy can be described as dual rather than vigorously integrated. On the other hand, a civil society appears to have emerged – still sharing some core values of public life, such as connecting collective risk sharing with citizen integrity and transparency of public government – that has formulated new solutions and ideas about how to cope with the inescapable climate change-driven energy issues that seem to demand action and investment, even at the household level. Until now this latter aspect – important to citizens – has not actualized very strongly in State policy. In Finland, for example, the National Government’s report (6.11.08) on Long Term Energy and Climate Strategy to the Finnish Parliament hardly included any elements of particular civil society policy and instead, clearly leaned one-sidedly on technological development and adaptation measures. Even if traditional social values in the Nordic countries generally support sharing the responsibility in mitigating climate change (see also Eurobarometer 2009), it seems that the hitherto performed energy sector-based climate strategy is not sufficiently addressing the issue as a civil society matter. Nevertheless, since the 1992 UN Rio Conference, regional and local policies have contributed to the institutionalization of a more climate change conscious public policy in the Nordic countries. Even if climate change mitigation in general and related energy policies, in particular, have not often been at the core of many political pursuits, one can at least refer to public policy endorsing sustainable development and to the more recent interest in finding new integration between climate mitigation and energy policies. In particular, major cities in the Nordic countries have launched particular climate policy programs (e.g., Oslo’s phase out strategy for fossil fuel, confirmed in 2008) or contributed to adaptation through planning new low-carbon districts (e.g., the Stockholm Royal Seaport district was selected for a CCI (Clinton Climate Initiative), Climate Positive Develop­ment Program, in 2009).7 Some of these aspects and elements ­influence the everyday practices of common citizens. Furthermore, well-organized public transport is an important issue, as exemplified by Copenhagen and Helsinki, when cities are examined in order to estimate their assets to contribute to the climate policy.

http://www.greenport.com/features101/marine-and-port-operations/stockholm-royal-seaport-chosenfor-clinton-climate-initiative

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The original Sustainable Development Program, launched in 1990s and further elaborated in Johannesburg (2002)8 has not been an immense success at the level of implementation (e.g., Elliott 2004). However, it has been a legitimate program recognized more or less worldwide. It is interesting that during the initial phases, the program was introduced to the local level (Local Agenda 21), which, perhaps, at least partly supported the idea of making sustainable development not only an issue of technology but also a socio-political and socio-cultural issue and hence, a concern of civil society. Today, one can question whether the strong emphasis on energy efficiency measures is having an opposite effect, thus, distancing the climate issue away from civil society matters. Despite this, it seems obvious that society is more aware about the linkages of energy and environment now than in early 1990s and it is also more likely that individual citizens reflect upon the “eco-efficiency” of their behavior with regard to consuming energy or any consumables (see e.g., Spaargaren and Vliet 2000; Moisander 2007). In any case, it seems evident that meeting present climate policy targets indeed implies considerable restructuring of the society at large. Even the bare energy sector transformations planned to endorse low-carbon futures in the Nordic countries and elsewhere would carry important social impacts that have not yet been properly addressed. In Nordic countries where the transparency of public policy is an important value, the current situation can hardly be considered satisfactory, even if economic sustainability may be at least partly ensured by these measures. Namely, as Dave Elliott (2000, 261) noted: “While technology itself is relatively straight forward, the social and institutional implementation problems are much harder to resolve.”

Conclusion It is becoming increasingly clear that applying distancing as a strategy to mitigate global climate change will not be an adequate approach. This is also true in the Nordic countries. Transferring climate change issues even further into the future is clearly no longer an acceptable strategy and evidence of this can be seen in the expansion of mitigation polices at the global, European Union and national levels. Crucial questions address the extent to which globally agreed upon mitigation measures are likely to help us avoid the most dangerous outcomes of climate change. Global challenges include major societal transformations in the way that energy production is organized and utilized. Economic growth relying exclusively on the use of fossil fuels is no longer considered a feasible strategy and alternative energy sources need to be explored. This need for a restructuration of energy sources is also true for the Nordic countries, which are required to contribute, as members of EU’s common policy on mitigating climate change. It is also worthwhile questioning the extent to which the Nordic countries are contributing to these targets. Simultaneously, it is clear that the

8 The reference is made to the World Summit on Sustainable Development (WSSD), unofficially known as Rio+10, a UN summit gathering at the highest level.

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abilities of countries in the North to contribute to mitigation vary significantly. So far, Sweden and Denmark have been able to actively reduce their emissions but there is still a long way to go before societies are reorganized effectively enough to achieve low-carbon futures. Finland will continue to struggle with finding affordable energy for its energy-intensive industrial sector, partially fuelled by the renaissance of nuclear energy. Consequently, there are only a few examples of localized energy solutions that provide local energy production and consumption in Finland, some of which will be covered in this volume. Other Northern nations discussed in this volume, such as Russia, exhibit a very vertical structure of energy production, where energy policy has a large role to play in national and international relations. In contrast, in Germany, for example, there is a trend towards more localized energy solutions, exemplifying a more horizontal energy production structure. While active preparation in the form of strategies and policies is currently taking place, concrete measures required for the transformation towards a low-carbon society are still in their initial phases. Ultimately, the degree to which different actors in society are willing to commit to more concrete energy production and consumption initiatives remains to be seen. It is clear that participation from all sectors of society is necessary, if mitigation measures are to be successful and the proposed targets are to be achieved. National level policies play a central role in transforming societies towards lowcarbon futures and supporting initiatives that can inspire further innovation. While they can encourage and support local and regional activities, in some circumstances, they may also create disincentives for action. Comprehending the vertical nature of mitigation policies and its challenges, spanning from the higher levels of decision making down to the lower is crucial in achieving a low-carbon future. Similarly, local and regional experiences can provide good examples that other regions can draw upon, introducing the idea of transferability of solutions to other locations. As the number of these innovative examples increase, the main challenge will be to gauge their relevance to the local context, given the myriad of ways in which energy is produced, regulated and consumed.

References Adger, W.N., Arnell, N.W., Tompkins, E.L. (2005). Successful adaptation to climate change across scales. Global Environmental Change, 15, 77–86. Barysch, K. (2008). Pipelines, politics and power. The future of EU-Russia energy relations. London: Centre for European Reform (CER). Bucholz, T.S., Volk, T.A., Luzardis, V.A. (2007). A participatory systems approach to modeling social, economic, and ecological componenets of bioenergy. Energy Policy, 35, 6084–6094. Commission of the European Communities. (2007). An energy policy for Europe. Communication from the Commission of the European Council and the European Parliament. Brussels: SEC 2007:12. Commission of the European Communities. (2008). 20 20 by 2020. Europe’s climate change opportunity. COM 2008:30. Brussels: Commission of the European Communities. Cottrell, W. F. (1955). Energy and society. McGraw-Hill: New York.

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Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009. European Environment Agency (2006). Annual European Community Greenhouse gas inventory 1990- 2004 and inventory report 2006. Submission to the UNFCCC Secretariat. EEA Technical Report. No 6/2006. Copenhagen, European Environment Agency. Ekholm, T., Soimakallio, S., Höhne, N., Moltmann, S., Syri, S. (2008). Assessing the effort sharing for greenhouse gas emission reductions in ambitious global climate scenarios. VTT Research Notes 2453. Espoo, VTT. Elliott, D. (2000). Renewable energy and sustainable futures. Futures, 32, 261–274. Elliott, L. (2004). The global politics of environment. Second Edition. New York: Palgrave MacMillan. Eurobarometer (2009). Europeans’ attitudes towards climate change, European Commission: Special eurobarometer 313. http://ec.europa.eu/public_opinion/archives/ebs/ebs_313_en.pdf. Field, C.B., Campbell, J. E. and Lobell, D.B. (2008). Biomass energy: the scale of the potential resource. Trends in Ecology and Evolution, 23(2), 65–72. Giersig, N. (2008). Multilevel urban governance and the ‘European city’. Wiesbaden: Springer. Gupta, J. (2010). From Rio to Copenhagen: from consensus to conflict? Amsterdam Law Forum, 2(2), 93–98. Hirvonen, R. (2003). Energy visions 2030 for Finland. Espoo: VTT. Honkapohja, S. (2009). The 1990’s Financial Crisis in Nordic Countries. Helsinki: Bank of Finland working paper. van Ierland, E.C., Gupta, J., Kok, M.T.J. (2003). Options for international climate policy: towards an effective regime. In van Ierland, E. C.,Gupta, J. Kok, M.T.J. (Eds.), Issues in international climate policy: theory and policy. Cheltenham: Edvar Elgar Publishing Limited. Järvelä, M., Jokinen, P., Huttunen, S., Puupponen, A. (2009). Local food and renewable energy as emerging new alternatives of rural sustainability in Finland. European Countryside, 1(2), 113–124. Lutzenhiser, L., Harris, C.K. and Olsen, M.E. (2002). Energy, society and environment. In Dunlap, R., Michelson W. (Eds.), Handbook of environmental sociology (pp. 222–271). London: Greenwood Press. Maskell, P., Eskelinen, H., Hannibalsson, I., Malmberg, A. and Vatne, E. (1998). Competitiveness, localized learning and regional development: Specialization and prosperity in small open economies. London: Routledge. Ministry of Employment and Economy (2008). National Climate and Energy Strategy. Helsinki: Ministry of Employment and Economy. Moisander, J. (2007). Motivational complexity of green consumerism. International Journal of Consumer studies, 31, 4040–409. Moser, G., Pointner, W., Reitschuler, G. (2004). Economic growth in Denmark, Sweden and the United Kingdom since the start of monetary union. Monetary Policy & the Economy, Q4/04. Müller, B., Höhne, N., Ellermann, C. (2007). Differentiating (historic) responsibilities for climate change summary report. OIES Energy and Environment Paper. Oxford: Oxford Institute for Energy Studies (OIES)/University of Oxford. Nordic Energy Perspectives. (2010). Towards a sustainable Nordic energy system. Nordic Energy Perspectives Final Report. Mölndal: PR Offset. Reinaud, J. (2008). Climate policy and carbon leakage, impacts of the European emissions trading scheme on aluminum. IEA Information Paper. Paris: International Energy Agency, OECD/IEA. Roberts, P. (2004). The end of oil: On the edge of a perilous new world. New York: Houghton Mifflin. Shaffer, B. (2009). Energy politics. Philadelphia: University of Pennsylvania Press. Sipilä, J., Anttonen, A., Kröger, T. (2009). Finland: Social care policies in post-industrial society. In Powell, J., Hendricks, J. (Eds.), The welfare state in post-industrial society: A global perspective. New York: Springer. Spaargaren, G., van Vliet, B.J.M. (2000). Lifestyles, consumption and the environment: The ­ecological modernisation of domestic consumption. Environmental Politics, 9(1), 50–77. Stastistis Finland. (2010). Energy consumption website. http://www.stat.fi/til/ekul/index_en.html Accessed 2.7. 2010.

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Stephens, J. D., Huber, E. and Ray, L. (2003). The welfare state in the hard times. Kitschelt, T., Lange, P. Marks, G., Stephens, J.D. (eds.) Continuity and change in contemporary capitalism. Cambridge: Cambridge University Press. Upreti, B.R. (2004). Conflict over biomass energy development in the United Kingdom: some observations and lessons from England and Wales. Energy Policy, 32(6), 785–800. Varho, V. (2007). Calm or storm? Wind power actors’ perceptions of Finnish wind power and its future. Environmentalica Fennica, 25. Helsinki: University of Helsinki, Faculty of Biosciences, Department of Biological and Environmental Sciences. Walker, G. (2008). What are the barriers and incentives for community-owned means of energy production and use? Energy Policy, 36, 4401–4405. Weart, S.R. (2003). The discovery of global warming. Cambridge: Massachusetts.

Chapter 3

Farewell to Self-sufficiency: Finland and the Globalization of Fossil Fuels Timo Myllyntaus

Keywords  Nordic countries • Energy policy • Self-sufficiency

Introduction The peculiarity of Finnish energy history is best to be examined in a transnational framework, where energy use and industrialization are closely connected to each other. This relationship is often considered an international pattern, a key regularity of modern global economic history. Therefore, it is claimed to be a decisive characteristic of globalization, featuring the expansion of trade in goods and services as well as the migration of population. At first coal, ‘black gold’, in the nineteenth century and then oil, ‘the global juice’, in the twentieth century have been regarded to power mass production and consumption culture throughout the modern world (MacGilliway 2006). Globalization is not a new phenomenon; it is a product of long historical development. ‘[It] is a new word which describes an old process: the integration of the global economy that began in earnest with the launch of the European colonial era five centuries ago’ (Ellwood 2001, p. 12). The emergence of globalization is generally linked to the growth of international trade as well as to the mobility of people, capital and information. In economic terms, trade has been the most significant of these international interactions since the late Middle Ages. Within the context of long-distance trade, there has been a clear long-term shift from expensive luxury goods to cheaper bulky goods. If we consider the globalization of trade over the past 200 years, energy, as a bulky good, has emerged as its most important component. At present, the majority of interregional freight transports energy, which is ­practically

T. Myllyntaus (*) Department of Finnish History, University of Turku, Turku, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_3, © Springer Science+Business Media, LLC 2011

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dominated by sea freights. More than 90% of world trade is transported by sea and much more than half of sea freight contains energy in the form of fossil fuels. Oil is now the most significant single product in world trade, accounting for 40% of the world’s energy consumption (Tekniikka and Talous 2006). Thus, since the beginning of the twentieth century, the history of globalization has been greatly influenced by energy, especially coal and crude oil. How did fossil fuels gain such a dominant position both in the world’s energy supply and in international trade? From ancient times, wood was used as the principal energy source, but densely populated areas witnessed a scarcity of fuel wood as forest resources began to deplete. The transition from wood to coal began in thirteenth-century London. Within a few decades, the resulting pollution provoked a counter reaction, with the Majesty of the Kingdom forbidding the use of coal for heating urban houses. However, due to a lack of alternative energy sources, coal was fairly soon thereafter accepted again as a fuel in Britain (Brimblecombe 1986). England had considerable coal deposits in the central parts of the country where fuel was mined and transported first via rivers and then by sea to urban centres. Later, a fairly comprehensive network of canals was built. Other countries in continental Europe soon began to follow the British example of connecting coal mining regions and cities with waterborne transportation. In early modern times, Western Europe lost a great deal of its forest resources, calling into necessity a transition to coal and coke. The First Industrial Revolution began in England in the 1760s and was powered by coal and steam. New methods of iron production made it possible to use coke as fuel in the melting process, which increased British iron output tremendously (Deane 1965). Within the broader realm of iron production, this new technology prompted a shift in emphasis from the charcoal furnaces of forested countries, such as Sweden and Russia, to countries with sufficient iron ore and coal deposits. In continental Europe, some of the first countries to industrialize were those with coal and iron ore deposits within a fairly close proximity of each other. Wellknown examples of the first industrializing countries in continental Europe include Belgium, northern France, and the Ruhr region in present Germany (Pollard 1981). Switzerland was also an early industrializing country but constitutes a rather exceptional case due to its need to import both coal and iron. While Britain became the first industrialized country, it managed to maintain its position as the largest industrialized economy in the world for several decades from the late eighteenth century to late nineteenth century. It was the largest industrialized economy in the world. Simultaneously, alongside its industrialization process, a significant transition took place from renewable energy sources, such as fuel wood, waterpower and windpower, to fossil fuels (Mathias 2001). For a long time, it was widely believed that industrialization was not possible without the abundant use of coal. Iron production, the heating of industrial processes and firing steam engines required a great deal of energy, and in the nineteenth century, coal was considered an indispensable energy source for extensive industrialization. In the nineteenth century, Britain became the most significant producer and exporter

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of coal as well as of industrial machinery. Many other countries therefore began to use British machinery and energy to kick-start their industrialization process. In the mid-nineteenth century, mineral oil entered the market as an energy source. Refined oil in the form of petroleum and kerosene, for instance, rapidly gained a foothold in the lighting industry. At the time, oil deposits were much fewer in number than coal mines and were generally located in remote areas, at least from a Central European perspective. As a result, oil shipments began to significantly increase the volume of international trade. In the late nineteenth century, Western Europe imported its fossil oil mainly from the United States, and smaller amounts from Poland and Russia. Almost simultaneously, as the consumption of coal and crude oil increased sharply, several European countries such as France, AustriaHungary, the Netherlands, Italy and Spain experienced industrial breakthroughs. This period marked a major transition both in terms of economic structures and energy consumption patterns across Western Europe. In nineteenth-century Britain, the strong industrialization of the economy, the trend towards urbanization, and the growth of railway transportation sharply increased the consumption of coal, which became the principal energy source not only on the British Isles but also in various colonies. Coal remained the predominant energy source for decades until it was replaced by both petroleum and natural gas in the latter half of the twentieth century. Similar structural changes took place in the countries of other continents, such as the USA (Schurr and Netschert 1970; Melosi 2006). Transitions from one dominant energy source to another have been related to other major structural transformation of societies. Energy sources with economic and technological systems related to them constitute a package that tends to reform societies. New energy sources have been seen as preconditions for the prominent societal change.

Finnish Sonderweg1 The Finnish story is quite different from the typical Western European one; in contrast, it bears several similarities with the United States. In the nineteenth century, Finland had relatively poor living standards; was a latecomer to industrialization; and had no coal or oil deposits. However, the country was sparsely populated and endowed with vast natural resources. Its renewable energy sources were particularly considerable – especially in relation to the population. Its forest resources were among the largest in Europe and its hydropower resources were medium sized but easily harnessed by nineteenth-century technology. In addition, the country had the second largest peat resources in all of Europe, surpassed only by those in Russia. 1  Sonderweg (special path) is a controversial theory in historiography regarding the development of Germany exceptional in Europe, because its ‘Third Way’ differed from both Western ‘vulgar’ democracy and Eastern Czaristic autocracy since the late nineteenth century. See Kocka (1988).

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Because of its few but abundant natural resources, Finland was self-sufficient with regards to energy. In nineteenth-century Finland, the import of fossil fuels was negligible. The technologically usable energy resources per capita were perhaps the highest in Europe at the time. Nevertheless, in a country with a population exceeding little more than one million and a territory of 338,000  km2 of which forests covered more than 70%, serious concerns were raised about the threat that Finland’s forests would be destroyed and that the country’s future would be endangered by a timber shortage. What was destroying Finnish forests? Contemporaries cited five potential factors: slash-and-burn cultivation; tar production; inefficient stoves; poorly constructed houses; and the lavish use of timber resources. Despite the government restrictions, Finnish peasants continued slashing forest and burning it for growing grain for their living. The upper class, especially sawmill and shipyard owners as well as timber merchants, regarded this as a waste of a valuable natural resource that should have been refined to sawn timber and wooden ships for exports. Being the biggest exporter of tar and pitch, early nineteenth-century Finland consumed vast amounts of mature pine forests for producing these staples. Opponents of tar production considered it irrational and uneconomic from the viewpoint of the national economy even if it might have been rational and profitable for peasants of Central Finland. In preindustrial Finland, the most of annual felling of timber was consumed for heating houses and saunas. In 1800, about 70% of the rural population lived in ‘smoke cabins’, in log houses without proper stoves connected to chimneys. Inefficient stoves of poorly constructed and insulated houses consumed enormous amounts of fuel wood annually and that was the core problem for Finnish forestry (Mattila 2001; Myllyntaus 2001). Finally, because the stamp price of timber was very low or even zero, there were no economic incentives for the rational use of timber. The lavish use of forest resources and poor forestry degraded the timber stock of the country (Myllyntaus and Mattila 2002). For example, Finns peeled a parchment like thin layer between the bark and trunk of pines for preparing a surrogate for bread grain; barkless trunks were often left in the woods for decaying (Myllyntaus 2009). Although it may sound far-fetched, the drain of standing timber stock exceeded its growth for almost the entire nineteenth century. Consequently, Finnish agrarian society was headed towards an energy crisis. However, various economic, administrative and technological reforms such as improved energy efficiency of stoves and houses, limiting the lavish use of timber, adopting more advanced forestry, were carried out and by the early twentieth century, this trend was reversed with timber resources beginning to grow, as indicated in Fig. 3.1. The break in the line in the 1940s refers to the 10% loss of forested area to the Soviet Union according to the Peace Treaty of Moscow in September 1944. Figure 3.2 illustrates a rather extraordinary development path. As a result of various reforms aiming to rationalize the use of timber, Finland’s energy consumption did not increase for 140 years, between 1800 and 1940, despite a population growth of one million to nearly four million during this same period. This suggests that energy consumption per capita was in steady decline for more than a century.

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2500

1 000 000 solid cubic meters

C

2000

B A

1500 1000 500 0 1800

1820

1840

1860

1880

1900

1920

1940

1960

1980

Fig. 3.1  Standing stock in Finland, 1800–1995, million cubic metres (Source: Myllyntaus and Mattila 2002)

35,000

30,000

Others Peat

25,000

Wood Wind power

ktoe

20,000

Hydropower Net import of electricity

15,000

Nuclear power Gases

10,000

Coal and coke Liquid fuels

5,000

0

Fig. 3.2  Use of primary energy in Finland, 1800–1997, ktoe (Source: Myllyntaus 2008)

Primarily giving up from slash-and-burn cultivation and tar production, replacing old chimneyless smoke cabins with heath-storing stoves with chimneys and dampers, building more energy efficient houses and rationalizing its timber use, Finland could in large part satisfy its gross energy demands through the use of indigenous energy sources despite rapidly growing population. Only from the mid-nineteenth

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Coal + coke 5% Liquid fuels 1% Hydro power 14%

Other 0%

Peat 5%

Wood fuel 75%

Fig. 3.3  The composition of the total primary energy use in Finland, 1914 (Source: Myllyntaus 2013)

century onwards was kerosene oil imported for oil lamps, while coal and coke were shipped for a dozen gasworks and few ironworks. The rate of energy self-sufficiency was 94% in 1914 and remained above 90% until the late 1920s as illustrated in Fig. 3.2. Finland’s dependency on indigenous energy sources is further illustrated through Fig. 3.3, which indicates the overwhelming proportion of wood fuel in the Finnish economy in 1914. This category, consisting of firewood and the wood waste of wood processing industries, contributed as much as 75% of the total energy consumption. At the same time, hydropower and peat accounted for 14% and 5% respectively. The share of imported fossil fuels was only 6%, but this can be partly attributed to the blockade of the Danish Straits and southern parts of the Baltic Sea by the German navy from August 1914. This blockade had a particularly pronounced impact on the decline of imported fossil fuels, which were transported in smaller amounts through Sweden and Norway. Finnish ironworks were able to obtain some coke and coal from Russia whereas urban gas works had to manage without these solid fossil fuels during the First World War (Myllyntaus and Tarnaala 1998). Prioritizing indigenous, mainly renewable energy sources did not mean neglecting industrialization, modernization or nation building. Still, in the mid-nineteenth century, Finland remained one of the poorest countries in Europe. One indication of this is the fact that the last nationwide peacetime famine in all of Europe took place in Finland in the mid-1860s, leading to the premature death of about 7% of the ­population (Myllyntaus 2009). Nevertheless, industrialization accelerated in the last third of  the nineteenth century, and in the interwar years, only Japan surpassed Finland in terms of economic growth. The Second World War temporarily ­interrupted

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the country’s economic catching-up process, but this once again continued after 1945. In the 1960s, living standards in Finland were almost at the same level as in Britain. What makes Finland an ‘odd-man-out’ within the context of European history is that the decisive phases of industrialization were powered primarily by indigenous, renewable energy sources, namely fuel wood and hydropower. Meanwhile, the imports of fossil fuels remained fairly modest until the 1950s. Indeed, at the time, it looked like Finland had succeeded in finding an environmentally friendly Sonderweg to economic prosperity.

The Rejection of Energy Self-Sufficiency and the End of Sonderweg By September 1952, Finland had paid all of its war reparations to the Soviet Union, and could thereafter concentrate on developing its industry and increasing its exports. At the time, its main export staples were newsprint, chemical pulp and sawn timber. The rapid expansion of heavy export industries demanded a considerable amount of raw materials and energy inputs. An exceptionally swift rate of urbanization, including an increase in transport in general and automobiles in particular, also contributed to increased energy consumption. The rising demand for energy was partly solved by importing more fossil fuels, with the most significant increase in energy imports occurring in the 1960s and the early 1970s. The shift in emphasis from indigenous and renewable energy to imported and non-renewable energy was rapid. Within the span of a decade, oil became the major energy source in Finland. The self-sufficiency rate decreased from nearly 70% to less than 25% between 1955 and 1975. Figure  3.4 illustrates this dramatic drop, which ended abruptly with the outbreak of the oil crisis in the mid-1970s. 100 90 80 70 60 % 50 40

Other indigenous fuels

30

Wood-based fuels

20 10 0 1800 1815 1830 1845 1860 1875 1890 1905 1920 1935 1950 1965 1980 1995

Fig. 3.4  Self-sufficiency rate of energy supply in Finland,1800–2000 (Source: Myllyntaus 2013)

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Table 3.1  Total Primary Energy Supply per Capita in 22 Top Countries with More than 3 Million Inhabitants, 2008, toe) Country TOE/cap Population million 1 United Arab Emirates 13,03 4,48 2 Canada 8,00 33,33 3 United States 7,50 304,53 4 Finland 6,64 5,31 5 Saudi-Arabia 6,56 24,65 6 Norway 6,22 4,77 7 Australia 6,05 21,51 8 Belgium 5,47 10,71 9 Sweden 5,36 9,26 10 Netherlands 4,85 16,44 11 Russian Federation 4,84 141,79 12 Korea 4,67 48,61 13 Chinese Taipei 4,60 22,92 14 Kazakhstan 4,52 15,68 15 Czech Republic 4,28 10,43 16 France 4,12 64,12 17 Germany 4,08 82,12 18 Austria 3,99 8,34 19 New Zealand 3,93 4,31 20 Japan 3,88 127,69 21 Switzerland 3,46 7,71 22 United Kingdom 3,40 61,35 (Source: Key World Energy Statistics 2010, International Energy Agency, Paris OECD/IEA 2010, pp. 48–57, http://www.iea.org/textbase/nppdf/free/2010/key_stats_2010.pdf)

The Swiss economic historian Christan Pfister has analysed a phenomenon that he calls ‘the syndrome of the 1950s’, which he defines as a mass and rapid increase in energy consumption in Western Europe. This phenomenon expanded the market share of fossil fuels, and impacted countries across the region (Pfister 2003). Not even Finland could escape the growing trend towards fossil fuel consumption; however, the impacts of this were mainly felt in the 1960s and on an even more fast and revolutionary scale than in many Central European countries. The two oil crises of the 1970s temporarily slowed the rate of energy consumption growth in Finland. However, this growth eventually resumed, with the increase in energy demand being mainly fulfilled by imported energy. Up to the present day, the Finnish industrial structure has remained very energy intensive despite the exceptionally strong position of the electronic industry in the country. Manufacturing still consumes half of the total energy and about a quarter is used by the wood-­processing industries. As a result, among OECD countries, Finland was the fifth biggest energy user in per capita terms in 2008, trailing only behind Iceland, Luxemburg, Canada and the United States. Table 3.1 lists the 22 most energy-intensive countries with more than three million inhabitants. Variations in their energy consumption are substantial; in 2008, for instance, an American

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Hydro- & windpower 2%

Peat 8%

39

Other 1% Liquid fuels 25%

Wood fuel 19%

Net imports of electricity 1% Nuclear power 16%

Coal & coke 16%

Gases 12%

Fig. 3.5  The composition of the total primary energy use in Finland, 2003 (Source: Energy Statistics 2003, Helsinki: Statistics Finland 2004)

­consumed on average twice the amount of energy than a Briton did. These disparities are mainly attributed to the different industrial structure and space heating/ cooling requirements. In the twenty-first century, Finland has derived its energy from fairly diversified primary sources. In 2003, for instance, the market share of indigenous energy sources was only 29%. The proportion of wood fuels and peat was 19% and 8% respectively, whereas hydro- and windpower accounted for only 2%. Liquid fossil fuels constituted a quarter of the total consumption of primary energy in Finland, while solid fossil fuels and nuclear power each had an equal share of 16%, as shown in Fig. 3.5.

Globalization and Reasons for Switching to Fossil Fuels In the end, the development path from renewable energy sources to non-renewable ones, mainly fossil fuels, is similar in Finland as it is in many other industrialized countries. What is exceptional in the Finnish case, however, is the timing and speed of the transition. Presumably, no other country has experienced such a rapid or profound transition in the use of primary energy sources. A paradox, then, emerges: since Finland managed to industrialize its economy and overcome the hardships of the Second World War through the use of indigenous energy, why did it suddenly switch to fossil fuels as part of its transition to a less energy-intensive post-industrial society? The surprisingly late transition in Finland can be explained in various ways. It could be argued that the country had no other choice but to give up its energy

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autarky and switch to the global trade of energy. The economic recovery period that had resumed in Finland following the great famine of the 1860s would have probably been interrupted had it not been for a large-scale transition to the use of fossil fuels. The decision makers of the 1950s and 1960s also considered it necessary to participate in the globalization process by means of expanded foreign trade in order to boost economic growth in Finland. All of the dimensions and consequences of that policy orientation, however, obviously remained unknown at the time. One of the more compelling reasons for Finland’s shift in primary energy sources was the fact that the country’s indigenous energy resources were largely exhausted. By 1965, all of the major rivers had been harnessed for electricity generation and there was no more surplus fuel wood or even wood refuse remaining for energy production. At the time, it was very easy to mechanize and automatize the use of fossil fuels, thereby making it possible to save considerably in labour costs. In contrast, the technology of the 1950s and 1960s did not favour indigenous firewood, wood waste or peat. However, the real explanation for the rapid energy consumption shift in Finland is much more complex than the exhaustion of indigenous energy resources for economic growth or problems in automatizing the feeding of indigenous solid fuels to boilers and ovens. In fact, a more profound explanation can be discerned in the relative prices introduced soon after the First World War to favor fossil fuels at the expense of indigenous energy sources. In the post–Second World War era, the price of coal and crude oil in producing countries, as well as transportation costs to Finland, began to decrease considerably, mainly due to technological and scale factors. The 1960s thus came to represent the decade of cheap oil. In contrast, the stump prices of almost all Finnish tree species rose during this same time. This was true even in the case of birch, which had previously been devalued by the industry and therefore used mostly for fuel wood. Upon the introduction of new technology making it possible to use birch as a raw material for chemical pulp, the stump price of birch also significantly rose. Within a short period of time, birch lost its competitive edge as a source of fuel wood compared to oil and coal. Birch became a precious raw material for the wood-processing industries, and therefore too valuable to be burned as fuel wood. The coniferous species had been upgraded in a similar manner earlier. Within this context, then, globalization via international trade and relative prices soon came to change the economic structures of Finland. In addition, the Government’s energy policies changed during the 1950s and 1960s. Through trade policy, import and transportation restrictions, as well as explicitly defined energy source preferences among state-owned institutions, the Govern­ment had deliberately favoured indigenous energy sources at the expense of imported ones. These measures were partly rooted in economic nationalism, partly in an effort to save hard currencies and partly as a matter of agricultural and forest policy. More specifically, the Government hoped to secure better income and employment rates for the rural population. This regulation policy served to support the competitiveness of fuel wood in Finland from the mid-nineteenth century to the 1960s.

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Why did the Government decide to give up its former line of autarky? In addition to the radical change in economic and technological circumstances mentioned above, another possibility is a change in foreign trade policy. In the 1950s and 1960s, Finland attempted to increase its trade with both Western countries and the Soviet Union. At this time, limited domestic timber resources were perceived as a threat to Finnish foreign trade due to their potential to restrict the exports of the wood-processing industries and curbing exports to the West. Meanwhile, it was increasingly difficult to achieve a balance in bilateral trade with the Soviet Union because the Eastern neighbour had difficulties in supplying competitive goods for the Finnish industry and consumers. In contrast, the demand for Finnish goods continued to rise in the USSR. By the 1960s, when Finland had climbed to the top of Western trade partners of the Soviet Union – only after West Germany, Japan and the United States – Finland’s trade expansion was significantly confined by the existing imbalances in bilateral trade with its Eastern neighbour.2 The Finnish Government, in cooperation with the wood-processing industries, found a creative solution to both problems. By reducing the consumption of timber for fuels, it was possible to increase the supply of raw materials for the exporting wood-processing industries. The marked decrease in the consumption of indigenous fuels was at the same time replaced by relatively cheaper Soviet oil, coal, coke and anthracite as well as Polish coal. As a result of these shifts, Finland could export more manufactured goods to both the West and the East and to find something useful to import from the Soviet Union in order to balance its bilateral trade. The ultimate cost of Finland’s shift in both foreign trade and energy policy, however, was that the country gave up its self-sufficiency in the energy sector.

Conclusions The Finnish case illustrates the core importance of the relationship between the national political context and global trends in international trade. If the latter two are in conflict for longer periods, the situation may become problematic and pressures may increase to change national policies to fit global trends. In the early nineteenth century, Finland was heading towards an environmental crisis. As a result, it redirected its economic activities, introduced more energy

In postwar years, Finland built up close trade relations between both Eastern trade organization The Council for Mutual Economic Assistance (In Russian: Coвeт экoнoмичecкoй взaимoпoмoщи, Sovet ekonomicheskoy vsaymopomoshchi, CЭB, SEV, English abbreviation COMECON, 1949–1991) and a Western organization European Free Trade Association (EFTA, since 1960). A principle of the Finno-Comecon bilateral trade was that within each period of the Soviet 5-year plan, Finland’s imports from the Soviet Union and its Comecon partner countries should be equal with its exports to those countries. The imbalances in Finno-Soviet trade could be levelled by triangular trade with some other Comecon country. In the early 1960s, Finland became an associate member of Comecon and EFTA. See, for example, Bideleux and Jeffries (1998); Müller and Myllyntaus (2008). 2 

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T. Myllyntaus 70,000 municipal waste

gases

fuel oils

coals

peat

60,000

Million kg

50,000 40,000 30,000 20,000 10,000

2005 2000 1995 1990 1985 1980 1975 1970 1965 1960 1955 1950 1945 1940 1935 1930 1925 1920 1915 1910 1905 1900 1895 1890 1885 1880 1875 1870 1865 1860

0

Fig. 3.6  Carbon dioxide emissions from the use of fossil fuels in Finland, 1860–2005 (Source: Kunnas and Myllyntaus 2009)

­efficient heating and construction technology and developed its forestry. These measures helped not only to avoid the environmental crisis, but also to spearhead a successful, timber-based industrialization process. After the Second World War, the country began to increasingly emphasize economic growth at the expense of its environmental interests. This policy shift called into necessity the import of fossil fuels. Now, Finland has one of the highest fossil fuel consumption rates per capita in the world. Because most countries have adapted their economies to rely on fossil fuels, the international trade of oil is now greater than that of any other product. Crude oil dominates world trade; it has the highest volume and the highest value. Therefore, fossil fuels account for the essence of the globalization of trade. Sonderweg to prosperity would no longer appear to be possible without fossil fuels. Similarly, that pathway to development is no longer available to Finland unless major changes are made to energy policy in the world economy. An unfavourable consequence of the policy transition in Finland is that carbon dioxide emissions soared, and air pollution became a major environmental issue during the last quarter of the twentieth century, as shown in Fig. 3.6. A key point of contention that emerges, then, is to ask whether Finland could have achieved its current standard of living and participation in world trade without  switching predominantly to the use of fossil fuels in the 1960s and 1970s. This  might have been possible. New technology for utilizing renewable energy sources and industrial waste with modern automatized methods was already emerging at the time. In urban areas, district heating networks with multifuel boilers for

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the joint generation of heat and electricity were expanding. However, the country should have had the government that would have been even more dedicated to indigenous renewable energy sources than any former governments. It should have had the stamina and patience to find solutions to technological and foreign trade problems as well as restructure the industry and its energy supply. All this would have meant choosing a developing path that no other country had taken before. Unfortunately, contemporaries were not able to anticipate the challenges of climate change. Because of that lacking vision on the future, they did not take greenhouse gases and global warming into consideration when making policy decisions; as a result, the Climate Conference of Copenhagen in December 2009 was a very tough place for the Finnish delegation.

References Bideleux, B., Jeffries, I. (1998). A History of Eastern Europe: Crisis and Change, London: Routledge. Brimblecombe, P. (1986). The Big Smoke: History of Air Pollution in London since Mediaeval Times. London: Routledge. Deane, Phyllis (1965). The First Industrial Revolution, London: Cambridge University Press. Ellwood, W. (2001). No-nonsense Guide to Globalization, London: Verso. Energy Statistics (2003). Helsinki: Statistics Finland 2004. International Energy Agency. (2001). Energy Balances of OECD Countries 1999–2000. Paris: IEA. Kocka, J. (1988). German History before Hitler: The Debate about the German Sonderweg, Journal of Contemporary History, 23, 3–16. Kunnas, J., Myllyntaus, T. (2009). Postponed leap in carbon dioxide emissions: The impact of energy efficiency, fuel choices and industrial structure on the Finnish economy, 1800 – 2005, Global Environment. 3: 128–163. MacGilliway, A. (2006). A Brief History of Globalization, London: Robinson. Mathias, Peter (2001). The First Industrial Nation: The Economic History of Britain 1700–1914. London: Routledge [1969]. Mattila, T. (2001). ‘Räppänästä ryöriin: Lämmitystekninen vallankumous Suomen maaseudulla 1800-luvulla’ [The revolution of heating technology in the 19th-century Finnish countryside], in Tekniikan Waiheita 19: 2, 13–20. Melosi, M. (2006). Energy Transitions in Historical Perspective, Energy and Culture. Perspectives on the Power to Work. Aldershot: Ashgate. Müller, M., Myllyntaus, T. (Eds.) (2008). Pathbreakers, Small European Countries Responding to Globalisation and De-globalisation. Bern: Peter Lang. Myllyntaus, T. (2001), ‘Tavallansa talo elääpi, puulla pirtti lämpiääpi,’ Energia Suomen historiassa,” in Tekniikan Waiheita. 19(2), 13–20. Myllyntaus, T. (2008). Energy in Finnish History. Forthcoming in 2013. Myllyntaus, T. (2009). Summer frost, A natural hazard with fatal consequences in pre-industrial Finland. In Mauch, C., Pfister, C. (Eds.) Natural Disasters and Cultural Responses: Case Studies toward a Global Environmental History, (pp. 77–102). New York: Lexington Books. Myllyntaus, T., Mattila, T. (2002). Decline or increase? The standing timber stock in Finland, 1800–1997. Ecological Economics. 41(2), 271–288. Myllyntaus, T., Tarnaala, E. (1998). When foreign trade collapsed. Economic crises in Finland and Sweden, 1914 – 1924. In Myllyntaus (Ed.), Economic Crises and Restructuring in History. Experiences of Small Countries. (pp. 23–63). St. Katharinen/Germany: Scripta Mercaturae Verlag.

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Pfister, C. (2003). Energiepreis und Umweltbelastung, zum Stand der Diskussion über das “1950er Syndrom, in Wolfram Siemann, Umweltgeschichte, Themen und Perspektiven. (pp. 61–86). München: Beckische Reich. Pollard, S. (1981). Peaceful Conquest: The Industrialization of Europe, 1760–1970. Oxford: Oxford University Press. Schurr, S., Netschert, B.C. (1970). Energy in the American Economy, 1850–1975: An Economic Study of its History and Prospects. Chicago: Johns Hopkins Press. Tekniikka & Talous [Technology and Economy], 26 October 2006, 14–21.

Chapter 4

Trends in EU Energy Policy 1995–2007 Susanna Horn and Angelina Korsunova

Keywords  European Union • Energy policy • Liberalization of markets • Security of supply • Diversification • Energy efficiency

Introduction Today, climate change and a significant increase in energy consumption are considered to be the two greatest global challenges facing the energy world (e.g., Hasselmann et al. 2003: 1923; IPCC 2007; Kara 2007: 5; Karl and Trenberth 2003: 1719). In addition to the scientific community having a common understanding about these two issues relating to each other, the political decision makers also need to acknowledge it and start building a framework around it – with the same longterm targets. On the EU-level, climate change concerns were already manifested in the White Paper on Energy Policy for the European Union in 1995. The development of the EU’s common energy policy is also the result of growing global concerns regarding a wide range of related political and economic issues (Kaivo-oja and Luukkanen 2004: 1511). The purpose here is to examine the development of EU energy policies during the period between 1995 and 2007, through an inductive content analysis of selected preparatory acts.

S. Horn (*) School of Business and Economics, University of Jyväskylä, Jyväskylä, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_4, © Springer Science+Business Media, LLC 2011

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Background to EU Energy Policy The EU has agreed upon a very challenging target to reduce total primary energy consumption by 20% by the year 2020 (European Commission 2011). Clearly, such a demanding goal requires great cooperation and collaboration between the EU Member States. Not surprisingly, the development of a common energy policy for the EU that emphasizes interconnections for more effective goal achievement is on the agenda once again (European Union 2008). Despite the strategies and programmes already implemented in 1995, the accelerating energy demand remains a serious problem with regard to reaching the established reduction target. Nevertheless, processes such as widespread deregulation, the liberalization of energy markets and the pursuit of sustainable development goals have already transformed European energy markets (Balmaceda 2002: 15; Salmela and Varho 2006: 3669). The more long-term trends revealed in the energy policies also shed light on changes in the European markets and lay the groundwork for understanding new developments that arise in competitive markets, such as emission trading, demand response and ESCOs (energy saving companies). Also, when discussing EU energy policies, it is important to understand their effect globally. EU Member States have assumed an active role in discussions regarding global treaties for combating climate change in the UN-led process. In addition to minimizing their own greenhouse gas (GHG) emissions, Member States have also taken serious steps in lowering the emissions of developing or emerging economies through the implementation of the EU GHG emission trading system. Thus, the policies the EU sets for itself are also crucial on an international scale. Political decision making seldom follows a rational process, which makes the already turbulent research topic of climate change even more difficult to grasp (Mallon 2006: 2). The far-reaching effects of climate change together with the shortterm and unpredictable decision making on an international, EU, as well as national levels are a demanding combination. In order to let new clean technologies diffuse and climate markets to function in a frictionless manner, the political and operational environment has to be stable and therefore less risky. Large-scale investments have a lifetime of decades, and in order to calculate the viability, some assumptions of future political framework need to be made, in terms of tax rates and reliefs, subsidies, feed-in tariffs, etc. In case reliable assumptions cannot be made, the investment eagerness decreases due to high regulative risk (Labatt and White 2007: 13). This is the reason why a stable and foreseeable environment is a necessity for letting climate change mitigation to have its best results and in order to make this happen, it is important to be aware of the past trends in political decision making. A crucial issue in the success of the policies is the specificity of their objectives (Mallon 2006: 15). In terms of EU policies, it is clear that in the beginning of setting a common energy policy, Member States may have differing methods or motivations for these policies. However, hopes are high that along the better establishment of the EU and longer cooperation within the Member States, the objectives would be harmonized. Therefore, it could be suggested, that the more the Member States

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are being engaged in discussion about the target setting, the more unified they will get about these targets and the better the outcomes will be. According to the glossary of the official online gateway to the European Union, the aim of current European energy policy is to develop a low energy economy, which is safer, more sustainable and more competitive (European Union 2008). The energy policy includes a set of guidelines that is enforced through directives, regulations and national legislation, but it is limited by EU treaties and inadequacies within the global market. The European Coal and Steel Community (ECSC) as well as the European Atomic Energy Community (EURATOM) can be considered crucial to the pre-stages of forming a common EU energy policy. However, the current EU energy policy, which focuses largely on limited energy supplies, did not begin to form until the first oil crisis in 1973 (European Union 2008). In addition, all throughout the years, there have been numerous contradictions and clashes related to the role of the EU and the Member States in preparing and implementing the energy policy (Kaivo-oja and Luukkanen 2004). Previously, security of supply had been central to national policies, but with the creation of EU’s single market, the focus seems to have shifted to the common policy as the most effective way to tackle energy challenges that are shared by all Member States. Overall, the aim here is to contribute to the understanding of developments in EU energy policy during 1995–2007, through examination of the process of its integration, its challenge areas, as well as success and failure areas based on the temporal dynamics of focus points and recurring issues within Commission communication documents. The examination of these issues will be elaborated upon by means of inductive content analysis. In the discussion, the important trends in EU energy policy are summarized, while reflecting on historical and political settings that have influenced the evolvement of the trends.

Method and Data Analyzing policies essentially entails the analysis of policy texts. Content analysis is an accepted method of textual investigation (Silverman 1985: 149) that reveals the content in a source of communication and allows comparison across many texts (Neuman 1994: 262). In order to obtain sufficient temporal insight into the dynamics of EU energy policy trends, a time interval of at least 10 years was decided upon. Initial investigation into energy policies revealed that the issue of climate change was first conspicuously manifested as a concern on an EU level in the White Paper on Energy Policy for the European Union in 1995. The White Paper generated several strategies and programmes for the energy field and it was considered an important benchmark in the development of EU-level energy policies and trends. Thus, the year 1995 was chosen as the starting point for the analysis, while 2007 was used as the end point, resulting in a 12-year time interval. The end point year corresponded to the year when the analysis was conducted.

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The purpose of the analysis is to identify trends emerging from the EU energy policy documents between 1995 and 2007 and note any changes in the trends. Thus, it fit the purpose to use the inductive mode of content analysis, which allows for the processing and analyzing of documents systematically and objectively, while deriving concepts from the data itself (Krippendorff 2004: 36; Kyngäs and Vanhanen 1999: 5–7). According to Sayre (2001), allowing the categories to emerge naturally from the text provides a richer and more detailed understanding of them. Adams et al. (2007) raise the issue of reliability for situations where the dominant themes are categorized as a result of reading the texts, as opposed to having pre-existing categories derived from a theory. They assert that the best way to ensure reliability is by having more than one person read the texts and draw up the categories independently. The final classifications should be based on a comparison of the different data sets and ultimately, the selection of categories that were identified by all readers. Thus, the reliability of content analysis here was ensured through the described procedure and the co-operation of two researchers. Since official policies are not formulated yearly, it is impossible to conjure a dataset from the published policies extensive enough to reveal the entire nature and trends or all energy issues in the EU. Nevertheless, all directives set in force in the EU, also energy-related, require Commission reports, in which the proposals for action are comprehensively discussed. These are published as Commission communications (COM documents)1 and can be found as such in the EUR-Lex database for preparatory acts (European Union 2007). They include Commission legislative proposals, Council common positions, legislative and budgetary resolutions and initiatives of the European Parliament, as well as opinions of the European Economic and Social Committee and of the Committee of the Regions. So this means that the preparatory acts should include the documentation related to a common EU energy policy. The use of exclusive COM documents narrowed the scope of the research, but at the same time helped to keep the data load manageable and homogenous. In other words, the research could also be defined as a study of policy trends, as communicated by the Commission to any interested parties.

Results The actual search was conducted on January 25th, using “energy” as a keyword. This resulted in a total of 132 hits. However, only documents published between 1995 and 2007 were accepted for analysis. Thus, the material used for analysis consisted of 57 COM documents to the Council and other institutions, centering on the subject of energy. A complete listing of analyzed COM documents is available

1 Proposed legislation and other Commission communications to the Council and/or the other institutions, and their preparatory papers. Commission documents for the other institutions (legislative proposals, communications, reports, etc.). (EUROPA: Gateway to the European Union).

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Table 4.1  The number of analyzed COM documents in the studied period of 1995–2007 Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 7 4 4 5 1 3 8 6 5 3 2 8 1 Number of COM documents

in Appendix 1. Table 4.1 demonstrates the number of documents for each year of the studied time interval. As previously mentioned, the initial reading and categorization of COM documents, as well as subsequent readings, coding, analysis and interpretation of results, were performed by the combined effort of two researchers in order to ensure reliability of the method. To create a visual aid for the analysis and results, separate tree diagrams were constructed for each of four major themes, where the number of diagrams equals the number of years during which a particular theme was most actively discussed in the EU energy policy documents. An example of a tree diagram is provided in Appendix 2. After the initial reading, four major themes emerged from the data: energy efficiency, security of supply, liberalization of markets and diversification. After subsequent readings, each theme was examined more closely. A total of 17 sub-categories emerged that appeared to be more or less the same across the four themes (Table 4.2). Later, several topics were identified within each sub-category. By analyzing these topics, the transformations, changes and dynamics within the major energy policy themes could be identified and summarized.

Energy Efficiency Content-wise energy efficiency received the most attention. Several issues came up repeatedly, with some shifts in focus, during the period between 1995 and 2007. The central topics under discussion in setting a well-designed policy for energy efficiency are public education and promotion. This has been pursued through various programmes throughout the years (there have been EU-funded programmes to promote energy efficiency during the entire period) but it seems to have lost momentum since 2002. Between 1995 and 2002, when a lack of information was identified to be the first barrier in achieving energy efficiency, this campaign has been included in documents every year (except in 2001, when there was no major communication on policy issues whatsoever). After 2002, the focus has shifted towards legislative and framework issues. Even the interest in those seems to be diminishing and the trend towards greater energy efficiency continues to weaken. Achieving proper legislation for energy efficiency has still managed to spark some interest, between 1995 and 2006. However, there has been little or no written documentation about EU energy efficiency in 1999, 2000, 2001, 2003, 2005, 2006 or the beginning of 2007. Therefore, our data suggests that the bulk of all legislative

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Table 4.2  Categories identified from COM document readings 1995–2007 Sub-categories Brief explanation Refers to the roles of various actors in the energy market   1. Actors (e.g., consumers, energy utilities)   2. Area specific References to different geographical regions   3. Economical Refers to all positive and negative financial flows and viability issues in the Member States   4. Environment Includes direct and indirect influences on the environment   5. Diversification Refers to the role of the diversification theme on its own and in the context of three other major themes   6. Energy efficiency Refers to the role of the energy efficiency theme on its own and in the context of three other major themes   7. EU strategy, focus areas Identifies key/focus areas in EU strategy (e.g., CO 2 reduction goals)   8. International issues Issues that emphasize the need for international solution, focus and cooperation   9. Liberalization Refers to the role of the liberalization theme on its own and in the context of three other major themes 10. Markets All references to processes and changes taking place in energy markets (e.g., integration, structural changes) 11. Mechanisms/Instruments Implementation tools for different themes (e.g., tendering procedures for increased security of supply) 12. Member States Reference to the role, plans, implementation histories, etc. of EU Member States 13. Policy issues Includes all issues that require policy-level implementation outlines (e.g., EU-wide educational initiatives) 14. Problems General problems within the energy field in the EU (e.g., rising electricity demand) 15. Security of supply Refers to the role of security of supply theme on its own and in the context of three other major themes 16. Specific sources/sectors Refers to issues within specific sectors, like transport, or energy sources, such as biofuels 17. Technical Includes specific technical problems, challenges or improvements (e.g., storage of liquefied natural gas)

actions concerning directly the energy efficiency issue have occurred in between 1995–1998 and 2004. However, alongside legislation, there are many other energyrelated directives that have had direct and indirect impacts on energy efficiency. Soimakallio and Manninen (2007) observe that the directives having been addressed include: emission trading; renewable energy in electricity production; the promotion of biofuels in transportation; air pollutants and the combustion of waste. However, they also note that the influence of these directives on energy efficiency is not straightforward. The interconnections are, in fact, very complex and despite the common goal of reducing emissions, energy efficiency is not necessarily promoted by the interconnected directives. In some cases, they even weaken the arguments for energy efficiency. In the EU, an obstacle in achieving an energy efficiency policy has been to find and develop more sophisticated mechanisms to increase consumers’ and companies’

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interest in energy efficient solutions. The developed incentives have ranged from standards, taxation and feed-in tariffs to state aids and special funds. Each EU Member State has been given the freedom to choose which incentives they wished to use. In addition to the aforementioned mechanisms, demand side management (DSM) has been widely accepted as an important tool in increasing energy efficiency. The aim is to influence energy consumption by end users, for example, through government programmes, so that demand and supply would move closer to the given optimum. The focus has been more on improving energy efficiency than on controlling the overall rise in the demand for energy. As a result, there has been a clear interest to create a market demand for energy-efficient technology. In fact, two main goals of DSM are load shaping (e.g., decrease in daily or seasonal load variations) and load leveling (e.g., decreasing energy consumption – saving). However, as noted above, DSM is mostly a prerogative of governmental interventions. New approaches are being developed to suit the competitive liberalized markets. For example, demand response can be used in competitive electricity markets to get demand-side or end-use customers involved in setting prices and clearing the market (Helynen et al. 2007: 86). Demand response is based on real-time prices and customers’ active response to them, which may be expressed through a shift in consumption depending on the time of day or through the reduction of total or peak demand, via energy efficiency measures. Customers should also have the opportunity to sell back their load to the market. Benefits of the demand response approach include customer activation and the motivation to take advantage of energy efficient possibilities. On the other hand, the implementation of demand response requires major technological investments, as it is based on up-to-date metering and communications equipment, such as automatic meter reading systems. International issues have been discussed from several different angles. Some areas, rather randomly picked, such as Eastern Europe, China, former Soviet areas, South America, developing countries in general, etc., have been mentioned individually and projects or investment activities have been started to help the energy efficiency promotion in those areas. An interesting shift, probably due to the growing concern about climate change, has been the shift from local problems to global ones. It can be noticed that especially developing countries have recently received more attention than ever before, as they are perceived to be the ones most heavily impacted, but simultaneously also having most to catch up in terms of technical solutions in energy efficiency. Also, prior to the EU enlargement process in 2004, there was a perceived need to urgently assist the new member states towards meeting adequate levels of energy efficiency. Concern over the environment has been a central theme behind discussions regarding energy efficiency throughout the entire study period. In particular, Eastern Europe’s poor energy efficiency has been associated with some of the environmental degradation within that region. Also, electricity generation has focused around the promotion of cleaner as well as more efficient technologies, due to current environmental concerns, especially climate change challenges. Meeting Kyoto Protocol commitments has become a pivotal part of energy discussions since 1998. Currently, there is much discussion about how to proceed from the Kyoto Protocol and whether

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it is an effective way to deal with the GHG emissions. For example, the outcomes of Copenhagen climate negotiations 2010 are very controversial: even though a political agreement for a two-degree warming limit was set, achieving a comprehensive working agreement through a pledge-and-review system will take at least 2 years or longer. Moreover, the targets currently pledged by EU are very modest when compared to what science recommends, as seen against the 2007 baseline (Tangen 2010). The data suggests that technical issues no longer play a central role in increasing energy efficiency. Many necessary technical solutions have been implemented, and therefore the problem seems to fall on either the policy side (i.e. how to generate a demand for them and ease their market entry) or on the diffusion side (i.e. how to increase the market entry/size). The documentation from 1995 to 2007 suggests that the focus has shifted from finding technical solutions to finding the necessary policy tools, which would best spur the technologies. On the technical side, the most discussed themes have been: the standardization needs of technological equipment (1996); the potential or opportunities for improving energy efficiency that have not been fully realized (1995, 2004), improving IT applications and infrastructural problems (1998) and the broadening of technical education (1998).

Security of Supply Security of supply, as a second main theme, focuses on the international dimensions of energy policy to an even greater degree than the other themes. An international perspective arises in nearly every document where security of supply is mentioned but from various viewpoints. In the beginning of the study period, the focus was on Eastern European and former Soviet countries (Russia, Commonwealth of Inde­ pendent States, the Balkans, Turkey, etc.), but it rapidly spread to the Mediterranean countries as well as all third party countries in general (developing nations, “Northern Dimension” and Caspian Basin countries) since they fall under the umbrella of either producer or transit countries. Dialogue and cooperation with these third-party countries have been considered valuable throughout the entire period. In terms of setting policies for security of supply in the EU, there has been an ongoing discussion regarding setting special policy objectives. Generally speaking, since 2001, there has been an increased interest in environmental (particularly climate related) problems. Attitudes towards the Kyoto Protocol in terms of security of supply were predominantly negative, as the two issues were considered independent from one another. This can be seen in the following quotes from the COM documents: “sustainable development must also consider security of supply” (1998) or “efforts will have to focus on orienting the demand for energy in a way which respects the EU’s Kyoto commitments and is mindful of security of supply” (2001). However, negative attitudes have significantly diminished, and since 2006 and 2007, the Kyoto Protocol and the reduction of greenhouse gases have been seen as a complementing part of securing energy supplies. These two run almost parallel to each

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other in more recent discussion, which can also be seen in the following quotes from the COM documents: “improve security of clean energy supplies” (2006) or “The Commission’s Green Paper on energy efficiency identifies the following major benefits of efficient use of energy: securing the competitiveness of European industry benefiting from reduced spending on energy, environmental protection due to a reduction of the carbon dioxide emissions caused by energy use, security of energy supply due to reduction of energy demand and hence reduction of dependency on energy imports” (2006). In 2007, the viewpoint becomes even more extensive, which becomes evident from the following quote of a COM document published that year: “EU [will be put] on the path to becoming a low carbon knowledge-based energy economy, but will at the same time improve its security of supply and make a progressively more significant contribution to competitiveness.” The strategy clearly outlines how these three issues complement each other. EU-level documentation has acknowledged the important notion and in doing so, transformed environmental issues from being perceived as drawbacks to benefits. The key concerns, which were identified in the COM documents, are manifold. The most common issues, until 2003, were technical problems related to network and capacity building. It has been a difficult and expensive task to secure energy supplies for the entire community, without overloading some bottleneck areas within the network and reaching all remote or otherwise special regions difficult to reach. Since the internal markets began to operate effectively, much of the discussion concerning technical problems ceased. Apparently, the majority of the network was built in time for market liberalization. The insecurity of energy supplies, resulting from geopolitical uncertainties, was another issue that came up rather often. Such issues have been discussed regularly (1995, 1997, 2002, 2003, 2006), where, for example, the 9/11 bombings, the Iraq war and other similar conflicts have increased the pressure to pinpoint the effects of political risks on supply security both in producer as well as in transit countries. Renewable energy sources were seen as a solution to improve security of supply in all EU Member States. The focus in the COM documents regarding renewable energy corresponds more or less with finding benefits that link environmental concerns with security of supply (see above). Renewable energy sources are available and indigenous, so Member States have domestic supply of them, thus increasing the supply security. The focus has shifted between gas, oil, nuclear and renewable energy, with a clear trend towards promoting the use of renewable energy sources. Renewable energy has been considered a solution for supply security nearly every year since 1995, and since 1996, it has even been considered necessary for securing the safe supply of energy. On the other hand, fossil fuels, hydrogen and nuclear energy sources have been receiving mixed responses. Although natural gas was accepted as an energy source, it was described as problematic ever since 1995. Its future demand and utilization would certainly require a reassessment due to the import dependency of gas. Nevertheless, throughout the study period, natural gas has remained a necessary, although problematic, part of the energy mix. On the other hand, it has been used to campaign the reduction of fossil fuel use. In 1997, a consensus within the EU was

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reached to keep only a minimum stock of fossil fuels within the region, in order to secure some level of energy supply. This consensus has remained unchallenged throughout the study period and the emphasis on climate change has only reaffirmed the goal of minimizing fossil fuel use. An interesting approach taken in 1998 was to include energy saving as a so-called energy source, since it was basically considered to be additional energy that aided the security of supply. There are growing concerns within the EU that safety standards relating to nuclear energy be met, for instance due to the threat posed by aging nuclear plants.

Liberalization of Markets The third set of results arises from the liberalization of energy markets. Market barriers and a lack of transparency between market actors have been noted to be the largest obstacles to achieving a fully liberal and operational market. The documents published during and prior to 2003 have focused on providing a detailed timetable to liberalization as well as searching for specific mechanisms for aiding the liberalization. Following 2004, after the markets were liberalized, the documents focused on external issues and decreased rapidly in quantity. Formulating policies has been a central issue in all of the documents – mainly the development of a working framework for the internal energy market in the EU, which include objective setting and the formulation of necessary ground rules and legislation. Understanding how the market works and assessing and monitoring its functionality have been key issues while preparing for a common energy market. Another key issue has been the competition on the market, once it was working. The concerns focused on how a healthy competition could be established in the market, should it be regulated in any way and whether it is worth to remove all barriers, so that all the players would have equal access to the market. The reasons and objectives behind market liberalization seem to have changed slightly during the years. In 1995, the COM documents stressed security of supply, the desire to increase the competitive edge of individual companies through removing barriers inhibiting new energy suppliers’ market entry (as a response to increased global competition), as well as reducing energy prices. But gradually – starting from 2001 – the focus shifted to creating the largest internal energy market in the world, which would increase the EU’s competitiveness amongst international players. Environmental issues gained interest even before the markets were liberalized. Environmental externalities (higher competition may lead to unsustainable activities and hazards due to not investing into environmentally sound technologies) of a fully liberal market were first discussed in 1998. In 2003, it was determined that high environmental standards needed to be introduced before the market was liberalized. It became a priority to create a legal framework for internalizing the externalities of energy production, meaning that the producers would bear the costs of causing environmental harm. A legal framework would ensure the promotion of sustainable energy and monitor environmental impacts in the future liberal markets.

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Between 1996 and 2003, technical issues related to liberalizing EU energy markets have been important. Production and distribution issues, as well as the technical ­standardization of equipment and facilities (also related to environmental standards), have required attention. Building an extensive enough electricity network to ensure a truly EU-wide common internal market, overcoming bottleneck and remote area provision problems, has also been a topic of interest. Before 1996, grids had not been developed to reach over all borders and bottlenecks, due to which additional capacity was seen necessary to be built to these grids. All in all, the infrastructural planning needed careful planning on an EU level, before the actual internal network could begin functioning. These technical discussions ended with the introduction of the internal market in 2004. In 2004, the EU’s internal gas and electricity markets became fully operational and suddenly small business customers could choose from different suppliers. This essentially meant that new suppliers were born and more competition developed. After the internal gas and electricity markets became functional, all COM documents subsequent to 20032 have focused on external issues, such as the growing role of Russia in the internal energy market. All EU documentation concerning internal energy markets has considerably decreased in quantity after 2003. The reason was rather self-evident. Market liberalization for all consumers was dependent on each Member State, so essentially, only national documentation and proposals were required. The entire legal framework required for achieving liberal markets was founded on a national level. However, since monitoring and assessing the functionality of the markets had previously been a top priority, additional communication concerning those phases, even after 2004, might be expected. In 2006, there has been some discussion regarding international issues and the possibility of granting Russia a stronger presence in the EU internal energy market. Some communication has also related to the markets, more specifically to internal market principles. None of these topics necessarily relate to any direct monitoring or discussion concerning the assessment of the energy market. As previously noted, Russia’s role in the EU’s energy market has grown considerably towards the end of the study period. In the early phases of planning the general appearance and framework of the internal market, communication regarding international issues generally referred to countries outside of the EU as “third countries.” However, since 2003 and around the time of EU enlargement, the topic of international issues needed to be readdressed. A number of former Soviet states, which were referred to as “third countries” in previous documents, were now a part of the EU. Upon closer examination, it appeared that most of the issues outside the EU concerned Russia. Russia’s role, either as a transit or as a producer country, gained a special focus within the EU.

All necessary legislative proposals, plans and other communication were prepared by 2003, even though the internal markets started functioning only after 2004.

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Diversification The final results section concerns geographical, supplier and fuel diversification targets. Diversification was a major concern in the beginning of the study period, and between the years 1995 and 2002, it was discussed thoroughly in a number of documents and in conjunction with numerous sub-topics. Towards the end of the study period, diversification received less attention. It was mentioned in documents throughout 2003–2007 but in limited amounts, and in conjunction with the previously mentioned topics. No new, ground-breaking ideas, measures or targets have been introduced after 2003. Policy issues related to reaching diversification targets have been discussed thoroughly during the entire period. The main objective for any new diversification policy was security of supply. Supply security has been mentioned on several occasions (1995–1997, 2003–2006) but the environment and sustainable growth of the economy have been targeted as special objectives. In recent years, policies have been also focused on improving political dialogue and developing international issues related to the diversification of fuel sources, as well as expanding the geographical scope of energy supply. International issues have gained significant interest. This has ranged from cooperation between producer and transit countries (since 1997) and amongst developing and transition countries (since 2002) to cooperation within the Member States (e.g., Austria and Slovenia, Nordic and Baltic States and countries around the North Sea). Focus on specific sources, such as increasing the use of renewable energy, has also been a main objective of recent policy making in the EU. The attitudes expressed around this issue were similar to those concerning security of supply. Renewable energy was certainly receiving more attention, due to its domestic and secure availability in all the Member States. It has been discussed since the beginning of the study period. In terms of diversification, only renewable energy sources have been mentioned repeatedly. Few references have been made to include more nuclear energy (1995), improved gas networks (1997, 2001) and even a new oil terminal (2003) in the diversification strategies but the prominent focus nevertheless remained in renewable sources of energy (mentioned in 1995, 1996, 1997, 1998, 2001, 2002, 2006 and 2007). Import dependency, due to a lack of indigenous, traditional energy sources, has been identified as an acute problem in the EU (as noted in the section concerning supply security). Diversification has been seen as a viable strategy to secure the supply of energy. It has appeared as a subject in 1995, 1996 and 2002 and oddly enough, thereafter, import dependency as a concern had not appeared, at least in direct connection with diversification plans. Thus, it was already more or less clear that import dependency was the underlying problem. Technical problems have arisen surprisingly little in connection with diversification. Diversification, as such, did not require specific technologies. Nevertheless, the energy sources, to which the diversification aimed, might have required new innovations (e.g., adjusting production to local conditions, technically improving

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networks, extracting sources in different geographic locations, decentralization technologies, etc.). In the middle of the study period (2002–2003), technical problems relating to network building or capacity problems were addressed, but otherwise, it appeared that they have either assumed radically new technologies, were not relevant or they have been addressed in connection with other issues. In fact, it seemed that the obstacles were more policy related, rather than of technical nature. The effects on the society or the economy have been briefly discussed in 1995 and 1997 in conjunction with employment effects or possible problems with consumption growth and supply increases but otherwise policy, international and other abovementioned issues have superseded them. Emission levels have decreased through the use of renewable energy sources. The positive impacts of alternate energy sources have been observed as early as 1995 and have been mentioned within the same context as sustainability, for instance. Also, growing energy requirements could possibly be fulfilled by more diverse energy sources, especially renewable ones, which are more environmentally friendly. Environmental issues and emission levels as factors determining energy policy were mentioned again in 1997 and 2005. Mechanisms for promoting diversification have varied during the studied time period, but none have succeeded in promoting any significant interest. In 1995, the instruments used were sector specific and not very homogenous. In 1998, direct financial support was promoted, and in 2002, closer to the introduction of internal energy markets, market-based instruments, healthy competition and long-term contracts were seen as priority in increasing diversification. In addition to promoting fuel diversity, these mechanisms also serve to increase the geographical diversity of energy sources.

Discussion The conclusions of this study are categorized into four main sections, in a matter similar to the data-based results. Political interest in energy efficiency has witnessed a decreasing trend, both in terms of information distribution, as well as in the number of legislative proposals. Although it may be labeled as controversial, the path to increasing energy efficiency needs to focus more on policy-level changes and less on technical innovations. Several mechanisms have been tested in the quest to improve energy efficiency, but there was no mutual understanding between the Member States as to which one was the most effective. The chosen mechanisms should not only increase energy efficiency in the Member States, but their benefits should extend into developing countries as well. Sector-wise, interest in the building and transport sector has shown the greatest growth during the study period. Generally, security of supply was strongly correlated with energy efficiency, since the EU’s security strategy relied on the systematic development of its energy efficiency policy, which, in turn, paralleled the policy for renewable energy. This is reflected in the change of attitude towards environmental issues in general.

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Throughout the years, improving environmental protection and seeking clean energy sources had increasingly been viewed as a source of security and an advantage, rather than a nuisance. The interest in renewable energy sources continued to grow, while dependency on gas remained a concern. Overall, a strong international dimension characterized the focus points of EU energy policy within the area of security of supply between 1995 and 2007. Although the geographical scope in the early stages of the energy policy documents being studied was mainly limited to Eastern European and former Soviet countries, it rather rapidly expanded to include Mediterranean countries, developing countries, as well as Caspian basin countries. This reflects the EU’s efforts to improve security of supply through diversified cooperation and reliance on different supplier and transit countries. Although nuclear power was sometimes considered as a solution to reduced GHG emissions and to improved security of supply, the safety concerns connected to the growing number of aging nuclear plants and waste were troublesome. Evidently, the liberalization of markets theme received more attention between 1995 and 2003, while the amount of documentation decreased thereafter and the focus areas of the theme shifted. Initially, the discussion centered on setting an adequate policy to establish and support healthy competition in the common liberalized market. The mechanisms, benefits, as well as dangers of the liberalized market were thoroughly examined and reviewed. For example, environmental externalities were a serious concern due to the lack of common stringent environmental standards and the insufficient use of environmentally sound technologies. Thus, the focus has been set on the implementation of common standards and mechanisms for internalizing the externalities, making the producers carry the costs of causing harm to the environment. In addition, the establishment of common technical standards and reliable grids across the borders, besides the general infrastructural planning, were emphasized up until 2004. It was interesting that while the initial reason behind liberalization was mostly the reduction of energy prices, the main endeavor had later been transformed into the formidable goal of creating the largest internal energy market in the world in order to increase the EU’s competitiveness with other global contenders. In addition, the international dimension of the discussion within the COM documents often centered on the ever-increasing role of Russia in the EU’s internal energy market. There were two main issues related to the context of diversification. Firstly, it was strongly coupled with supply security and improvement of import dependency. The second issue concerned renewable energy and diversifying in its direction. Interest in renewable energy sources had been growing increasingly. In regards to other trends, a new focus aimed at increasing diversification in developing countries had emerged. Both renewable energy targets and development issues went hand in hand with growing concerns regarding climate change and obligations to cut CO2 emissions. However, the extent to which diversification has been discussed has weakened towards 2007. Nevertheless, the actual aims (renewable energy, security of supply, development aid) have not lost their relevance. They were merely not discussed in this context.

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Conclusions Overall, the challenges facing EU’s energy policy between 1995 and 2007 remained relatively unchanged. The number of focus areas, however, has been reduced from six to three main sectors. In 1995, the six focus areas of the energy policies were: (1) market integration, (2) deregulation, (3) economic and social cohesion, (4) sustainable development, (5) environmental protection and (6) security of supply. By 2007, the main challenges were reduced to (1) competitiveness, (2) sustainability and (3) security of supply. Each of these later challenges included one or more of the previous ones, which would indicate that discussing the problems in this kind of policy formation process helped to clarify the most important problems even to the decision makers themselves and to present them to the public in a clearer way. Obviously, the economic (competitiveness), environmental (sustainability) and technical (security of supply) aspects have been separated from each other and these three topics have crystallized during the 12 years of policy formation to be the next generation’s challenges. Although they have been viewed as separate issues, the Communications still stress the need for cooperation among all fields in order to improve any one single issue. Promoting the most pertinent themes of energy efficiency, market liberalization, security of supply and diversification might effectively contribute to improving competitiveness, sustainability and security of supply within the European Union’s energy market, thus presenting a solution to the current main challenges.

Appendix 1 COM documents related to energy policy of the European Union in the studied period 1995–2007 (Based on search through EUR-Lex database) 1995

COM 127 A memorandum on the activities of the European Atomic Energy Community relevant to the objectives of Articles III and IV of the Treaty on the Non-Proliferation of nuclear weapons COM 171 The conclusion of an agreement for peaceful nuclear cooperation between the European Atomic Energy Community (EURATOM) and the Government of the United States of America COM 197 Multiannual programme to promote international cooperation in the energy sector – SYNERGY programme COM 225 The promotion of energy efficiency in the European Union (SAVE II Programme) COM 391  The repeal of several community legislative texts in the field of energy policy COM 440 The conclusion by the European Communities of the Energy Charter Treaty and of the Energy Charter Protocol on energy efficiency and related environmental aspects COM 682  White Paper – an energy policy for the European Union (continued)

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(continued) 1996

COM 149  The Euro-Mediterranean partnership in the energy sector COM 308  Europe-Asia Co-operation strategy for Energy COM 320 The repeal of several Community legislative texts in the field of energy policy COM 576 Energy for the future: Renewable sources of energy – Green paper for a Community Strategy

1997

COM 125  The external dimension of trans-European energy networks COM 167  An overall view of energy policy and actions COM 196  The energy dimension of climate change COM 599 Energy for the future: renewable sources of energy – White paper for a community strategy and action plan

1998

COM 244 Financial assistance by the European Communities to the energy sector from 1995 to 1997 COM 246 Energy efficiency in the European Community – towards a strategy for the rational use of energy COM 267 The position to be adopted by the European Community within the Energy Charter Conference and the International Conference of the Signatories of the Energy Charter Treaty, on the amendment to the trade-related provisions of the Energy Charter Treaty and its provisional application COM 458 Progress report on the multiannual programme for the promotion of energy efficiency in the Community – SAVE II COM 571  Strengthening environmental integration within Community energy policy

1999

COM 548  Strengthening the Northern dimension of European energy policy

2000

COM 117 The procurement procedures of entities operating in the water, energy,   (COD) transport and postal services sectors COM 247  Action Plan to improve energy efficiency in the European Community Communication from the Commission to the European Parliament pursuant to the third indent of Article 251, 2 of the EC Treaty concerning the common Position of the Council on the adoption of a European Parliament and Council Directive on Energy Efficiency Requirements for Ballasts for Fluorescent Lighting

2001

COM 69 The implementation of the Community Strategy and Action Plan on Renewable Energy Sources (1998–2000) COM 98 Common position of the Council on the adoption of a Directive of the   (COD) European Parliament and the Council on the energy performance of buildings



 ommunication from the Commission on adoption of a Regulation of the C European Parliament and of the Council on a Community Energy Efficiency Labelling Programme for Office and Communication Technology Equipment COM 125  Completing the internal energy market COM 126  Enhancing Euro-Mediterranean cooperation on transport and energy COM 311  The guidelines for trans-European energy networks   (COD) COM 506 Pursuant to the second subparagraph of Article 251 (2) of the EC Treaty concerning the common position of the Council on the adoption of a Directive of the European Parliament and the Council on the promotion of electricity from renewable energy sources COM 775  European energy infrastructure (continued)



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(continued) 2002

COM 82 A multiannual programme for action in the field of energy: “Intelligent   (COD) Energy – Europe” programme (2003–2006) COM 185 The promotion of cogeneration based on a useful heat demand in the   (COD) internal energy market COM 321 Final report on the Green Paper “Towards a European strategy for the security of energy supply” COM 408  Energy cooperation with the developing countries COM 448 Comments of the Commission on the conclusions of the Mid-term Assessment of the Energy Framework Programme (1998–2002) COM 488 The internal market in energy: Coordinated measures on the security of energy supply

2003

Communication from the Commission concerning the conclusion of an Agreement for Co-operation in the Peaceful Uses of Nuclear Energy between the European Atomic Energy Community (EURATOM) and the Cabinet of Ministers of Ukraine COM 164  The consequences of the war in Iraq for energy and transport COM 215 State of progress of the negotiations concerning the ITER international nuclear fusion energy research project COM 262 The development of energy policy for the enlarged European Union, its neighbors and partner countries COM 743  Energy Infrastructure and Security of Supply

2004

COM 366  The share of renewable energy in the EU COM 711 The future development of the EU Energy Initiative and the modalities for the establishment of an energy facility for ACP countries COM 777 The Energy Dialogue between the European Union and the Russian Federation between 2000 and 2004

2005

COM 222 The negotiation of the accession of the European Atomic Energy Community (Euratom) to an international Framework Agreement among the Members of the Generation IV International Forum in the field of nuclearrelated research COM 627  The support of electricity from renewable energy sources

2006

COM 20 External Action: Thematic programme for environment and sustainable management of natural resources including energy COM 121 Enhancing the status of the European Atomic Energy Community at the International Atomic Energy Agency COM 357 Comments of the Commission on the conclusions and recommendations of the Mid-term Evaluation of the “Intelligent Energy – Europe” programme (2003–2006) COM 545  Action Plan for Energy Efficiency: Realizing the Potential COM 583 Mobilizing public and private finance towards global access to climatefriendly, affordable and secure energy services: The Global Energy Efficiency and Renewable Energy Fund COM 590  External energy relations – from principles to action COM 848 Renewable Energy Road Map: Renewable energies in the 21st century: building a more sustainable future

2007

COM 1



An energy policy for Europe

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Appendix 2 An example of tree diagram for one of the major themes (energy efficiency) constructed as a result of the analysis of COM documents related to energy policy in the studied period of 1995–2007.

Objective Programmes Public discussion and information Policy issues

Monitoring Legislation Implementation Technical

Problems

Environmental externalities Barriers Oil crisis IT applications

Technical 1998

Infrastructure Market barriers Legal Institutional Financial

Production processes Increase in R&D Taxation

Mechanisms/ Instruments

Standardization Investment and financing (also public)

References Adams, J., Khan, H. T A., Raeside, R., White, D. (2007). Research methods for graduate business and social science students. Los Angeles: Response. Balmaceda, M. (2002). EU energy policy and future European energy markets: Consequences for the Central and East European States. (Working paper 42/2002). Mannheim, Germany: Mannheim Centre for European Social Research. European Commission. (2011). European Commission Climate Action – The EU climate and energy package. Retrieved from http://ec.europa.eu/clima/policies/package/index_en.htm European Union. (2008). EUROPA. Gateway to the European Union. Retrieved from http://europa. eu/index_en.htm European Union. (2007). Eur-Lex: Access to European Union Law. Retrieved from http://eur-lex. europa.eu/

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Hasselmann, K., Latif, M., Hooss, G., Azar, C., Edenhofer, O., Jaeger, C. C., Johannessen, O. M., Kemfert, C., Welp, M., Wokaun, A. (2003). The Challenge of long-term climate change. Science 302, 1923–1925. Helynen, S., Kärkkäinen, S., Sipilä, K., McKeough, P. (2007). Efficiency in energy production, transfer and distribution. In Viinikainen, S., Ikonen, E. Soimakallio, S., Lind, I. (Eds.), Energy use: Visions and technology opportunities in Finland (pp.95–151). Helsinki, Finland: Edita, VTT. Intergovernmental Panel on Climate Change [IPCC]. (2007). Climate change 2007: Synthesis Report. Contribution of Working Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Core Writing Team, Pachauri, R. K., Reisinger, A. (Eds.). Geneva, Switzerland: IPCC. Kaivo-oja, J., Luukkanen, J. (2004). The European Union Balancing between CO2 reduction commitments and growth policies: Decomposition analyses. Energy Policy, 32, 1511–1530. Kara, M. (2007). Foreword. In Viinikainen, S., Ikonen, E., Soimakallio, S., Lind, I. (Ed.board), Energy use: Visions and technology opportunities in Finland (p.5). Helsinki, Finland: Edita, VTT. Karl, T., Trenberth, K. (2003). Modern global climate change. Science, 302, 1719–1723. Krippendorff, K. (2004). Content analysis: An introduction to its methodology (2nd ed.). Thousand Oaks, CA: SAGE. Kyngäs, H., Vanhanen, L. (1999). Sisällön analyysi. [Content analysis]. Hoitotiede [Nursing science], 11(1/99), 3–12. Labatt, S., White, R. R. (2007). Carbon finance – the financial implications of climate change. Hoboken, NJ: John Wiley & Sons. Mallon, K. (Ed.). (2006). Renewable energy policy and politics – a handbook for decision-making. London: Earthscan. Neuman, W. L. (1994). Social research methods. Qualitative and quantitative approaches. Boston, MA: Allyn and Bacon. Salmela, S., Varho, V. (2006). Consumers in the green electricity market in Finland. Energy Policy, 34, 3669–3683. Sayre, S. (2001). Qualitative methods for marketplace research. Thousand Oaks, CA: SAGE. Silverman, D. (1985). Qualitative methodology and sociology: Describing the social world. Aldershot, England: Gower. Soimakallio, S., Manninen, J. (2007). Energy efficiency and the Finnish energy system. In Viinikainen, S., Ikonen, E., Soimakallio, S., Lind, I. (Ed.board), Energy use: Visions and technology opportunities in Finland (pp. 20–25). Helsinki, Finland: Edita, VTT. Tangen, K. (2010). Speech at the seminar entitled “Copenhagen: Outcomes and prospects. The global climate regime and carbon markets”, Finnish Institute of International Affairs, Helsinki. Retrieved from http://www.upi-fiia.fi/en/event/255/

Chapter 5

The Legacy of the Oil Industry in Tomsk Oblast: Contradictions Among Socio-Economic Development, Political Legitimacy and Corporate Profits David Dusseault

Keywords  Russia • Natural resources • Oil • Natural gas

Introduction The brunt of contemporary academic and media analysis regarding the Russian energy sector has fallen on the country’s uneasy relationships with the transit states of the Western CIS (Commonwealth of Independent States) and the Caucasus,1 as well as the implications of the federation’s energy policy for the consumer states in the European Union. Considering the economic and political stakes involved in the reorganization of the European energy sector, such a geopolitical focus is justifiable. However, what the international approach seemingly neglects to reflect are the no less important structural changes currently taking place in the upstream (field development and extraction sectors) of Russia’s energy sector. Unlike the superficial, Moscow-centered treatment depicted by Western pundits, Russia’s energy sector is far from the economic and political monolith it is portrayed to be. In mere physical terms, Russia’s resource wealth is distributed unevenly among the federation’s 82 constituent units. Subsequently, interests and strategies to accrue and distribute socio-economic and political benefits from regionally located resources throughout the federal system are also heterogeneous. Depending on one’s standpoint, scarce commodities such as oil and natural gas are valued and evaluated differently. For local populations, the export of resources is ­logically fueling expectations for improved living standards. For the political elite, oil and gas form the basis for breaking the historical trend of critical socio-economic The Western CIS is comprised of Ukraine and Belarus while the region referred to as the Caucasus refers to Georgia, Azerbaijan and Armenia.

1 

D. Dusseault (*) Russian Energy Policy, Aleksanteri Institute, University of Helsinki, Helsinki, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_5, © Springer Science+Business Media, LLC 2011

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under-development in the presence of huge natural endowments. Additionally, ­hydrocarbons provide the political elite at all levels of Russia’s federal system with an important but variable source of political legitimacy in the eyes of the taxpaying public. For the business community, natural gas and oil are defined and valued in terms of the amount of profit that can be gleaned for various forms of basic economic progression. The degree of overlap and incongruity among the various expectations for Russia’s oil and gas resources is the focus of this chapter. It is hoped that by concentrating on the variations in the inter-relationships among interests of the political elite, the business community and the local population, a more detailed, realistic picture of the country’s energy sector will emerge. The purpose of this instalment is to identify some of the dominant structures influencing the policy formation process in Russia’s energy sector from a domestic perspective. The empirical data is presented in a case study format that focuses on the West Siberian oil and gas-producing region of Tomsk Oblast. Tomsk is interesting as an object of study because the region is a microcosm of the socio-economic and political shifts brought about by the growth in importance of Russia’s energy industry on the whole. While possessing significant reserves of oil and natural gas, a developed refining and transit infrastructure and a wealth of experience in managing the industry since the Soviet times, Tomsk’s political leadership, energy companies and society itself are facing challenges of a new ilk that include simultaneously translating the Oblast’s hydrocarbon base into a economic, political and social commodity. However, as the article will reveal, the relationship between the existence of natural resource wealth and the ability to maximize the derived socio-economic benefits from the oil and gas industry is not guaranteed. In fact, the methods by which various actors interpret the policy environment, evaluate the various benefits derived from a specific natural commodity, along with their ability to coordinate various competing interests along the energy value chain often intervene in the policy-making process. In the end, expectations for another regional oil and gas boom in Western Siberia may need to be tempered. The article is organized in the following manner: First, a structural description of Tomsk Oblast’s energy sector is presented. Second, the region’s socio-economic development strategy is discussed within the energy sector context. Third, a general theoretical framework is applied in an attempt to illuminate the challenges posed by the chosen policy path. Fourth, the inter-relationship among agency actors and the policy environment, as portrayed in the previous empirical sections, is discussed. In  the final section, relevant conclusions are presented and questions warranting further research proffered.

The Structure of Tomsk’s Energy Sector in a Historical Context It can be argued that over the past 50 years, the fortunes of the Soviet Union’s and (later) the Russian Federation’s energy sectors have mirrored specific aspects of the country’s economic and political evolution. Besides referencing the obvious peaks and valleys in hydrocarbon production from the late 1960s to the present day, structural

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changes in the energy sector can be mapped through the development of relevant ­federal and regional legislation. Following the legislation from 1995 to 2008,2 the executive and legislative branches of Tomsk Oblast’s leadership seemingly understood the need to create the corresponding legal conditions necessary for the region’s resources and industry to return to profitability in the evolving political environment of Yeltsin’s Russia. From the outset, there has been a consolidated legislative effort to set basic rules governing the sector’s key economic and legal aspects, including ownership, licensing and taxation under market conditions. There have also been gradual attempts to leverage the region’s reserves against capital investment in the various sectors along the energy value chain. Finally, there is evidence suggesting that the local executive and legislative branches of government have a great interest in developing the region’s resources beyond the existing parameters. Actions taken include organizing regional seminars and international congresses to address future directions that the industry may take, such as technical development and regional gasification of power generation for industrial and domestic consumption. Tomsk Oblast’s major oil producing company is Tomskneft VNK,3 located in the northern town of Strezhevoi. Formed in 1966 as the Tomsk Industrial Association, Tomskneft was privatized in 1993 and became a major production unit of the Vostochnaya Neftovaya Kompaniya (VNK). In the mid-1990s, YUKOS4 became the majority owner of VNK and thus, Tomskneft VNK became a daughter company of YUKOS. During the YUKOS years, the relationship between regional authorities and the oil company was symbiotic. Both sides acknowledged the commonalities they shared in terms of relevant strategic interests. For YUKOS, the company’s image as a contributor to the regional economy was carefully groomed through its business activities, as well as by its support of ­socio-economic projects5 that aided both the regional government6 and society on

For a chronicled list of the relevant energy sector legislation from 1995 to 2008, please see Appendixes 1 and 2 at the end of this chapter. 3  For more information, see http://www.rosneft.com/Upstream/ProductionAndDevelopment/western_ siberia/tomskneft/. 4  The oil company YUKOS headed by former Oligarch Mikhail Khodorkovsky was formed back in 1993 as a part of one of the many controversial “loans for shares” deals between private Russian bankers and the Yeltsin government. At its peak, the company was responsible for 20% of Russia’s total oil production. 5  Through its subsidiary company, Tomskneft, YUKOS was very active in supporting regional medical services by supplying training and technology to the staff of local hospitals and policlinics. The company was also involved in sponsoring employment fairs for local students in an attempt to fill the company’s ranks with home-grown talent that would eventually make up the next generation of the company’s leadership cadre. 6  Taxation of corporate profits is only one aspect of the relationship between YUKOS and Tomsk Oblast. The roles taken on by the companies and the socio-economic needs of the region were manifold. Subsequently, in early1998, the regional administration determined that relations among Tomskneft VNK, the company’s owner YUKOS and Tomsk Oblast needed to be coordinated by a special committee. See Appendix 1: Legislation in Tomsk Oblast’s Gas and Oil Sector 1995–2001 at the end of this chapter. 2 

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the whole.7 Simultaneously, the regional leadership acknowledged that without the cooperation of the oil companies, the political elite would have a much harder time meeting their socio-economic and political responsibilities in front of their local constituencies.8 While the balance of interests between the profit-making enterprise and the regional government was maintained during the YUKOS period, the unbalanced nature of the regional economy was the proverbial “elephant in the room” for the local administration. This stress first emerged following the arrest of Khodorkovsky9 and continued after the completion of bankruptcy proceedings against YUKOS in 2006.10 Following the bankruptcy of YUKOS, the controlling package of Tomskneft VNK was sold to Rosneft in spring, 2007. Half of the company’s stock package was then sold by Rosneft to Gazpromneft in the winter of the same year. Although the relationship between the company and the regional administration has remained constructive on the surface, the region’s concerns of over-dependence on a federalbased monopoly have intensified: Tomsk Oblast, in which one of the major natural resources is oil, has made the decision to develop greenfield projects. In a region that occupies one of the top spots in hydrocarbon extraction in Western Siberia, the amount of oil pumped out of the ground has gradually begun to decline since 2005. The total reserves of the region have shrunk, symbolized by lower growth in hydrocarbon recovery.11 7  According to YUKOS’ executive board, following the arrest of Khodorkovsky, the company continued its normal business activities. At the time, Tomskneft contributed 20 mt of oil. Based on these numbers, the company was able to provide close to 3.1b RR in socio-economic support for the regions where the company worked. This total represented a doubling of the company’s social contributions over a 4-year period. See YUKOS will not Surrender its Position Tomskaya Neft 6 March 2004. 8  In an interview granted to the Strezhevoi newspaper, Tomskaya Neft, the Governor of Tomsk Oblast, Viktor Kress outlined the primary structural challenge facing the region. While producing the highest rate of industrial growth in the Siberian Federal Region, the Tomsk economy was too dependent upon the energy industry for production and economic growth. At the same time, the majority of proceeds acquired from the exploitation of the region’s resources were sent to Moscow (10b out of 25b RR). See When We Talk About Success, We Mean Oil Tomskaya Neft 7 February 2004. 9  While serving as head of the former oil giant YUKOS, Mikhail Khodorkovsky was arrested under less than clear circumstances. While most analysts perceived Khodorkovsky’s incarceration as politically motivated by the new Kremlin elite under President Putin, additional evidence points to YUKOS’ behavior as a predatory company that through a system of offshore accounts and daughter companies was siphoning off Russia’s oil, embezzling the proceeds from the sales and refusing to pay the relevant taxes to the Russian government. 10  Discussions in the local press to assuage employees for Tomskneft were published with regularity. The mayor of the city of Strezhevoi where Tomskneft’s production facility is located spoke publically about the uncertainties presented by the YUKOS bankruptcy at the local Duma. See About YUKOS, a Bridge and a Jubilee Tomskaya Neft 5 August 2006. These concerns spread to the regional gas sector as well. The Tomsk Parliament was so concerned about the overall state of the regional energy sector after the bankruptcy of YUKOS that representatives composed a letter to then Prime Minister Fradkov and the head of Gazprom, Aleksei Miller, requesting financial aid to explore new resources and develop infrastructure for the region. See Appendix  2: legislation in Tomsk Oblast Gas and Oil Sector 2002–2008 at the end of this paper. 11  Big Ambitions for Tomsk Oil Kommersant Business Guide No. 154 29 August 2008.

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As the quote demonstrates, the foreseeable future for the region’s oil and gas industry is not particularly optimistic.12 Signs for concern began to appear as early as 2002. At that time, the federal agency responsible for licensing new hydrocarbon exploration opened up the tendering process for a geological survey of the Ob river’s right bank in Tomsk Oblast. In pursuit of new hydrocarbon sources, investment in seismic research increased from 686.9  m Russian Rubles (RR), to a peak of 13.654 m RR in 2003.13

Regional Oil and Gas Resources Despite gloomy forecasts, both the region’s administration and the companies involved in the oil and gas industry in Tomsk Oblast have several strategic options available to them to contend with the increasing decline of brownfield projects. Before tackling the structure of the region’s oil and gas industry and how it influences the administration’s socio-economic plans, it may be helpful to look at the region’s production in a federal context. The table below outlines Tomsk’s oil and natural gas production in comparison with other regions, either currently or in the future that are earmarked to begin production of oil and natural gas. In Table 5.1, Tomsk Oblast’s oil and natural gas reserves are portrayed as a percentage of the Russian Federation’s total production for 2005 in comparison with the major producing region of Tyumen, Sakhalin Oblast, which is in the initial phases of production and the future oil production regions of Sakha and Irkutsk Oblast.

Table 5.1  Tomsk oil and natural gas production in the federal contexta Oil and gas condensate Natural gas Percentage of national gross 2005/ Percentage of national gross 2005/ Region amount (million tonnes) amount (billion cubic meters) Tyumen (Total) 68.1/320 91.3/585 Khanti-Maisiiskii 57.0 04.3 Yamalo Nenets 10.8 87.0 Irkutsk 0.03 0.8 Sakha 0.09/0.412 mt 0.2/1.6 Tomsk 2.5/11.7 mt 0.8/4.638 Sakhalin 0.85 0.3 a Information compiled by author from Rosstat statistics (2007)

12  In order to keep the region’s oil and gas industry profitable and the economy in balance, the region’s producers need to recover 18–20 mt of oil and gas (oil equivalent) annually. See Expert Siberia (2007a). 13  It is interesting to note that while the process of exploration was initiated by the federal authorities, the bulk of financing for the seismological surveys came from the private sector. Drilling in Tomsk Expert Siberia No. 9 (61) Expert on Line 2.0 7 March 2005.

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At a quick glance, the figures for oil and gas production in Tomsk are small, compared with the total produced in a federal context in Tyumen Oblast. However, according to company sources and the local administration in Tomsk, ground activities by the region’s largest oil company, OAO Tomskneft VNK,14 contributed 3.6 billion RR to the local budget in 2007. Continuing investment in the region’s energy sector will garner a further 11.3 billion RR, totalling 4.5 billion RR in taxes for Tomsk’s budget in 2008.15 However, the predictions for Tomskneft’s production over the next several years are not entirely encouraging. By 2011, growth in the company’s production is only expected to total 0.6 million tonnes. In fact, Tomsk Oblast’s oil fields currently under production (brownfields) are stagnating and showing signs of decline. Therefore, the numbers for Tomskneft do not bode well for the region’s budget or its socio-economic development strategy. The opportunity to explore the east bank of Tomsk Oblast’s Ob River for hydrocarbon reserves may provide strategic options for both regional firms and the Oblast administration.16 According to the Oblast’s Deputy Director for Administration, Tomsk’s policy in coordination with federal authorities to open up the region for seismic surveys has been a success, even though results for the surveys are still pending. Capital inlay in projects involving resource management, geological surveying and the rehabilitation of existing wells has already totalled 21b RR.17

Division of Labor and Regional Capacities of Action Another popular fallacy that has been supported by the geopolitical discourse surrounding the structure of the Russian energy sector is the uniformity of various political and economic interests and the limited number of actors that populate the lengths of the energy sector’s value chains. Although this misrepresentation of the Russian energy sector may primarily be attributed to a methodological problem concerning the level of analysis, it also belies a less than comprehensive understanding of the nature of the energy business itself.

14  OAO Tomskneft VNK is currently owned by federal monopolies Rosneft (50%) and Gazprom (50%) (Expert Online 2008a, b). The company, once owned by YUKOS, controls over 80% of the region’s producing fields, holds 17 production licensing agreements in Tomsk Oblast, along with a further nine licenses for developing unexplored blocks in the region. In 2008, the company is expected to extract close to 8.5 mt of oil in Tomsk Oblast. 15  Kommersant 29.08.2008. 16  Tomsk Oblast is dissected almost down the middle of its territory by the Ob River. To the west and north of the river lie the bulk of the region’s oil and gas reserves already under production. These fields form the base for the region’s oil and gas production. However, due to the steady decline in these fields’ production, the local administration and sector interests have begun to look towards the right bank of the Ob to replace and significantly increase the region’s falling production (Kommersant 2008; Expert Siberia 2007a, b, c). 17  The investments in the right bank from the federal government alone total 1b RR. Administrative Drilling Apparatus Expert Siberia No. 4 (146) Expert On-line 2.0 29 January 2007a.

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Table 5.2  Breakdown of the firms in Tomsk Oblast along the energy value chaina Company type Upstream sector Value-added sector Downstream sector VostokGazprom Tomskneftekhim/Sibur Federal monopoly VostokGazprom r.Omsk (OAO (Gazpromneft/ (OAO Tomskgazprom); Tomskgazprom); Sibneft); Rosneft Gazpromneft; Rosneft Gazprom (Tomsknefteprodukt (Tomskneft VNK) Tranzgaz Tomsk; & Strezhevoi NPZ) Tranzneft Regionally owned None None None TNK-BP; Surgutneftegaz; Petroneft Resources Plc. Imperial Energy (f); Privately owned Petroneft (Kolpashevsky Imperial Energy (f); (f = foreign Resources Plc.(f) region) Tomskburneftegaz; owned) Russneft (ZAO Tomskaya Neft/ Sobolnoye); Petroneft Resources, Plc.(f) & VTK(?) a Information compiled by author from relevant corporate sites on the Internet

To put it succinctly, in order to maximize returns on exploration investments and eventually turn a profit, energy companies aim to consolidate their control over the value chain from the ownership of the producing fields (upstream activities) to maximized access to industrial, as well as individual consumers (downstream). However, due to the physical scope of the value chains themselves, which may span thousands of kilometers, centralized oversight and management of the various activities would be unworkable under present political and economic conditions. One would expect certain areas to fill niches with smaller firms where larger firms found economic activity unprofitable and vice versa. The information included in Table  5.2 illustrates this point in the context of Tomsk Oblast’s gas and oil sectors. Approximately 20 companies have been active in developing the region’s oil and gas resources.18 Smaller firms such as Tomskbur­ neftegaz, Russneft, Imperial Energy, and Petroneft Resources Plc. could be responsible for 20–30% of the region’s output by 2010, according to the regional administration’s estimates.19 These companies are contributing to the diversification of the industrial activities in the region’s upstream sector, which is also populated by the major firms Gazpromneft, TNK-BP, Gazprom and Surgutneftegaz. Another positive development for the region’s energy sector is the involvement of Tomsk-based enterprises. The majority of firms analyzing or supporting the scientific surveys are registered in Tomsk. Engineering services are provided by local experts and the fieldwork is conducted by Tomsk-based firms. The region’s universities are also involved. According to the administration, it is estimated that 85–87% of the work is carried out by Tomsk workers.20 Kommersant 29.08.2008. Kommersant 2008. 20  Administrative Drilling Apparatus Expert Siberia No. 4 (146) Expert On-line 2.0 29 January 2007. 18  19 

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There are concerns regarding the diversified energy sector in terms of taxation, involvement in socio-economic development and the region’s investment environment. The administration’s ire does not fall entirely upon the shoulders of the region’s new comers. In fact, the brunt of the administration’s criticism rests at the feet of Tomskneft VNK.21 Since the company is controlled by the federal oil giant Rosneft, company policy is formulated not in Tomsk, but in corporate headquarters, in Moscow. For the regional administration, having policy formulated 3,500 km away in the Kremlin means a certain degree of economic and institutional aloofness on the part of federal energy interests from the energy sector priorities and socio-economic needs of the Oblast. Since we established that a producer needs to be registered in the Oblast to receive the operating license, we collect the taxes here in Tomsk. However, when the discussion concerns oil and gas extracted by vertical federal holding firms, taxes are exclusively collected for refined products. It is difficult to argue with this — such is the law… 22

The issue of taxation between the region and Moscow is very sensitive. According to regional sources, in 2006, the region lost 3 mt of production, which translates into 1b RR in losses for the Tomsk budget. Some of the loss was counterbalanced by the increase in world oil prices. However, the administration argues that if adjustments to the taxation regime are not made and prices fall, the decrease in budgetary funds could be too substantial to overcome future at production and pricing rates.23 In order to increase the region’s competitive advantage in the energy sector, the administration has suggested relaxing the tax burden or even offering tax holidays for new investors. In addition, the experts admit that new infrastructure needs to be constructed in order to export the region’s resources out to new markets in Asia, thus providing producers with new, more proximate markets. Another innovative suggestion is the creation of a regional stabilization and investment fund that would support the entrance of new companies into Tomsk’s energy sector by providing the necessary capital to cover initial start-up costs.24 Still, new companies in the region have faced predatory behavior by federal monopolies. The most recent case involved the British owned firm, Imperial Energy.25 The company’s licences for the right bank of the Ob were called into question by the Russian Ministry of Natural Resources. Reportedly, Imperial Energy had exaggerated the reserves held in three fields for which they posses operating licenses.26 Despite the problematic circumstances, Imperial successfully lobbied its case in Moscow and retained its right to develop the three fields in question.

In 2008, the ownership of Tomskneft VNK was again in question. Once owned fully by the federal oil company Rosneft, half of Tomskneft’s stock package was put up for sale with Gazprom’s affiliate Gazpromneft offering 3.4–3.6b RR for the deal. Behind the very public sale swirled concerns over the company’s falling oil recovery rates and growing tax debt of 9b RR. See Tomskneft in Half Expert Siberia No. 1–2 (191) Expert On-line 2.0 14 January 2008. 22  Tomskneft (2008b). 23  Tomskneft (2008b). 24  Tomskneft (2008b). 25  Russian–British Conflict Approaches Nadir Gazeta.ru 5 August 2007. 26  Tricky Licensing Expert Siberia No. 36 (178) Expert On-line 2.0 1 October 2007d. 21 

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From an overall point of view, the diversification of actors, including smaller, foreign-owned firms in the upstream may provide a boon for the Tomsk administration not only in its relations with the powers that be in Moscow but with major Russian energy firms, as well. Increasing registered firms in the region will expand the regional tax base and may thus increase access to new revenue streams outside those that have previously heretofore been dominated by Moscow-based firms. With an increase in budgetary revenue, the regional political elite may have more resources to assign towards development plans and greater discretion to determine which development projects to ultimately allocate those funds to.

Beyond the Siberian Agreement: Tomsk Oblast’s Socio-Economic Development Strategy Tomsk Oblast did not experience the political upheaval and social strife to the extreme extent witnessed in other regions of the Russian Federation during the early years of economic and institutional reform, following independence in 1991. However, economic path dependency based on the hydrocarbon industry, which was still controlled from Moscow, did limit the region’s ability to cope with the socio-economic pressures brought about by market reforms. At the beginning of Putin’s second term in office, Tomsk was a typical Siberian region in that it possessed a significant amount of natural wealth but was not in a position to fully translate that wealth into social-economic development for the region’s population. However, in the Siberian context, Tomsk had an advantage due to its limited, yet relatively developed energy sector infrastructure and a higher than average standard of living, as evidenced by the data in Table 5.3. It can be inferred from the data presented so far that the political leadership of the Oblast is not starting from scratch where the formulation of the region’s socio-economic development is concerned. Although far from perfect, the region has access to revenue streams from the energy sector at various levels of the value chain, as shown in Table 5.4. The energy sector itself is diversified in terms of its resource base (oil and natural gas). The business encompasses extraction, refining and transit activities, while the workforce is well educated and highly skilled. It appears that some, if not all of the ingredients required for a new socio-economic development strategy, are in place. The basic document outlining the strategic approach to the region’s socio-economic development was formulated by an independent group of development experts and approved by the region’s high committee for economics in 2005. The approaches used to address the region’s social and economic needs were novel in the Russian context at the time due to the program’s adoption of a long-term scope that simultaneously focuses on the fulfilment of concrete priorities that contribute to the overall ­improvement of the region’s socio-economic status within the Russian federal system.27 (2007) Strategia Razvetija Tomskoi Oblasti do 2020: 4

27 

74 Table 5.3  Selected socio-economic indicators for Tomsk Oblasta General socio-economic indicators Population (2006, in thousands) Industrial production resource sector (% of Russian Federation (RF)) Agricultural production (% of RF) Gross regional product (2005 in billions RR/% of RF) Average personal income (in thousands RR/month) Unemployment (in thousands/%) a Table compiled by author from Rosstat statistics (2007)

Table 5.4  Selected industrial production in Tomsk Oblast, 2002–2004a Product 2002 2003 Oil (million tonnes) 10.6 13.7 4,444.1 5,264.3 Natural gas (million cubic meters, mm3) Gasoline (thousand tonnes, tt) 35.2 35.6 Polypropylene (thousand tonnes, tt) 106.2 105.4 Electricity (million kilowatt hours, mkh) 4,665.8 4,973.4 a Zakon Tomskoi Oblasti No. 157 2007: 8–9

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1,033.1 1.9 0.6 158,219/0.9 9,896.5 47.8/9.0

2004 15.9 5,337.8 36.4 106.9 5,325.5

To fulfil the strategy’s main goal, several areas where the region’s economy needed to be modified were outlined. The region’s industrial output would need to become more diversified, thus moving away from traditional resource extraction and the military industrial complex; the conditions for small- to medium-sized businesses would need to be set so that the economy could establish new areas of service provision and production while simultaneously allowing for increased economic competitiveness and growth in Tomsk Oblast; and as a knock-on effect, the successful fulfilment of the latter two conditions would allow for the gradual improvement of the living standards of the general population, as well as the overall socio-economic status of the region within the federal context. As evidenced later, one of the ironic twists that the strategy provides concerns the current main sectors of the region’s economy. While acknowledging that the present industrial base of the region is a major contributor to the region’s continuing socio-economic development, strategic development as envisioned by the regional administration will inevitably reduce the socio-economic and political importance of the resource extraction industry and to a lesser extent, the MIC sector, upon which the whole strategy is currently based. The inconvenient question that crops up at this point is how does the regional administration and the affected industries cooperate to form a stable consensus regarding the nature of the region’s socioeconomic development? This question is not only relevant for the policy makers and vested interests involved in the process itself but also for researchers who are trying to make sense of this complicated process.

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Making Sense of Policy Formation: Expectations, Anticipation and Contingency Based upon the work of Aalto et  al. (2008) and Dusseault (2008b), an effective approach to categorizing how actors formulate strategies and then compete for them under changing institutional, physical, financial and informational conditions has been applied to the Tomsk Oblast socio-economic development strategy. As a theoretical tool, structuration, asserts that the two main components of the policy making process are the policy environment and the actors within that environment. The policy environment is composed of four components or factors: Physical conditions (climate, space and natural resources), information, finances (value chains and revenue flows) and institutions (the various levels of the Russian Federal system). Actors make strategic decisions based upon their understanding of the policy environment. While operating under conditions of less than perfect information, the actors’ ability to maximize their policy preferences depends greatly upon the accuracy with which they interpret the ever-changing conditions of the policy environment. By interpreting signals from the policy environment to which each of the four ­factors listed above contribute, actors form policy expectations respective to their conceptualization of the existing policy space. Subsequently, understanding that both actor behavior and the policy space itself are volatile and subject to change over time, actors assess modifications in the environment and anticipate the level of risk these changes may bring to the success or failure of their chosen strategy. In the final stage of policy formation, actors adopt concrete contingency plans that correspond both to their expectations and the anticipated risks derived from the morphing policy environment. The expectation model is applied to the Tomsk case in Fig. 5.1. By juxtaposing the framework on the strategy, several crucial points and challenges become clear, especially those concerning the influence that the federal structure and the international externalities exert on the region’s long-term socio-economic development. It is of particular interest to the current argument that the observed vulnerability of the region’s energy sector can be traced to the fact that federal interests and the global market set commodity prices. For its part, the regional administration has admitted that the underdetermined status of resources between the federal center and the regions and the global price for the region’s hydrocarbons are considerable risks to the region’s long-term interests. In response to this perceived risk, the administration has decided to diversify away from the traditional, upstream resource extraction industries in favor of a diversified economy achieved through investments in the regional workforce and transit infrastructure development. Simultaneously, the administration also intends to focus on improving the legislative framework and investment environment in order to attract outside investments that would further contribute to diversification and the budgetary revenue stream. The same model is subsequently applied to Russian energy sector enterprises in Fig. 5.2. Despite the industry’s obvious market-oriented strategy, businesses and the

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Expectations Tomsk’s natural resources, along with human capital, form the basis for regional social development and economic diversification away from the current resource-based economy.

Anticipation Risk lies in the region’s competitiven ess: ability to harness and develop the region’s human capital; threat of multinational corporations to Russian producers; global commodity pricing; and the under-determined nature of Russia’s economic and regional policies.

Contingency Small & medium business development; Effective & diversified economy; Attractive investment environment; Internationalization of the economy; Quality workforce & labour market; Infrastructure development; Rational use of natural resources; Improved socio-economic conditions; and Effective administration.

Fig. 5.1  Tomsk Oblast’s socio-economic development strategy

Expectations

Prices for hydrocarbons to remain unstable; Domestic economic conditions will increase socio-economic obligations; and Russia’s energy sector will face increasingly difficult investment environment & competition on the global level.

Anticipation

Risk lies in business’s competitiveness (maximise profits, minimise costs):

Contingency

Maximise export value of oil & gas resources;

labour and social responsibilities;

Upstream technological and greenfield investment;

threat of multi-national corporations to Russian producers;

Downstream capital expenditures;

global commodity pricing; and underdetermined nature of Russia’s economic and regional policies.

Targeted expenditure for domestic infrastructure; Rational employment; and Downsizing of corporate socio-economic responsibility.

Fig. 5.2  Expectations, anticipation and contingency for actors in the Tomsk Energy Sector (Information collected by author from relevant corporate sites, the Russian Energy Strategy to 2030 http://www.energystrategy.ru/materials/koncepc.htm)

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regional administration appear to have some common interests. Those include: Competitiveness of the regional economy; the effective exploitation of the regional hydrocarbon resource base; the resolution of competencies and relations between the federal center and the regions concerning the country’s oil and gas resources; the global pricing system for regional oil resources and a well-educated and competitive workforce. Conversely, there are some areas where the concerned parties’ preferences do not fully agree. It stands to reason that the regional administration favors more budgetary proceeds for its socio-economic development plans, based upon the exploitation of the region’s hydrocarbons. However, the companies are seeking to reduce their socioeconomic burden in favor of capital investment and direct tax payments to both the federal and regional authorities. Furthermore, the companies, under structural conditions that emphasize export, may see that the most effective way to maximize the value of the resource base is to extract and export as much and as quickly as possible, while the regional authorities on their part would prefer to have the resources’ value spread over a longer term; especially since their constituency consists not of international consumers but the local, voting and tax-paying population.

Where Does Tomsk Go from Here? The structural conditions observed in the Oblast seem to be conducive to further socio-economic development for Tomsk. The region still possesses hydrocarbon reserves and is pursuing an exploration program to increase the resource base. The quality of engineering and industrial expertise lends itself to the expansion of a service-orientated market for value added industries – such as refining – along the energy value chain. The political situation is stable with the representative and executive branches of government working in a constructive, if not fully cooperative manner. These factors form a solid basis from which the region’s businesses and political elite may move away from a fully resource-dependent economy towards a more diversified, knowledge-based portfolio. As noted previously, the strategies chosen by the regional hydrocarbon industry and the regional administration are not mutually exclusive. Both perceive the future of the region to be tied in some form or another to the oil and gas industry. The extent to which the region stays within the current resource extraction paradigm remains to be seen. The regional administration for its part has been quite blunt in terms of presenting its future socio-economic development model for Tomsk. Regarding the oil and gas industry, diversification translates into increased investment and numbers of actors in the upstream, simultaneous, gradual transition away from extraction activities and increased emphasis on the value added sector (refining and engineering). 28

First Step for the State Expert Siberia No. 40 (227) Expert Online 2.0 13 October 2008.

28  

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Additionally, the administration expects the regional economy to benefit from the expansion of the Soviet era rail system that will connect the region to the oilproducing regions Khanty-Mansiisky in the north and Krasnoyarsk Krai in the east.29 Despite the region’s natural wealth, the Siberian climate and physical conditions impede access to the Oblast’s resources, subsequently increasing costs and reducing investment potential. According to the regional administration’s transport strategy, investments in transport total 578 m RR annually. With the realization of the new rail link and associated projects, that total could reach 15b RR by 2025.30 Finally, the region’s own energy needs have come into focus under the administration’s development plan. Even though the region is richly endowed with hydrocarbons, the majority are controlled and exported outside the region by federal interests. In the meantime, the local population and businesses still require sources of heat and power. To put it bluntly, Tomsk cannot generate enough electricity for its inhabitants and is forced to import power from neighboring regions.31 In order to tackle this power and heating deficit, the region has taken steps, with the help of the federal authorities and Vostok Gazprom, to assume an Oblast-wide gasification project.32 Additionally, the regional administration has earmarked the  region’s nuclear industry for investment.33 Both plans would cover the deficit in power generation within the region and potentially allow for exports of electricity to burgeoning industrial centers, such as Krasnoyarsk and Irkutsk.

Discussion: Best-Laid Plans and Questions Left Unanswered One indelible impression that this case study has provided is that the general expectations surrounding the benefits that can be derived from the energy trade are enormous. The structure of the energy policy environment is hypothesized to possess four

29 Construction on the new SevSib rail link is scheduled to begin in 2010 with initial capital investment (500b RR) garnered from both public and private sources. See Investors Reach tentative Agreement on New SevSib Railway European Daily Monitor Vol. 5 No. 47 Jamestown Foundation 12 March 2008. 30 The Road Determines the Journey Expert Siberia No. 40 (227) Expert On-line 2.0 13 October 2008. 31 For 2008, it was expected that Tomsk would consume 8.5b kw/h while producing only 4.08b kw/h (approximately 48% of the total). See Atomic Plans Expert On-line 9 July 2008. 32 Already in 2003, plans were set for a propane–butane plant in Tomsk Oblast, which would ­produce 72  tt of liquid hydrocarbons. The plant’s expected production would have covered the Oblast’s annual demand and dropped prices for heating isolated localities outside of the capital, Tomsk by half. See Liquefied Gas to Reduce Costs of Heating Expert Siberia No.9 (9) Expert On-line 6 October 2003. 33 This investment program is tied into the Federal Strategy to build up to 11 new nuclear power plants by 2020. As part of the federal plan, Tomsk would receive one new plant in addition to the existing facilities already in the region, which were once part of the country’s military industrial complex. See Atomic Plans Expert On-line 9 July 2008, Atomic Seversk Expert On-line 21 March 2007 & Peaceful Seversk Expert No. 44 (538) Expert On-line 2.0 27 November 2006.

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i­nterrelated independent variables: Physical aspects, financial flows, institutional mechanisms and information. To extend this notion further, it has been argued that expectations are based upon actors’ abilities to accurately interpret the structure of the existing policy environment and formulate policies that will maximize their strategic preferences. Furthermore, just how dissonant various actors’ expectations are may determine to what extent the costs and benefits from the energy trade may be efficiently distributed among the different interests that populate the policy space. Physical aspects:  One of the essential drivers for actor agency in the energy sphere is the finiteness of oil and gas. Knowing the commodities will be exhausted at some point in time adds a sense of urgency when considering the remaining independent variables of financial flows, institutional mechanisms and information. To put it bluntly, because oil and gas will eventually “run out,” there is an additional strategic importance associated with the remaining reserves. These primarily include to what extent the hydrocarbons’ value can be maximized, the mechanisms used to distribute the benefits and costs and most importantly, who profits and who pays for energy. Institutions:  If the concept of expectations is approached from the institutional perspective, it is apparent that federal and regional authorities have dissimilar plans for the region’s resources. Moscow’s priority in terms of its energy sector is political and concerns the socio-economic development of the Federation on the whole. Proceeds derived from regionally located resources are maximized as budgetary flows that contribute to federal budgetary coffers. Employment of the funds is at the discretion of the federal government; whether they are expenditures for national defense, discretionary transfers to the poorest federal units or federal grants for housing, education or healthcare based on competitive regional applications. From the regional perspective, the spill-over costs of federal projects such as national defense are palatable because the costs and benefits are arguably distributed among all the constituent units more or less equally. However, when the discussion turns to the re-distribution of financial flows to underprivileged regions that do not contribute in any measurable manner to the political or socio-economic advancement of the federation beyond the vagaries of stabilization, then accusations of free riding on the natural resources of other units begin to be voiced from resource-producing regions (Expert, 2007). Finances:  The preference dissonance also extends to the financial sphere. The case study has convincingly demonstrated that commodities such as oil and gas have differing utilitarian profiles according to the perspective adopted. Disregarding the obvious linkages to the institutional perspective outlined above, government, regardless of its place in the institutional hierarchy, is principally involved with establishing the conditions for effective distribution of public services and the collection of payment for such services. For the regional administration, besides taxation, hydrocarbons have a derivative socio-economic utility in which budgetary flows are translated into sources of heating, electricity and secondary offshoots affecting the quality of life, including employment, healthcare, public transportation, education and sports.

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On the other hand, companies are primarily profit driven. They value the commodities in their grasp according to the amount of profit derived from the exploitation of those various goods. Conversely, businesses perceive social utility as subtracting from their financial gains. This profit versus social benefit fault line is intensified when crude oil or natural gas is used for basic heat and electricity generation, robbing companies of added economic value from the production of derivatives such as methanol, lubricants or plastics that are highly valued in other industrial sectors. Information:  Accurately assessing the structural conditions, along with the opportunities and constraint structures pose to particular strategies, may inevitably contribute to the ultimate success of a specific policy. However, no matter how well a particular policy is suited to the policy environment, judging the human factor as it relates to expectations is problematic. No actor possesses perfect information. As demonstrated earlier, questions concerning the sustainability of Tomsk’s resource base are prevalent both in the business community and with the administration. Another indeterminable factor is the reaction of any actor to changes to the structure of the policy environment brought about by actor agency, unexpected changes in the structures themselves or the unintended consequences of strategic choices. The Resulting Contingency:  Judging by the nature of the structures above, it should be possible to assess the direction in which the region’s energy strategy is heading if it is assumed that the administration desires to maximize the benefits produced by the region’s resources. First and foremost for the Oblast is the severing of the region’s dependence on its natural resources for socio-economic development.

Conclusions The evidence presented suggests that the process of diversifying the economy entirely away from oil and gas production may never fully be implemented. Judging by the physical and informational structures in place at this time, there are partial steps the administration can take to aid in this process. The region has the technical expertise to relocate from oil production into the engineering end of the business. It may also choose to rely upon its petrochemical assets (refining in particular) to produce derivatives such as gasoline and methane as an increasingly important regional cog in the value-added sector of the energy production chain. In terms of production, the regional leadership has made a conscious effort to diversify upstream production by allowing small companies to explore and invest in the next set of greenfield projects. Although this could be considered a major gamble – bearing in mind the way in which federal authorities and domestic energy majors have treated competitors in the past – this diversification strategy may pay off in terms of reducing regional economic dependence on Rosneft for tax revenue. It may also provide impetus for further regionally based development of the

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upstream, away from old fields. Additionally, it may advance diversification of refining and service-oriented business activities in the value-added sectors and the downstream, thus guaranteeing an expanded tax base for future economic growth. The second step is to determine just how the expected rise in benefits accrued from the region’s resources will be spent. Here, there are some institutional pitfalls that need to be avoided. The Oblast administration has given consideration to improving the overall environment for businesses in order to spur investment away from the resource extraction sector to a diversified value-added, knowledge-based economy. However, increased budgetary revenues do not necessarily guarantee that bureaucrats or businesses will comply with the long-term vision of the regional executive and opt for short-term rent extraction strategies. In addition to the distribution of costs and benefits to all stockholders, the energy industry, the bureaucratic establishment, small- and medium-sized enterprises and the federal government itself need to be involved in planning the long-term socioeconomic development of the region beyond the formation of a general strategic development policy. Regulatory frameworks that form the basis for competition are already in place in Tomsk and have facilitated the flow of ideas among various interest groups. With the onset of increased revenue comes the need for increased management and long-term planning that will support existing institutional mechanisms and foster flexibility in investment policy, deal with increased expectations on the part of the regional population, while taking into account the basic cost and benefits of all actors. One mechanism that has already been discussed is the establishment of a stabilization fund that would augment direct investment in the region when necessary. Another feasible concept is the creation of a development corporation to focus on the investment needs of the Oblast in line with the strategic development plan. Such a mechanism would limit rent extraction from the resource sector by tying participants’ profit to the success of the organization’s business and socioeconomic activities. Finally, society on the whole cannot be disenfranchised by the development ­process. Housing, healthcare, quality education and employment are key issues that need to be dealt with continuously, despite their costs. A positive sign has been the acknowledgement of their importance by the regional and federal authorities, as well as by the business community. Existing models, such as the competitive grants program or budgetary transfers sponsored by the federal government are geared towards redistributing assets for public service investment for the neediest or in some cases, the most realizable projects. However, these projects are blunt instruments that provide one-off benefits for a limited number of citizens. The optimum model would see continuous funding based on regional sources directed by the regional elite under the auspices of the federal authorities. Acknowledgments I would like to take the opportunity to thank Professor Alexei I. Sherbinin, Head of the Department of Political Science and Professor Evegenia Popova, Lecturer, at the Department of Political Science at Tomsk State University for their assistance and research that has contributed to this chapter concerning Regional Perspectives on the Russian Energy Sector.

1995 Decision N 123 Tomsk Oblast Duma 25 March 1995 Social-economic development of oil and gas producing regions of Tomsk Oblast Resolution N255 20 Sept.1995 Realization of Tomsk Oblast’s Gasification Programme

1997 Resolution N49

17 March 1997 Creation and Development of Production of Competitive Oil & Gas sector Equipment Resolution N329 Resolution N362 4 Dec 1996 17th Dec 1997 Establishment of Appropriation public company of salaries Mezhregiongaz for expertise Trading House concerning companies in the oil and gas sector

1996

1999 Resolution N380-p

6 Feb 1998 13 Sept 1999 Forms of support Creation of the for construction working committee of Strezhevskogo on relations among Oil Refinery YUKOS, VNK and Tomsk Oblast Administration Resolution N237 29 June 1998 Creation of Joint Stock Company Sibirgazifikatsii

1998 Resolution N49

Appendix 1  Legislation in Tomsk Oblast Gas and Oil Sector 1995–2001

12 Jan 2001 2nd regional conference “Oil & Gas 2001”

2001 Order N4-p

Resolution N120 Resolution N22 31 March 2000 23 Jan 2001 Emergency Oblast Budget Fuel measures Subsidies to regional for oil-related Institutions & Firms catastrophes Decision N 568 Tomsk Oblast Duma 6 June 2000 Oblast guarantee of repayment of federal credits to Oblast firms 1992–1994 Resolution N 283 21 June 2000 Reactivation of inactive wells in Tomsk Oblast

10 March 2000 1st regional conference “Oil & Gas 2000”

2000 Order N82-p

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29 Dec. 2002 Working group on actors in oil sector

2002 Directive N74r 11 March 2002 3rd Regional Congress “Oil & Gas” Automation of Production Processes Directive N624r

Law N 791 State Duma Tomsk Oblast 28 Aug. 2003 Exploitation of natural resources in Tomsk Oblast

2003 Resolution N4a 10 Feb 2003 Payments for use of regional natural resource

Directive N 583r 5 Oct. 2005 Siberian natural resources/ Energy complex forum

7 Oct. 2004 Working group on model hydrocarbon companies

30 May 2005 Licensing rights

Resolution N58a

2005 Resolution N50 4 April 2005 Administrative expenditures

Directive N26r

2004 Directive N507r 13 Aug 2004 Amendments to the development of the oil and gas Industry 2001–2005 to 2030 Law N 1380 State Duma Tomsk Oblast 26.08.2004 Assignment of associated mineral rights 23 Jan 2006 Confirmation of licensing agreement legislation Resolution N2783 GDTO 26 Jan 2006 Request for assistance in regional gas sector (Miller/ Fradkov visit)

Resolution N2a

2006 Resolution N7 20 Jan. 2006 Amendments to oblast fuel subsidy resolution N120 (2000)

Appendix 2  Legislation in Tomsk Oblast Gas and Oil Sector 2002–2008

28 April 2007 3rd Siberian forum “Suppliers & Consumers in the Energy Complex”

Directive N266r

12 March 2007 Amendments to regional energy strategy

Directive N122 r

2007 Resolution N18 16 Feb 2007 Gasification of Tomsk Oblast

(continued)

2008 Resolution N37ra 25 June 2008 11th international congress “Energy Conservation” & Exhibition “Gasification 2008”

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Appendix 2  (continued)

Directive N761r 2 Dec. 2004 Competition Commission for Gasification project of Tomsk Oblast

20 Oct 2004 Payments for Use of Natural Resources

Identification N63 Federal antimonopoly commission 22 Nov. 2005 6 April 2006 16th Int. Congress Anti-monopoly “New High investigation Aleksandrovo region Tech in the Oil & Gas Sector” Resolution N129a Resolution N204 16 Dec. 2005 7 June 2006 State Industrial Audit Compensation for energy savings

Resolution N75a

6 April 2006 Amendments to Oblast’s emergency response programme Resolution N. 22 2001 Resolution N170r

13 Oct. 2005 Amendment to Oblast fuel Subsidy Res N 120 2000

13 Oct 2004 Regional conference “Problems Perspectives in NR Sector”

Resolution N36

Resolution N130r

Directive N639r

Law N 121-O3 6 July 2007 Bases for energy conservation in Tomsk Oblast

17 Dec 2007 Liquefied gas pricing “NSRK Tomsk” “BMGK Myldzhino”

Orders N 73/565 & N. 73/566

Orders N73/563 & N73/564 17 Dec 2007 Liquefied gas pricing “Gaztorgresurs” “Asinomezhraigaz”

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References Aalto, P., Dusseault, D., Kennedy, M., Kivinen, M. (2008). The social structuration of Russia’s energy policy. Paper given at Centre For East European and Russian Studies International Workshop - The Cultural Politics of European Union Energy Security 7th-11th May 2008. Dusseault, D. (2008b). Expectation, anticipation and contingency: Problematising Russia EU energy relations. Paper given at the Centre For East European and Russian Studies International Workshop - The Cultural Politics of European Union Energy Security 7th-11th May 2008. Expert. (2007). A Period of Competitive Federalism Awaits, No.44 (585) Expert Online 2.0 26 November 2007. Expert Siberia. (2007a). Administrative Drilling Apparatus No. 4 (146) Expert On-line 2.0 29 January 2007. Expert Siberia. (2008b). Atomic Plans Expert On-line 9 July 2008. Expert Siberia. (2007c). Atomic Seversk Expert On-line 21 March 2007. Expert Siberia. (2005). Drilling in Tomsk. 9: 6. Expert On-line 2.0 7 March 2005. Expert Siberia. (2008). First Step for the State No. 40 (227) Expert Online 2.0 13 October 2008. Expert Siberia. (2003). Liquefied Gas to Reduce Costs of Heating. 9 (9) Expert On-line 6 October 2003 Expert. (2006). Peaceful Seversk. 44:538. Expert On-line 2.0 27 November 2006. Expert Siberia. (2008a). The Road Determines the Journey.. 40:227. Expert On-line 2.0 13 October 2008. Expert Siberia. (2008b). Tomskneft in Half. 1–2 (191) Expert On-line 2.0 14 January 2008. Expert Siberia. (2007d). Tricky Licensing Expert Siberia 36:178. Expert On-line 2.0 1 October 2007. Gazeta.ru (2007). Russian-British Conflict Approaches Nadir 5 August 2007. Kommersant Business Guide. (2008). Big Ambitions for Tomsk Oil No. 154 29 August 2008. Railway European Daily Monitor. (2008). Investors reach tentative Agreement on New SevSib Vol. 5 No. 47 Jamestown Foundation 12 March 2008. Strategia RazvitijaTomskoi Oblasti do 2020 Goda Administratisija Tomskoi Oblasti Departament Ekonomii i OOO Deltaplan (2007). Tomskaya Neft. (2006). About YUKOS, a Bridge and a Jubilee 5. August 2006. Tomskaya Neft. (2004). When We Talk about Success, We Mean Oil,7 February 2004. Tomskaya Neft. (2004). YUKOS will not Surrender its Position 6 March 2004. Zakon Tomskoi Oblasti No. 157 “O vnesenii izmenenii v Zakon Tomskoi Oblasti < Ob ytverzhdenii Programmi sotsialno-ekonomicheskogo razvitija Tomskoi oblasti na period 2006–2010 gody > 31.05.2007.

Electronic Sources http://atlas.socpol.ru/print.asp?f=/portraits/tomsk.shtml http://ec.europa.eu/energy/russia/events/doc/2003_strategy_2020_en.pdf http://www.gazprom-neft.ru/ http://www.imperialenergy.com/ http://www.petroneft.com/ http://www.rosneft.ru/Upstream/ProductionAndDevelopment/western_siberia/tomskneft/ http://www.russneft.ru/structure/info_5009.stm http://www.russneft.ru/structure/info_5011.stm http://www.sibur.ru/109/186/543/index.shtml http://www.surgutneftegas.ru/rus/index.xpml http://www.tbng.ru/home.php http://www.tnk-bp.ru/

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http://www.tomsktransgaz.ru/ http://www.transneft.ru/ http://www.vostokgazprom.ru/ http://www.vtk.ru/ http://www.iea.org/textbase/work/2008/neet_russia/Gromov.pdf http://www.energystrategy.ru/materials/koncepc.htm http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=32250 http://en.rian.ru/russia/20070218/60911275.html http://www.rosneft.com/Upstream/ProductionAndDevelopment/western_siberia/tomskneft/

Part II

Challenges of National Energy Policy and the Environment

Chapter 6

Innovative Democracy and Renewable Energy Strategies: A Full-Scale Experiment in Denmark 1976–2010 Frede Hvelplund

Keywords  Energy policy • Innovative democracy • Technological innovation

Introduction: Transforming Renewable Energy and Conservation (REC) from Supplementary to Main Technology The development of renewable energy and energy conservation (REC) technologies in Denmark from 1976 and onward is interesting, because two models of political economy have been competing at a time when the Danish energy system is undergoing a transformation. REC systems have increasingly shifted from being minor energy alternatives to becoming the main technologies, while fossil fuel energy systems are increasingly becoming the supplementary options. Danish development of REC systems can be divided into two phases. During the first phase, from 1976 to around 2000, REC technologies were supplementary to energy systems mainly based upon fossil fuels. In this first phase, a “green energy cluster” consisting of renewable energy technologies such as wind power, solar energy, biomass and energy conservation technologies was developed. Furthermore, the remarkable success of REC development in this period can be credited to the innovative democratic public regulation approach, which characterized this phase.

F. Hvelplund (*) Department of Development and Planning, Aalborg University, Aalborg, Denmark e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_6, © Springer Science+Business Media, LLC 2011

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The second phase, from 2000 onward, is being marked by fossil fuel-based heat and power production increasingly becoming supplementary to intermittent ­renewable energy technologies. In this period, it is important to not only support the implementation of single REC technologies but also to establish an infrastructure that support increasing amounts of intermittent energy sources, such as wind, wave and solar power. During this same period, a right-wing government, led by Prime Minister Anders Fogh Rasmussen (AFR), removed financial support from REC technologies and replaced the former innovative democratic policy with a neo-liberal energy policy, relying predominantly upon “market tools” such as CO2 trading, Clean Development Mechanisms (CDMs) and Joint Implementation (JI). After 6 years, AFR made a political U-turn in 2007 and admitted that his policy had been erroneous and that the government had suddenly incorporated a 100% renewable energy policy goal. Until 2010, this political goal has only been incorporated into an active policy to a very modest degree and the policy is still regarded as neo-liberal and relying heavily on market tools embedded in the present and unchanged institutional settings. Meanwhile, in 2011, a new Energy Strategy was published (Danish Energy Agency 2011), where an array of rather strong energy policy goals and instruments was introduced. The amount of renewable energy of electricity consumption is to be increased from at present 30% to 60% in 2020. Out of this, the wind power share is planned to rise from the present 20% to 40% in the same period. In summation, Denmark is in the initial stages of the second phase of REC develop­ment, with: 1 . A politically accepted need for further expansion of REC technologies. 2. A politically accepted need for the development and implementation of a new infrastructure that can integrate large amounts of intermittent REC technologies. 3. An in general neo-liberal energy policy that relies mainly upon present market actors and the present institutional market construction until 2011, where a new policy has been announced. Presently, important questions to consider are: (a) To what extent can the experiences regarding market and public regulation from the first phase be used to support the second phase of development and (b) what new types of markets and public regulation amendments will arise as REC technologies to an increasing degree replace fossil fuel-based energy technologies? And in general: Will the neo-liberal approach be able to manage this transition from first to second phase or will it be necessary to reintroduce a new version of the innovative democracy regulation model from the first phase of development? To answer these questions, it is necessary to analyze both the characteristics of the technological change that is currently underway and public regulation from the period 1976–2000/2002. Following these analyses, the policies required to further develop REC technologies in the second phase of development will be explored.

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The Radical Technological Change from Fossil Fuels and Uranium to Renewable Energy and Conservation When examining Danish energy planning development, all political and economic theories behind the energy policies must be considered in relation to both the type of technological change in question and the concrete politically designed institutions and market conditions present at the time (Hvelplund 2001a, 2005a). Therefore, it is problematic that neoclassical economics and its proponents neither distinguish between different technologies nor analyze the different characteristics of the various political and economic processes of technological change. Neoclassical economics considers technology to be purely capital and claims that technological change only occurs when new technologies are competitive in the marketplace. In this paradigm, companies are simply regarded as identical “dots” in the market; all behaving rationally and in the same manner. In neoclassical economics, various motivations within different companies are not at all taken into consideration. Contrary to this, one should distinguish between the inherently diverse motivations and motivational structures of different companies and also explore the various aspects of different processes of technological change (Hvelplund 2001a). To accomplish this, the terms technology and technological change must first be defined. For the analytical purposes of this chapter, technology is defined as consisting of technique, knowledge, organization, product and profit and technological change occurs when at least one of these five areas is changed considerably. Radical technological change is defined as a situation where at least two of these five areas are changed considerably. In the first phase (1976–2000/2002), several REC technologies were improving their cost efficiency. The cost of electricity generated from wind power, for instance, was reduced from 25 Eurocent per kWh to around 5 Eurocent per kWh. Wind power was introduced by new organizations such as cooperatives, where legislation only allowed those neighboring the wind turbines to invest in the ownership of the turbines, thus keeping profits within the locality instead of seeing them disappear to distant power companies. This was a new innovation that was to a large extent owned by new organizations, profited new owners and required the use of new knowledge and technology. Thus, it could be classified as a radical technological change. Although the share of wind power was still relatively low during this phase, one should bear in mind that the “product” was a intermittent one and therefore was unlike fossil fuel-based products. In the second phase (from 2000/2002 onward),“intermittent energy” has become an important characteristic, as wind power now covers 20% of electricity production in Denmark and is projected to cover 50% by 2030. During periods of maximum production and low consumption, wind power accounts for 80–90% of all electricity consumption in Denmark. Therefore, it is necessary to introduce an infrastructure that is able to manage large amounts of fluctuating energy. Among other things, this infrastructure should encompass such technologies as flexible cogeneration units, heat pumps with heat storage and electrical cars. If these technologies are introduced, it becomes possible to incorporate considerable amounts of wind power into the market without the need for additional power storage systems (Lund 2010).

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The Character of the Technological Change from Fossil Fuel (FFU) Based to “Renewable Energy and Conservation (REC)” Technologies To understand the distinction between various types of technological change and how they relate to different energy companies, the concrete characteristics of the alterations must first be described. The main alternative to FFU-based energy is a combination of electricity and heat conservation, renewable energy and cogeneration REC technologies. Some of the discrepancies between these new REC technologies and the traditional FFU technologies are described in Table 6.1. The abovementioned characteristics of the REC and FFU technological alternatives indicate a change in technological paradigm from scarce, stored energy resources to abundant, intermittent energy sources and from technologies that are Table 6.1  Some public regulation consequences of changing from FFU to REC technologies Character of change from fossil fuel and uranium (FFU) technologies to renewable energy and conservation (REC) technologies. Consequences of the change Reduced need for strategic security policies From scarce stored energy sources linked to energy supply. Increased need for to abundant intermittent energy infrastructure that integrates the fluctuating sources. Increased long-term energy sources. Increased need for and reduced short-term security coordination of supply and demand side. of supply. Reduced need for green house gas abatement From sea- and CO2-polluting technologies activities. Increased need for solving to zero CO2 technologies imposing concrete local REC visual and noise visual and noise impacts on local impacts. residents. Need for a bottom-up public regulation From solutions that are independent approach adapting REC technologies to of local environmental context to their specific local ecological and sociologitechnical solutions that are dependent cal conditions. on the local environmental context. Need for development and implementation From grid-based Electricity Infrastructural of a new electricity infrastructure with Systems (EIS) to EIS based upon grid electrical cars, heat pumps, heat storage systems in combination with integration systems, etc. technologies such as heat pumps, electrical cars, etc. Need for stable prices when selling electricity From capital intensive with long to the grid, enabling new and financially technical lifetime embedded in existing weak local organizations to borrow money supply organizations to very capital and consequently invest in REC systems. intensive technologies also linked to new organizations. Need for an “innovative democracy” political From economically and politically strong approach that gives influence and power to economically and politically weak to actors that are independent of FFU technologies. technologies. Need for local and regional influence upon From relatively few concentrated large the location agenda and ownership power plants to many visible and of REC plants. distributed REC activities.

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independent of local, natural conditions to technologies that are dependent upon environmental conditions. The transformation also indicates a change from economically and politically well-established technologies, to economically and politically vulnerable ones. In the 1970s and 1980s, few people were employed in the Danish wind power industry. The industry, therefore, had neither membership in the Confederation of Danish Industries nor any support in the Danish trade unions. Consequently, there was resistance against wind power both from the Confederation of Danish Industries and from the metal trade unions, as these organizations strongly supported building new coal-fired plants. Nevertheless, despite resistance from these strong organizations, institutions and regulations supporting wind power were established during this time period, largely due to the activism of renewable energy NGOs. Since the 1970s, the abovementioned situation of change from conventional FFU to REC technologies have resulted in a multi-faceted FFU economical and institutional path dependency, where new technologies mostly meet tough resistance from FFU companies and their support organizations in both the phases (Hvelplund 2005a). This resistance to innovative technologies has been continuous in Denmark during the last 25 years and is further substantiated in the succeeding discussion of the changes in profit and value added when adjusting from FFU to REC technologies (Hvelplund 2005a; Lund 2010).

The Value-Added Chain and the Transformation from FFU to REC Technologies Contrary to neoclassical economic theory, the main understanding in this chapter is that the motivation for developing and implementing new technologies varies from company to company. Furthermore, this variation, in addition to the differences shown in Table 6.1, is also a function of the cost and value-added structure described below and referred to as the profit component, in Fig. 6.1.

The Value-Added Chain of FFU Systems The question to consider is: What are the general value-added characteristics of the present fossil fuel and uranium-based electricity supply systems, which at present control between 80 and 90% of the world’s electricity market? Answering this question is crucial, as the FFU system must, to a large extent, be replaced with renewable energy and energy conservation systems within the next 20–40 years. Figure 6.1 illustrates the value-added flow in a typical FFU system, as it was in Denmark in the mid-1990s. In this case, it is represented by the Danish system and is based upon large coal-fired power plants. It should be noted that the data has been extracted from the Danish system in 1989, when the whole value chain was still a non-profit system.

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1. Fuel 26

2. Power production 9.3

3. Transmission

4. Distribution

8. Sale

3.4

14.6

100

6. Transmission equipment 8.6

7. Distribution equipment 10.5

I. Direct Electricity Supply System

5. Power plant equipment 27.6

II. Indirect Electricity Supply System

Fig. 6.1  Value-added distribution in a coal fired electricity system (Source calculated on the basis of SØ89-112, 10 April 1989 ELSAM, Statistic 1991, DEF, and Statistisk tiårsoversigter 1980–1989). The cost distribution between production and transmission is calculated on the basis of SØ89-112, ELSAM. In this calculation, an interest rate of 1% is used, which was the inherent interest rate in the cost structure at that time. With a higher interest rate, the indirect electricity supply system would have a higher proportion of the 100 value-added units. It is worth remarking that future electricity systems with no fuel consumption will, all other things being equal, have a higher proportion of the value-added chain within direct and indirect power production, transmission and distribution (boxes 2, 3, and 4). Furthermore, it is probable that a higher proportion will be in the indirect electricity system (boxes 5, 6 and 7).

In this FFU electricity supply system, electricity is delivered to the consumer for 100 value units (100 DKK, for example). In a non-profit system, this is the consumer price of electricity. Looking at box 1, Fig. 6.1, the Direct Electricity Supply System, it can be seen that out of 100 DKK, 53.3 DKK is paid to the direct electricity supply system as a whole, with 26 DKK disbursed for coal, 9.3 DKK paid to the employees at the power plants, 3.4 rewarded to the employees of the transmission system and 14.6 paid to the employees of the distribution system. Thus, of 100 DKK, a total of 27.3 DKK is paid to the Danish employees of the direct electricity system. Looking at box 2, Fig. 6.1, the Indirect Electricity Supply System, a total of 46.7 DKK is disbursed to the indirect electricity supply system. Of this amount, 27.6 DKK is paid to power plant equipment producers, 8.6 DKK to producers of transmission equipment and 10.5 DKK to producers of distribution network systems.

The Value-Added Chain of REC Systems The present Danish electrical system includes wind power production, as well as some development of biomass and waste-based electricity production. Forthcoming developments will probably also include the extensive use of photovoltaic and wave energy-based electricity production. Furthermore, there is a political agreement to increase the wind power production to around 40% wind power in 2020 (Danish Energy Agency 2011). The increased utilization of wind power will require the introduction of regulation facilities that will synchronize wind power production with consumers’ consumption needs. But what are the typical value-added characteristics

6  Innovative Democracy and Renewable Energy Strategies… I. The Direct Electricity Supply System

95 III. Consumer level

(1 ) Transmission 3.4

(2 ) Distribution 14.6

(6) Sale 100

(3) Centralized renewable energy equipment 27.3

(4) Decentralized renewable energy equipment 27.3

(5) Consumer organized conservation and renewable energy equipment 27.3

II. The Indirect Electricity Supply System Fig. 6.2  The value-added chain of future renewable energy and conservation systems

of these “new” non-fossil fuel and non-uranium technologies? Figure 6.2 attempts to answer this question. The assumption is that the renewable energy system can produce energy at the same price while using the same transmission and distribution grid as the current FFU system. This will be achievable if the necessary infrastructure to regulate the fluctuating REC energy system is in place. A further assumption in this example is that the renewable energy technologies are distributed in such a way that one third of the indirect electricity supply system will be linked to the central transmission level, one third to the decentralized distribution level and one third to the household level. The characteristics of the value-added change from FFU to REC energy systems can be described by combining Fig. 6.1 with Fig. 6.2, whilst Fig. 6.3 illustrates the consequences of establishing such a transition. In the traditional fossil fuel-based system, a 100 DKK sale at the consumer level will divide the value-added cost between the different levels of vertical integration, as shown in Fig. 6.1. The bottom Fig. 6.2 demonstrates the value-added distribution in an energy conservation and renewable energy system. Figure 6.3 illustrates that the value-added chain of REC technologies clearly differs from the value-added chain in an FFU-based system within two areas: 1. In the REC value-added chain, the fossil fuel resource value has disappeared and has been replaced by investment in renewable energy capital equipment. 2. In the REC value-added chain, the power production value in a specific direct electrical supply system organization has been replaced by “renewable energy system automation.” In this system, the maintenance functions, at least at the decentralized and consumer levels, will be performed by the manufacturers of windmills, solar cells, wave energy plants, hydrogen production systems and the electricity battery charging systems, for example. The need for a specific power production organization will be reduced considerably or disappear entirely as the day-to-day work on the power plant has been replaced by automatons requiring maintenance from the manufacturers of the single technologies in the REC energy system.

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1. Fuel 26

2. Power production 9.3

3. Transmission 3.4

4. Distribution 14.6

6. Transmission equipment 8.6

7. Distribution equipment 10.5

8. Sale 100

IV. Direct Electricity Supply System

5. Power plant equipment 27.6

V. Indirect Electricity Supply System From fossil to renewable energy

IV. Direct Electricity Supply System

III. Consumer level

1. Transmission 3.4

2. Distribution 14.6

6. Sale 100

3. Centralized renewable 3. energy equipment Centralised 27,3

4. Decentralized renewable energy equipment 27,3

5. Consumer conservation and renewable energy equipment 27,3

renewable V.Indirect Electricity Supply System

Fig. 6.3  The change in value-added profile connected to from FFU to REC energy systems

Naturally, it is possible that the existing power companies will take over some of the maintenance functions of the renewable energy automatons, especially those connected to large, offshore wind power plants. But even then, the added value directly linked to the power sector will be halved compared to the value-added in an FFU system. Only by directly purchasing the actual factories producing renewable energy equipment will the power companies be able to maintain their present value-added level. Therefore, the combination of points (1) and (2) above may reduce the direct electricity supply system until it only consists of the transmission organization and the distribution network organization. As the transmission system in Denmark is owned by the state-owned organization, Energinet.dk, almost no value-added would be assigned to the power production organizations, DONG and Vattenfall. Consequently, a main characteristic of technological change, as illustrated in Fig. 6.3, could be the increase of the share that the indirect electricity supply system consists of, as a part of the whole value added in the electricity system. In Fig. 6.3, the indirect electricity system linked to power production, transmission and distribution increases from 46.7% of the total value added in the FFU system to 81% of the added value in an REC system. This is primarily due to the fact that fuel import is replaced by REC energy equipment and capital. In an electricity system like the German one, with ownership integration of fuel extraction, power production, transmission and distribution, the value-added share

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would decrease from between 50% and 60% of the price of electricity to around 20%, if a 100% REC energy system is introduced. As the above example deals with the Danish non-profit system, the costs are equivalent to the price, and include no profit. If, however, a renewable energy monopoly is established, the establishment of high prices will likely offset this reduction in value-added share. If a monopoly is not established, a shift to 100% renewable energy will significantly reduce the profit base of the FFU energy companies, due to the considerable reduction in value-added shares. In an electricity system like the Danish one, a change from FFU to REC systems would result in a considerably lower value-added reduction; namely, from approximately 27% to around 18% of the price of electricity. But as electricity transmission is presently owned by government-controlled organizations and the distribution ­network principally by municipal and cooperative organizations, the value-added share assigned to the power companies is reduced by an even greater degree – in some cases to almost zero. From the above discussion, it can be concluded: 1. That due to the differences between the institutional characteristics of FFU and REC technologies, the FFU-based energy companies encompass internal, economical and organizational resistance against REC technologies (Fig. 6.1). This resistance first emerged in the 1970s. 2. That companies based on FFU energy systems are rapidly losing market shares in the transformation from FFU to REC technologies. Since the FFU companies have no comparative advantages in regards to REC technologies, they cannot expect to achieve 100% of the market shares for the technologies. The power companies also have a comparative disadvantage in regards to maintenance functions concerning REC technologies. 3. That even if the FFU companies could attain 100% of the REC technology market shares, they would lose in value-added, as the value-added share in the direct electricity system is heavily reduced in the transformation from FFU to REC technologies. 4. That FFU companies have invested in traditional power plants and will lose portions of these investments in the transformation from FFU to REC energy systems. 5. That a successful transformation to REC technologies will therefore result in massive reductions in the share values of present FFU companies. Thus, a transformation from FFU to REC energy systems will result in a considerable transfer of jobs and profits from the FFU companies to the actors within the REC energy systems. Therefore, the transformation from FFU to REC technologies represents a win/lose situation at the company level, where the FFU companies will “lose” and the REC companies will “win.” Consequently, the political system should be aware that a transformation to REC energy systems, which in the Danish case has represented a win/win situation at the societal level with regards to jobs and economic welfare, will meet very strong and systematic resistance from the FFU companies (Hvelplund 2001a, 2005a; Lund 2010). Consequently, the general political problem is manifested in a transformation where the politically and economically strong should lose and the politically and

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economically vulnerable should win. Politically, this is a difficult change. How should the political process then be designed in order to cope with such a challenge? This question is focused upon in the preceding section.

Public Regulation, Economic Paradigm and the Transformation from FFU to REC Technologies The established associations in the market neither have the organizational comparative advantage nor the economic interest to invest in new REC technologies. Historically, in Danish development, traditional FFU companies have worked against the introduction of REC technologies. Considering this long period of resistance, it is imperative to analyze which type of public regulation and thus political and economic paradigm would be the most efficient to advance the change from FFU to REC technologies. In order to understand some of the underlying forces behind Danish energy policy, it is important to be aware that the construction of a concrete market design has occurred in a political setting consisting of various ministries, different lobby groups and a specific power balance within the Danish Parliament. Furthermore, these actors all have different political economy paradigms – in their beliefs about how the economy functions. The conflict has historically been, and continues to be, between different interest groups, each with their own understanding of political economy. The “interest groups” that have been important in the studied time period are: The Ministry of Finance, the Ministry of the Environment, the Ministry of Climate and Energy, the trade unions, Danish Energy Association (mainly FFUbased energy production), the political parties and the green NGOs. As previously mentioned, these groups can each be associated with their own paradigm of political economy, which they employ to argue their case. The contending political economy paradigms have been and still are the neoclassical approach, the concrete institutional approach and the innovative democracy approach.

The Neoclassical Approach In this approach, there is usually no direct support for REC technologies and the general attitude is that new technologies should enter the market when they are ready to be competitive. However, this approach acknowledges that there are external environmental costs and that these should be internalized in the energy prices via carbon quotas. The public regulation tools linked to this paradigm are CO2 caps and trade systems, Clean Development Mechanisms (CDMs), some CO2 taxation, etc. All these tools influence the development of REC technologies by influencing the price in existing markets.

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Fig. 6.4  The neoclassical approach (In Box 2, all five technology components – technique, organization, knowledge, product and profit – should change, which is symbolized by the five balls changing color from grey to green. Source: Hvelplund (2011), forthcoming book on Renewable Energy and Innovative Democracy, and Mendonca et al. (2009))

This approach is generally the paradigm adopted in econometric models and in the policy suggestions from the Ministry of Finance and is used in arguments by Danish Energy Association and right-wing political parties in the Danish Parliament. Clearly, fragments of this paradigm are employed by other actors, as well. In this approach, the role of the Danish Parliament is to maintain order in the free-market institutions, and the role of a climate and energy policy is to make sure that the external costs of energy production are internalized in the market prices. This is illustrated in Fig. 6.4. Once the market is considered to be functioning in accordance with the free-market institutions, the outcome of the market process is regarded as representing an economic optimum. In this approach, it is assumed that the economy is in an optimum, and an energy policy should simply be regarded as a policy where a few “market failures” are corrected. One of these failures is that environmental consequences, such as climate effects from greenhouse gases, are not automatically internalized in the market prices.

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Thus, an energy and climate policy only consists of an internalization of these external costs by means of a system of CO2 taxes, CO2 trading and CDM and JI market tools. This is mainly achieved by applying the “Grandfathering Principle” where established energy companies are awarded a free CO2 quota that provides them with a financial advantage, compared to newcomers on the energy scene. The theory is that if these tools are successfully introduced into the market (Box 3, Fig.  6.4), then societal goals will be achieved automatically through this wellfunctioning market. In Denmark, this way of thinking has been dominant in several strong institutions since 1974, and the Ministry of Finance, for example, has always advocated this paradigm. The Danish Ministry of Finance and the Danish Economic Council do not systematically examine the character of required technological changes. According to the paradigm of this economic school of thought, all companies behave identically in the market and the motivation for developing new technologies is the same for all companies, regardless of their present activities. But in long periods of time, there was a majority in the Parliament that did not accept this way of understanding economy. Because of this, all existing wind power-supportive institutions, as described below, have been introduced despite resistance from strong proponents of the neoclassical approach.

The Concrete Institutional Approach This is a technocratic approach, which realizes that merely applying a neoclassical approach to energy planning is too simple. It thus recognizes that the market is embedded in an artificial, concrete, institutional setting that is created by men, and also be modified by men. However, this approach does not go into details regarding the various motivations of FFU and REC companies. This approach tends to apply an ecological modernization approach that assumes that at a certain stage of development, all companies will begin implementing REC technologies because these technologies are modern and create a base for any sound business. Thus, this approach does not expand on the different political incentives of the FFU and REC interests and therefore does not offer any active redesign of the political process in the direction of political liberalization, either. It assumes that we are currently in a process of ecological modernization where all actors are motivated to introduce innovative REC technologies, including the FFU companies. As this approach does not assume that the transformation will meet much resistance from traditional power companies, there is no need to strengthen the political process in order to cope with any opposition. Therefore, this approach does not support changes in the political process behind the redesign of market rules. Consequently, the public regulation tools will be the same as those in the neoclassical approach, with the addition of an active support policy for new REC technologies, mainly to be implemented by existing ecological, modernized FFU companies.

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The Innovative Democracy Approach This paradigm also appreciates that market rules are designed in political processes and recognizes that these processes have to be redesigned in order to overrule the fossil fuel path dependency inherent in present-day market conditions. It argues that in the current political situation, the transformation to REC technologies (Box 2, Fig. 6.5) will meet strong resistance from FFU companies and their supporters (Box 5, Fig. 6.5). The neoclassical paradigm illustrated in Fig. 6.4 does not acknowledge the political processes that construct the market conditions at a given period of time. Therefore, a framework describing the political process is added to Fig. 6.4, thus introducing Fig. 6.5 that visualizes the framework of a process, here named innovative democracy. Innovative democracy can be said to exist when the political process establishes alternative goals (Box 1) and technological possibilities in technical (Box 2), institutional and market condition (Box 3) scenarios, in an unbiased manner. In an innovative democracy process, the rules for the interaction between the political process (Box 4, Fig. 6.5) and the various lobby groups (Boxes 5, 6 and 7) are designed in such a way that the influence from independent1 lobbyists carries at least the same weight in the political process as the influence from the dependent2 lobbyists. In the energy case, this would imply a level playing field for political competition between FFU and REC interests. This also includes bestowing funds to independent actors, enabling them to develop and establish prototypes for new technologies and to develop concrete and well-designed policy suggestions, including energy plans, etc. Hence, establishing a level, political playing field on the energy scene means granting both an equal “voice” and equal economic “means” to FFU and REC actors. In Box 1, the discourse regarding goals and norms is performed. In Box 2, the discource regarding realistic technical scenarios from “grey to green” is carried through. In Box 3, concrete institutional and market reforms are discussed. In Box 4, the design of political institutions is discussed. In Boxes 5, 6 and 7, the design of the information and resource balance between dependent and independent is made. For instance, between lobbyists linked to the old fossil fuel interests, Box (5) and the lobbyists that are economically independent of the interests of the uranium and fossil fuel companies, Boxes 6 and 7. All concrete, Danish development from 1975 to 2001 has been influenced by an active policy design at each of these levels. This chapter chiefly discusses level 4 (the political processes) and levels 5, 6 and 7 (the information and resource balance between economically dependent and economically independent lobbyists). An independent lobbyist is characterized by having no direct economical interest in the different technological alternatives on the agenda. 2  A dependent lobbyist is characterized by having direct economical interest in one or more of the technological alternatives on the agenda. 1 

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Fig. 6.5  Energy policy and innovative democracy (Comment: In box 2 all five technology components: technique, organization, knowledge, product and profit are changing, which is symbolized by the five balls changing color from grey to green. Source: (Hvelplund 2011), forthcoming book on Renewable Energy and Innovative Democracy, and (Mendonca et al. 2009))

Based on the Danish experience of the first phase of development, it can be c­ oncluded that if parliamentarians aspire to have different political scenarios to choose between, they must establish a resource and information balance between the dependent and the independent lobbyists. The establishment of this balance is essential, if a successful transformation from uranium and fossil fuel technologies to energy conservation and renewable energy technologies should take place. The associations constituting this balance can be termed the “institutions of innovative democracy.”

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They include: 1. The presence or establishment of independent research units, such as universities, which have the freedom and necessary resources to design technical and institutional scenarios that are independent of the government, central administration and the large energy companies. Such independent universities have been present in advanced Danish energy development and proposed alternative energy scenarios (Blegaa et al. 1976; Hvelplund et al. 1983, 1989, 1995; Lund 2010). 2. Easy accessibility to information regarding public plans and the cost and capacity of existing energy plants. There is a law3 in Denmark requiring that any information between a public organization and any other organization is accessible to the public. 3. The establishment of independent energy offices and locally accepted test centers that can advise the public regarding the possibilities and potentials of energy conservation and renewable energy. In Denmark, such energy offices and the Nordic Folkecenter for Renewable Energy4 received modest funding and have played an important role in the technology innovation process. 4. The distribution of public funds to institutions whose boards are independent of traditional fossil fuel interests. In Denmark, this was accomplished by means of an institution5 that had the resources to support a set of renewable energy pilot plants. The above public regulation tools should be established in order to grant political access to people and organizations that have no invested interest in the present FFU companies. These tools are also needed to introduce some of the neoclassical market tools in combination with giving active support to new REC technologies. It can be achieved, especially by implementing fixed feed-in prices for renewable energy sold to the heat and electricity grid [5],[6]. Furthermore, this approach focuses on bestowing funds to new REC organizations and encouraging local ownership of REC technologies. The bottom line in these proposals is that the Danish Parliament should ensure that independent groups and the general public have access to information regarding the energy scene and the financial resources necessary to develop alternative technical and institutional scenarios. If these “political liberalization” reforms are introduced and secured, the public and parliamentarians will be granted the “freedom of choice” between different technological and organizational scenarios on the energy scene.

3 Lov om offentlighed i forvaltingen (Law regarding openness in political and administrative processes). 4 The Nordic Folkecenter for Renewable Energy has played an important role despite relatively modest funding, by working on renewable projects at the practical research level. 5 Teknologirådets styregruppe (the steering committee for the Danish Board of Technology), which played an important role by distributing funds to renewable energy pilot projects and performed critical research work within the energy sector.

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In the Danish case, the three political economy paradigms and their supporters are described in Table 6.2. The policy from 1980 to 2002 is characterized by an innovative democracy approach, although there are intermittent periods with a tendency towards a neoclassical approach. In 2002, the employment of this approach disappeared and the neoclassical approach has been almost completely dominant ever since, with a minor change in 2007–2011, where a concrete institutional approach has gained increased support in the government. The innovative democracy approach has brought some remarkable developments within wind power and combined heat and power (CHP) in Denmark. In 2010, wind power accounted for 20% of total electricity consumption and more than 40% of electricity consumption was supplied by the combination of wind power and small natural gas and biomass-based heat and power plants. Altogether, total wind turbine production by Danish manufacturers increased from around 500 mill. EUR in 1995 to around 6.7 billion EUR in 2009. Danish export of wind turbines amounted to approximately six billion EUR in 2009. (Vindmølleindustrien 2010, 2006). The export of the “green cluster” of energy technologies linked to Danish energy policy (including wind turbines) increased from 530 million EUR in 1992, to 8.000 million EUR in 2009. Thus, it is probable that the active Danish energy policy influenced by an innovative democracy approach was one of the most important reasons for the relative success of the Danish economy from the mid-1990s up until 2001 (Hvelplund 2005a; Lund 2010). It should be emphasized that this development was implemented despite systematic resistance from the Ministry of Finance, the industrial establishment and the FFU-based power companies (Tranæs 1997), which regarded the new “green energy technologies” as competition to their large coal and oil-based power plants. These actors succeeded in delaying the innovation process but fortunately, some political power was seized by a “coalition” of organizations that were independent of the existing fossil fuel-based energy companies. These independent lobbyists, such as energy grass root organizations, new companies within the green technology cluster and some active politicians were able to generate political momentum for the development of a spectrum of green energy technologies. These organizations, independent of existing economic interests that have gained democratic influence, have been analyzed. They are a manifestation of the innovative democracy process, as previously defined. Yet, in 2002, a right-wing government led by Anders Fogh Rasmussen (AFR) was elected and support for green energy technologies was removed. The political process of innovative democracy was brought to an end and a “non-policy” relying on existing market actors (FFU companies) and existing market conditions was implemented. This market conformed energy policy was combined with a policy of purchasing CO2 allowances in the CO2 market. During the same period, most support for green energy technologies ceased and since 2003, almost no new wind power capacity has been built in Denmark. Until 2008, support for renewable energy in Denmark was far below average among the 27 EU countries.

Table 6.2  “Political economy” paradigm in Denmark from 1974 to 2011 1974–1979 1980–1983 1984–1989 1990–1991 1992–2002 2002–2007 2007–2011 Government Right/liberal Left/social Right/green Right Left/social Right Right democrat democrat Neoclassical approach XX X (-) XX X XXXX XXX Concrete Institutional approach X X X X (-) (-) X Innovative democracy approach X XX XXX X XXX (-) (-) (-) means no influence, one X indicates some influence, two Xs connotes considerable influence, three XXXs implies strong influence and four XXXXs indicates a very strong influence.

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In 2007, AFR made a political U-turn. He admitted that he had been wrong and declared that a 100% renewable energy target would be incorporated into Denmark’s future goals. In 2008, the economic conditions for wind power improved but overall the policy has changed very little and can still be regarded as a neoclassical economic paradigm. In 2011, the government published a new energy plan with some concrete policies and declaring 100% renewable energy in 2050 as its goal (Danish Energy Agency 2011).

Two Cases of Innovative Democracy and Technological Change Wind Power Development According to government energy plans for 1990 and 1996, wind power was predicted to cover up to 20% of electricity production by 2005 and 50% by around 2030. The 20% goal was almost reached in 2005 and at present, the goal for 2020 is 40%, and still 50% for 2030. The production cost of wind power at a good coastal site has decreased from around 0.14 EUR per kWh in 1984, to 0.08 EUR per kWh in 1991, to merely 0.05 EUR per kWh in 2004–2009. Until 2002, the Danish wind power regulation regime included a feed-in tariff system, where purchasers of windmills receive a fixed price from electricity companies and a fixed public service payment for CO2-free electricity production from the government. In this context, this is termed a “political price/ amount market” (Hvelplund 2005b) system. During the 1990s, this system motivated wind turbine producers to lower their production prices, as they realized that more windmills could be sold if the prices of wind turbines decreased. The wind turbine industry did not develop without an active policy from the Danish Parliament. There was systematic public interference in the market, which broke its “barrier to entry” institutions and created an opening for wind power technology. An array of institutional reforms increased market entry. The reforms of the 1980s and their political background can be briefly described within the wind power field. In the initial phase from 1980 to 1992, several policy measures were established to support REC development, despite heavy resistance from representatives of the fossil fuel-based companies. Examples of such reforms include the following: • A 30% investment subsidy. • Utility obligation to purchase wind power at a price equal to 85% of the price paid by consumers using 20,000 kWh/year. • A right to produce up to 7,000 kWh of wind power without income tax payment. • Ownership limited to actors living within a range of initially 3 km from the wind turbine. • The establishment of a public wind power test station at Risø Research Centre. • Spare capacity in the machine industry. • A motivated population.

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During this phase, lasting until around 1992, more than 3,000 cooperative wind turbines were installed. Typically, a cooperative 100–300 kW wind turbine had anywhere from 20 to 60 owners. Consequently, around 1990, there were around 150,000 wind turbine owners in Denmark. Among other elements in the process, this was the result of a debate in the Organization for Renewable Energy (OVE), a green grassroots organization (NGO), which fought for the cooperative model, and initially limiting of ownership to people living within a range of 3 km from the wind turbine. Later, this range was extended to 10 km. The model managed to secure very stable public support for wind power and it helped the industry survive vulnerable years between 1987 and 1991 when export was close to zero. Since 1992, wind power development has been further supported by a steady increase in export markets, the development of larger wind turbines (600–2,000 kW) and until around 2001, a 30–40% decrease in electricity prices. The political preconditions for the above developments were: • Efficient grassroots movements: Especially the Organization for Renewable Energy and the Anti-Nuclear Movement (OOA). • A fairly open and active public debate. • A specific balance in the Danish Parliament, with small parties with green profiles being influential. • A situation where the energy companies systematically worked against innovative renewable energy technologies. • An economic situation with high unemployment rates. In this period, the power companies, the Ministry of Finance, the Association of Large Industries and the Danish Economic Council systematically worked and argued against wind power, whereas NGOs, sometimes employees of the Ministry of the Environment and The Danish Federation of Small and Medium-Sized Enterprises argued in support of wind power. These groups were given further political power, became members of public committees and received funds for wind power pilot plants, the publication of periodicals, etc. Despite resistance from large and powerful actors, this “innovative democratic process” succeeded in implementing a policy that supported the development and implementation of wind power in the 1980s and 1990s.

The Development of Decentralized Cogeneration in Denmark By 1988, all cities in Denmark with a population exceeding 60,000 inhabitants had combined the production of electricity and heat (CHP). Currently, these CHP systems are largely coal, and to some extend natural gas based, but future systems are planned to rely upon wind power, heat pumps and geothermal energy. Back in 1975, there had been discussions regarding the establishment of CHP units in small cities. But heeding the advice of the Ministry of Trade, the large power companies, opted for nuclear power and did not consider CHP units.

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The grassroots organizations OVE6 and OOA7 argued for decentralized CHP as it was an alternative to nuclear power. The Utilities, the Ministry of Trade and later the Ministry of Energy, argued that CHP in small cities was not technically achievable and if it were even possible, it would be too expensive. Furthermore, they argued that even if it was technically possible and economically feasible, the potential was too small to spend time discussing it. As late as 1988, the authorities and utilities considered the potential for decentralized CHP in Denmark to be 450 MW, at most. In 1989, a new Minister of Energy came into office and “suddenly” the new energy plan, “Energy 2000” (Danish Ministry of Energy 1989), correctly claimed a potential of 1,400–2,000 MW with regard to decentralized CHP, including industrial CHP. Public financial support8 was given to independent groups analyzing what price should be paid for electricity sold from the CHP plants to the grid (Mæng and Hvelplund 1988). Concurrently with this, different institutional preconditions were established. These included the utility obligation to purchase electricity from CHP plants according to “avoided cost” pricing for electricity sold to the grid, based upon the principle of long-run marginal costs (LRMC). Furthermore, a “low CO2 emission” subsidy of 0.013 EUR/kWh plus municipal guarantee was given to natural gas-based cogeneration plants. These concrete institutional reforms had an enormous effect. From 1990 to 2001, power production from decentralized CHP units increased from 1% of total electricity consumption to more than 30%. Of the decentralized CHP units, 60% are organized as cooperatives and are owned by the heat consumers of small towns or villages. The units have between 0.5 and 5 MW of electrical capacity and are mostly fueled by natural gas (Lund and Hvelplund 1994). Many years of strong resistance from the power utilities and the Ministries of Energy and Finance has characterized the political process of the abovementioned institutional reforms. The policy was generated by a bottom-up approach and established through considerable public pressure from grassroots movements, local district heating cooperatives and some members of the Danish Parliament. The introduction of small CHPs evolved in what can again be regarded as an innovative democracy process.

Organisationen for Vedvarende Energi (The Organization for Renewable Energy). Organisationen til Oplysning om Atomkraft. (The Organization for Information on Nuclear Power). 8 Financed by “Teknologirådets Styregruppe for Vedvarende energi” (The Renewable Energy Governance Group of the Technology Council). 6 7

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Public Regulation Requirements in a Mainly REC-Based Energy System REC development is in a transitional phase. It is being reallocated from being a supplement to a fossil fuel-based energy system (first phase) to becoming the primary energy system, with the fossil fuel system becoming supplementary (second phase). The present public policy for instance is that Renewable Energy should cover 60% of the electricity consumption by 2020 (Danish Energy Agency 2011). Due to the lower short-term marginal production cost of wind power, fossil fuel systems should only produce electricity when no wind power is available. In a way, fossil fuels can already be regarded as a supplement to wind power. Due to the intermittent nature of wind power, it is currently approaching the limits of the regulation infrastructure linked to the fossil fuel-based system. Hence, Denmark is facing an increasing need to establish infrastructure systems that are able to incorporate the fluctuations from large amounts of wind power (Lund 2009). Such systems will consist of heat pumps with heat storage in single homes and district heating areas, flexible cogeneration units, plug in electrical cars, etc. Denmark is currently in the midst of developing a policy that makes it possible to establish such an infrastructure. The Danish Transmission System Operator (TSO), Energinet.DK, is responsible for analyzing the situation and providing advice regarding the establishment of this infrastructure. Furthermore Energinet.Dk is working actively on solving this problem, but has not yet found a coherent regulation model that can assure that the necessary technologies are both built and that they perform the mandatory regulation activities. Some electricity trading companies, such as Nordjysk Elhandel, are systematically developing models that can ensure that the needed infrastructure is established. In the development of this infrastructure, it becomes increasingly important that the common consumer understands the importance of the venture. At Aalborg University, we are developing models, where heat consumers are given ownership preference to wind power shares, and receive special subsidies and loan guarantees if they establish home insulation, heat pumps, heat storage and sign a contract obligating them to participate in the regulation of the fluctuating energy supply from wind turbines. Although an innovative democracy approach was important in the initial stages of renewable energy development, it may be even more imperative now, as technical problems linked to the integration of large amounts of wind power may require a high level of consumer understanding and active participation. The regulatory structures are in a period of development and have not yet been fully established. The cost structure of the Nordpool market is shown in Fig. 6.6. This figure suggests that increased wind power production will push the whole cost structure to the right, which will lower prices in the Nordpool market. Understandably then, the economy of wind power is relatively unfavorable for any actor already selling electricity to this market, including large producers such as Vattenfall, DONG, E.ON, etc. For these companies, wind power expansion has costs incorporated into three levels: The cost of the wind turbines, lost revenue due to reduced prices in the

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Fig. 6.6  The Nordpool market cost structure. Source: (Federation of Finnish Technology Industries 2009)

Nordpool market and the cost of acquiring a lower utility factor at their fossil fuel, hydro and uranium-based power plants. Therefore, it often is not economically feasible for these companies to invest in large wind power capacities in the Nordpool market region, unless they can achieve exorbitantly high prices for the wind power they produce. The Danish power company, DONG Energy, bid on a 400 MW offshore wind park near the island of Anholt and won the bid at the (very high) price of 13.8 Eurocent per kWh. Generally, it is far more economical for the companies producing electricity for sale at the Nordpool market, to invest in wind turbines outside this market. The above discussion reveals that the lack of incentive among the FFU companies to invest in wind power in the Nordpool market area needs to be addressed. Market conditions should be altered so that wind power investments could become profitable also for FFU companies. Furthermore, investment opportunities for independent investors, such as municipalities, households and private firms outside the energy sector should be improved in order to place competitive pressure upon the FFU companies. The second phase is also characterized by the introduction of very large wind turbines (2–7 MW), with a height of up to 200 m. These turbines are approximately four times as high as the first phase wind turbines, which were typically 0.3–1 MW turbines, with a height ranging between 40 and 70 m. At the same time, these new, large wind turbines also represent more substantial investments. While the first phase wind turbines would typically cost 0.3–1.2 million EUR, the investment cost

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of the 3 MW turbines is typically predicted to be around four million EUR. The final cost of a 3–5 MW wind turbine park with 4 wind turbines would range from 15 to 20 million EUR. This represents new challenges for public participation and public ownership of wind turbines. These challenges have been overcome on the island Samsø, with a mixed ownership model, where residents only had to pay in cash on average 14 EUR cash per person as shareholders in a nearby offshore wind turbine park. Mainly local banks financed the rest. In such a mixed ownership model, the municipality owns a portion of the wind turbines, in combination with private companies and households. This ownership model is presently being discussed in several municipalities, including Copenhagen. It demonstrates that an increase in wind turbine size and investment does not hinder the innovative democracy approach, but rather makes it a necessary tool in developing a mixed ownership model.

Conclusion The first phase in REC development experienced a difficult technological transformation, where financially and politically reputable FFU companies lost value added, while new and financially unstable renewable energy and energy conservation companies gained value-added and market shares. Thus, a successful transformation will yield a situation where established companies will suffer losses, while vulnerable newcomer companies will benefit. This is the basic stipulation of a transformation from FFU to REC technologies not only in Denmark but in other parts of the world as well. Even in the unlikely scenario where the FFU companies gained 100% control of the REC market, they would still lose a considerable amount of valueadded and therefore, profit and share value. Therefore, believing in an environmental modernization approach, where FFU companies would undergo a painless transformation to REC technologies, has no actual validity in the real world. However in Denmark, the political process has been successful in creating REC technologies, especially with regard to the development and introduction of energy conservation, wind power and district heating systems. This success can possibly be credited to the establishment of the innovative democracy process, where a political, financial and informational balance has been established between the FFU and REC lobbyists, such as renewable energy NGOs, the public, in general and industrial interests linked to small companies. An important component of innovative democracy has included the allocation of financial means to a network of NGO-based energy offices and independent innovators that have established prototypes of REC technologies at different locations throughout the country. Furthermore, Denmark had approximately 150,000 wind turbine owners, primarily consisting of neighbors to wind turbines who formed cooperative ownerships. Consequently, an ownership competition was imposed upon the FFU companies, strongly motivating them to invest in REC technologies by applying the logic, “if we don’t do it, they will.” Moreover, the REC development was established despite the opposition and lobbyism of large power companies and the association of large industries and in spite of the resistance and economic paradigms of the Ministry of Finance (Tranæs 1997).

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In the second phase, as REC technologies are in the process of replacing FFU ones, they are incurring an increasing amount of market shares, thus creating even greater competition. Furthermore, due to the fluctuating character of solar, wind and wave energy, the increased REC shares necessitate the establishment of a new technical infrastructure, such as flexible heat pumps, flexible cogeneration, heat storage, plug-in electrical cars, etc. Therefore, the second phase is characterized by both increased competition between FFU and REC technologies and the need for the development of a new infrastructure at the consumer level that can handle the fluctuations in the REC technologies. The second phase of REC development can learn the following lessons from the first phase of development: –– A process of green technological innovation will meet increased resistance from established market actors due to conditions in the Nordpool market and the inherent basic financial circumstances of these actors. Prices in the Nordpool market will fall if there is a high percentage of wind power in the market, resulting in existing power companies losing money on their present coal, nuclear and hydro capacities. Also, the reduced utility factor at their present power plants, due to an increased percentage of wind power will affect their economy negatively. –– The second phase of REC implementation therefore requires a very strong innovative democratic process, where the potential of the public, grass roots organizations and new green developers are given communicative, as well as financial power and where new, mixed ownership models with a combination of municipal and private households is established. The second phase will also require a greater public acceptance of REC technologies in order to counterbalance the present resistance against these technologies. An even stronger innovative democratic process will be required in the second phase of development, due to increased economic and shareholder-driven conflicts between FFU and REC interests. –– A green innovation process can never solely rely upon market tools and existing dominant market actors. This is demonstrated by the problems in the present Nordpool market construction, for instance, as shown in Fig. 6.6. The characteristics of the second phase of development further contribute the following requirements, regarding public regulation: –– The infrastructure required to cope with greater amounts of fluctuating REC technologies does not evolve automatically in the market. There must be an established, concrete policy that secures the development and implementation of the necessary infrastructural amendments. In turn, the requirement for new links between the REC supplier level and the consumer level are enhanced. The 2002–2010 Danish “market experiment” nearly has brought REC development and the implementation process to a complete a halt. The experiment has shown that the present market construction alone does not solve the development and implementation requirements in the second phase of REC development.

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The conclusion of this chapter is therefore that in both the first and second phases of renewable energy development, “market conditions” must be regarded for what they are – namely man-made political constructions. As the competition between FFU and REC technologies becomes more intense in the second phase, there is an increased need for a strengthened innovative democracy process, so that the advance of REC technologies is not hindered by the strong FFU organizations, now fighting for market survival. In addition, the second phase of development entails a need for a new infrastructure at the consumer level that can manage an increasing amount of fluctuating REC technologies. Therefore, a successful second phase transition from FFU to REC energy technologies requires an innovative democracy process with increased consumer and NGO commitment and financial support from groups that are independent of the FFU organizations.

References Blegaa, S. et al. (1976). Skitse til alternativ energiplan for Danmark, Organisationen for vedvarende energi. Danish Energy Agency. (2011). Energy Strategy 2050-from coal/oil and gas to green energy, March 2011. Danish Ministry of Energy. (1989). Energy 2000. Copenhagen: Danish Ministry of Energy. Federation of Finnish Technology Industries, (2009). New Design for Electricity Market. Hvelplund, F. (2011). Fortcoming book: Renewable Energy and Innovative Democracy. Hvelplund, F. (2005a). Erkendelse og forandring (Cognition and change), Doctoral thesis. Aalborg: Department of Development and Planning, Aalborg University. Hvelplund, F. (2005b). Renewable energy: Political prices or political quantities. In Lauber, V. (Ed.), Switching to renewable power. (pp. 215–224). London: Earthscan. Hvelplund, F. (2001a). Electricity reforms, democracy and technological change. Aalborg: Department of Development and Planning, Aalborg University. Hvelplund, F. (2001b). Renewable Energy Systems. Aalborg: Institute for Development and Planning, Aalborg University. Hvelplund, F et al. (1983). Energi for fremtiden, Borgens forlag. Hvelplund, Serup.K.E, Bjerregaard, H. (1989). Energihandlingsplan 90, Aalborg: Aalborg Universitetsforlag. Hvelplund, F., Lund, H., Serup, K. E., Mæng, H. (1995). Demokrati og forandring (Democracy and Change). Aalborg: Aalborg Universitetsforlag. Lund, H., Hvelplund, F. (1994). Offentlig regulering og teknologisk Kursændring. Aalborg: Aalborg Universitetsforlag. Lund, H. (2009). Energy systems analysis of 100 percent renewable Energy Systems. Energy, 34(5), 524–531. Lund, H. (2010). Renewable energy systems – The Choice and Modeling of 100% Renewable Solutions. Academic Press, Elsevier 2010. Mendonca, M., Hvelplund, F., Lacey, S. (2009). Stability, participation and transparency in renewable energy policy: Lessons from Denmark and the United States. Policy and Society, Journal of public foreign and global policy. 27(4), 379–398. Mæng, H., Hvelplund, F. (1988). Hvad er en omkostningsrigtig pris for salg af el fra decentrale kraftvarmeværker til det offentlige net? Aalborg: Department of Development and Planning, Aalborg University, 1988. Tranæs, Flemming 1997, Danish Wind Energy, Danmarks vindmølleforening. Vindmølleindustrien, 2010, Branchestatistik, 2010.

Chapter 7

Disregarding Wind Power: Introduction to Finnish Feed-in Tariff Policy Miikka Salo

Keywords  Finland • Energy sector • Wind power • Feed-in tariffs

Introduction In 2001, the Third Assessment Report (TAR) presented by the Intergovernmental Panel on Climate Change (IPCC) identified some major barriers inhibiting the deployment of technology that has the potential to reduce greenhouse gas (GHG) emissions. The TAR classifies such barriers into categories including prices; financing; trade and environment; market structure; institutional frameworks; information provision; and social, cultural, and behavioral norms and aspirations (IPCC 2001, 355). Similar categorizations have been made prior to and following the TAR (see e.g., Reiche and Bechberger 2004; Painuly 2001; Roos et al. 1999). This chapter examines the institutional framework of Finnish energy policy making, addressing the TAR’s request for “models of processes that reflect ‘real world’ decision making […] in order to identify and elaborate on the barriers that prevent or slow the diffusion of mitigation technologies” (IPCC 2001, 390). The central argument of this chapter is that the failure to implement wind power in Finland can to a great extent be explained by the power structure of the Finnish energy sector. The group of actors influencing Finnish energy policy making is quite small. Civil servants of key ministries and representatives of Finnish industry – particularly the forest and energy industries – have traditionally enjoyed close, informal relationships. In addition, some political parties have similar relationships with certain industry sectors (Ruostetsaari 1998). A special characteristic of the Finnish energy system in

M. Salo (*) Department of Social Sciences and Philosophy, University of Jyväskylä, Jyväskylä, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_7, © Springer Science+Business Media, LLC 2011

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respect to renewable energy (RE) is that the majority of RE used in Finland is derived from forest industry waste and by-products and the amount of available energy is thus conditional on the economic trend within this industry sector. The large forest companies are also joint owners of two out of four existing Finnish nuclear reactors.1 These companies have also announced plans for new wind power farms with a capacity of several thousand megawatts. The conditions in which policy decisions are made have constantly changed during the 1990s and 2000s. Finland was among the first European nations to liberalize its electricity markets, in 1995. The European Union has dramatically influenced Finnish greenhouse gas reductions and RE policies. Emissions trading began in 2005 and it promptly separated the state from the energy sector where GHGreductions are concerned. At the beginning of 2008, the Climate and Energy Package united the interests of both state and industry by suggesting obligatory RE targets for member states.2 In light of these new circumstances, the government renewed its climate and energy strategy by further emphasizing the need for additional nuclear power and renewable energy. In Finland, the utilization of wind power has been rather modest. Finland has never been able to achieve national wind power targets, the first of which was set in 1993 (Varho 2007). In the majority of Europe, the development of wind power has been very rapid. In countries with the greatest aptitude for wind power, development has been aided by the implementation of Feed-in Tariff (FiT) systems, now employed in 21 out of 27 EU countries. In Finland, FiT for wind power was finally implemented on January 1, 2011.

Renewable Energy in Finnish Energy Politics The Finnish Kyoto target for 2008–2012 is to reduce yearly greenhouse gas (GHG) emissions to 1990 levels. In 2006 and 2007, Finnish GHG emissions were more than 10% higher than in 1990 but after Kyoto targets were implemented in 2008 and 2009, GHG emissions fell below 1990 levels, mainly due to an economic decline. The increase between 1990 and 2007 was mainly due to emissions from energy production. Emissions in other sectors, however, such as agriculture and waste management, have decreased.3 The structure of Finnish renewable energy production has some peculiar features. Finland’s share of renewable energy consumption I considerable by international comparison. Renewable energy accounted for 25% of the total energy

In addition, forest companies are joint owners of the fifth Finnish nuclear reactor now under construction and the sixth reactor whose decision-in-principle Finnish Parliament has approved. 2  Directive (2009/28/EC) came into force in April 2009. According to this directive, Finland has a mandatory renewable energy target of 38% in gross, final consumption. 3  See http://www.stat.fi/til/khki/2008/khki_2008_2009-12-04_tie_001_en.html. 1 

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consumption in 2007 (Statistics Finland 2008). Finnish renewable energy is based on the structure of Finnish industry, as more than 80% of Finnish RE is produced from wood (Statistics Finland 2008). Finnish RE traditionally comprised forest industry by-products and large-scale hydropower. Half of all wood used in energy production comprised black liquor and other concentrated liqueurs, one third consists of industrial wood residues and by-products, and one sixth of the small combustion of wood. Black liquor is a by-product of pulp production and is burned for energy production in the pulp and paper manufacturing process. Nevertheless, the paper production process always requires additional electricity purchased outside the production process, which means that as the volume of paper production increases, so do the GHG emissions generated in the production of the additional electricity. However, all things being equal, this increases the relative share of RE in Finland. Thus, black liquor does not contribute to decreasing net GHG emissions.4 The volume of pulp and paper production naturally influences the material available for the production of forest converted chips. In the forest industry, forest converted chips have replaced fossil fuels, thus decreasing GHG emissions.

Securing Energy Support for Economic Growth This chapter primarily focuses on RE resources other than wood. Wind power in Finland has been mostly unutilized. In this first section, it is argued that prior to the 2009 Climate and Energy Package by EU, there was never a need for RE sources other than wood. Finnish energy targets are formulated in such a way that RE is not necessarily required for emissions cuts. The foundation of Finnish energy politics has been nuclear power. On a global scale, a third wave of nuclear enthusiasm is currently underway. During the first wave of enthusiasm in the 1950s–1960s, nuclear power was seen as cheap, abundant, and as the solution to resolving energy problems permanently. The second wave in the 1970s was related to the oil crises but the Three Miles Island accident in 1979 and Chernobyl accident in 1986 rapidly ended all nuclear enthusiasm. Present enthusiasm is founded on climate change mitigation (Verbruggen 2008). Nuclear advocates argue that nuclear power is only a part – but a necessary one – of an energy system that will redeem us from climate catastrophe. This has also been the central argument used by advocates in Finland since the early 1990s. Since preparation of national Finnish energy strategies first began in the late 1970s, increasing the use of domestic energy has been an important target. This, in addition to concerns about energy savings, arose following the energy crisis of the 1970s. Environmental concerns were not related to the main objectives of energy policy at the

4  The impact of using black liquor can be related to a hypothetical situation in which black liquor is left unused and the pulp and paper industries use other energy sources. Hypothetical emissions, however, are excluded from Finland’s annual reporting of emissions of the greenhouse gases specified in the Kyoto Protocol to the Secretariat of the UNFCCC.

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time and it was thought that solutions to environmental problems would be achieved by the additional use of domestic energy (Ministry of Trade and Industry 1978). In 1983, the Federation of Finnish Industries5 adopted an attitude on energy politics that defined the basic conditions for Finnish energy policy making at the time and the content of that paper is very similar to all national strategies developed since (Federation of Finnish Industries 1983). In 1983, the Finnish Industries emphasized the importance of choosing the most economical options for electricity production. Back-pressure power was deemed to be the most economical choice but as that option was already being implemented at the time, the production of basic electricity by way of nuclear power6 was considered to be the most inexpensive option. Forest industry by-products were determined to be the most important domestic fuels and others – particularly peat7 – were to be utilized when economically viable. The consumption of wood for energy production was to be accomplished in such a way that it would not compete with the supply of raw wood for forest industries.

Economy Versus Environment: Energy Sector Revisited Since the late 1970s, all government strategies have focused on the security of energy supplies and maintaining competitive prices. New environmental concerns arose in strategies from the 1990s, as the need for greenhouse gas reductions became unavoidable. Finland signed the Rio Convention in 1992 in which Finland, as one of 35 Annex 1 countries, agreed to reduce anthropogenic emissions of carbon dioxide and other greenhouse gases to 1990 levels by the end of the century (Rio convention article 4.2 a,b). This target was adopted into the 1992 Finnish Energy Strategy (Ministry of Trade and Industry 1992). This can be considered the starting point of rhetoric energy policy making, where environmental concerns seem to be the most important challenge of energy politics and economics in theory but never in practice. The major recession in Finland during the 1990s impacted the 1992 strategy. References were made to the possible failure to meet emission reductions targets, if the economy did not improve. Also, the key arguments to legitimize Finland’s failure to meet reduction targets were already given in the beginning of the 1990s: Finnish energy production was already more efficient by international comparison. Furthermore, it was argued that Finland consumes more energy due to the climate, structure of industry, and other natural reasons (Ministry of Trade and Industry 1992, 7). Environmental targets were manifested into Finland’s 1997 energy strategy and incorporated into the governmental platform during the Second Government of

Now part of the Confederation of Finnish Industries EK. There are four nuclear reactors in operation in Finland at the moment. These were connected to electric network during 1978–1980. 7  Peat is a domestic resource that covers about 6% of Finnish total energy consumption. In Finland, peat is classified as a slowly renewing biomass. The EU does not classify peat as biomass and the IPCC treats peat similarly to fossil fuels. 5  6 

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Paavo Lipponen, in 1999. This strategy formulated that “the environmental emissions generated have to fulfill the international commitments” and this formulation was also manifested into the governmental platform of Matti Vanhanen I, in 2003. This formulation first appeared in a minority report for members of the Economy Committee of Finnish Parliament, who proposed the rejection of the decision-inprinciple on the construction of a fifth nuclear reactor in 1993. This formulation, alongside with “cost efficiency” and “zero emissions” have always supported the government’s favorable stance toward nuclear energy.8 The cost efficiency claim, on the other hand, rules out renewable energy sources other than hydropower and the wastes and side products of forest industries. Nuclear advocates state that additional nuclear power has no negative impact on the utilization of renewable energy. The foundation of this argument lies in the fact that Finnish renewable energy strategies are executed regardless of any additional nuclear reactors. To a certain point, this has been the case. Unfortunately, Finnish renewable energy strategies have been rather modest in regards to greenhouse gas reductions. Finnish energy and climate strategies in the 1990s and early 2000s were based on the assumption that the majority of the Kyoto commitment was to be achieved by building the fifth nuclear reactor.9 The promotion of renewable energy in Finland was written into the Action plan for renewable energy sources in 1999 (Ministry of Trade and Industry 1999). This plan was renewed in 2003 but the targets set in 1999 were still considered to be challenging and were not altered. According to these plans, renewable energy will be increased by 3.1 million tons of oil equivalent (Mtoe) until 2010, compared to 1995 levels.10 Bioenergy accounts for 2.8 Mtoe of this target, of which 1.5 Mtoe is industrial bioenergy,11 0.8  Mtoe is from the district heating sector, and 0.5  Mtoe from small combustion. The most significant sources of GHG emissions reductions were to come via waste (otherwise transported to tips) and from forest converted chips.

Political Challenge of Reducing GHG Emissions In 2001, the Government presented the Finnish Climate Strategy to the Parliament. In this strategy, a Business as Usual (BAU) scenario was created, announcing a GHG reduction target of 14 Mt of CO2-eq per year for the Kyoto period 2008–2012. This scenario is unrealistic, however, as it describes a future that will likely not actualize. The strategy presented two scenarios for future energy production: The first was

These formulations are missing from the Lipponen I platform in 1995. In the mid-1990s, there was no publicly announced plan for the construction of additional nuclear reactors in Finland as the Finnish Parliament had rejected the decision-in-principle of the fifth nuclear reactor in 1993. 9  Due to several delays in the construction of this reactor, it threatens not to contribute to GHG reductions in the Kyoto period of 2008–2012 at all. 10  Total energy consumption in Finland in 1995 was 28.8 Mtoe. 11  Two thirds of additional industrial bioenergy would be black liquor and other concentrated liquors. 8 

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based on the increased use of gas and the second on an additional nuclear reactor. In 2002, the decision-in-principle for the construction of a fifth nuclear reactor was made by the Government and accepted by the Parliament. According to the strategy, either of these two basic electricity production scenarios would decrease Finnish GHG emissions by 6–10 million tons of carbon dioxide equivalent (Mt CO2-eq). The share of additional renewable energy would, according to this strategy, decrease emissions by 4–5 Mt CO2-eq. This decrease would not be required, however, if additional nuclear power did decrease emissions as suggested.12 In reality, emissions in Finland are very volatile. In 2003, GHG emissions were almost 20% higher than in 1990. In 2000, 2005, 2008 and 2009 emissions have been near or less than 1990 levels. The difference is due to the variation of available hydropower – especially in Norway. Finland imports electricity from Sweden (and Sweden from Norway) and when the amount of imported hydropower is unusually low, the use of condensing power in Finland increases. In 2003, the amount of available hydropower was very low. The last time Finland had produced such a small quantity of hydro­power was in the 1970s and thus, the net import of power into Finland from Nordic countries during a usual year changed into a net Finnish export. As a result, high emission levels for 2003 and 2004 were recorded in Finland. Before emissions trading, this kind of scenario would have been problematic from a national point of view. After emissions trading began in 2005, energy politics changed considerably. Companies in the emissions trading sector (which includes energy production) cover their own emission balances. Therefore, years such as 2003 and 2004 that reported high GHG emissions were no longer problematic for the state.13 As a result, state support for renewable energy is no longer required from a national emission reduction perspective. According to the state, additional support for emission trading is no longer a question of climate policy but rather a question of industrial ­policy. In the period between 2005 and 2009 (until the Energy and Climate Package became valid), any significant utilization of wind power would have been rather improbable.14 Since 2006, the state has only supported wind power projects that are utilizing new technology. Coal condensing power is the marginal energy in Nordic electricity markets most of the time. Thus, in principle, additional nuclear power replaces coal condensing power in Nordic electricity markets. Condensing power in the Nordic joint market is produced mainly in Finland and in Denmark. If the fifth reactor fully replaces coal, it would decrease GHG emissions around 10 Mt CO2-eq. In practice, the decrease is less, because coal condensing power is not marginal energy all of the time. Furthermore, a situation where nuclear power replaces condensing power is not optimal for the power producers as marginal energy is the price setter in the whole Nord Pool market, which means that the fewer the condensing power price setting hours are, the fewer the profits of all electricity production are. In practice, this can be avoided either by increasing electricity consumption in domestic markets or by selling the electricity in a different (larger) market. The latter means integrating European electricity markets. 13  High emissions are not problematic for the energy industries either, as the cost of carbon permits can be shifted into the price of electricity. 14  This is due to reasons that will be discussed in the next section: no state support, zero interest from traditional energy sector companies for massive wind power projects. 12 

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Nuclear energy has been the backbone of Finnish energy politics. When the decision for additional nuclear power was made, it was realistic to think that a fifth nuclear reactor would have decreased emissions in Finland below 1990 levels, had it been completed as initially planned. Renewable energy production has never been necessary in fulfilling international commitments, since they only applied to GHG emissions, not RE per se. This situation changed, however, when the EU Directive on the promotion of energy from renewable sources came into force in April 2009. This will obligate Finland to increase its share of renewable energy to 38% of its total energy consumption. This is the first time that Finland has been given a mandatory RE target.15

The Continuity of Policy Communities and Its Key Actors In order to understand wind power-related policy making, some general remarks regarding the structure of Finnish energy politics are necessary. The first point is that the core group of actors influencing energy policy making in Finland includes only a small number of actors. Finnish energy politics is largely set by the Finnish government with the Ministry of Employment and the Economy generally preparing the issues that emerge to the political agenda. In the case of a majority government, as has been the case in Finland in the last few decades, party discipline assures that government proposals do not change dramatically in parliament processing. One distinctive feature of Finnish energy politics is that the government and ­market-based actors have traditionally enjoyed a close relationship (Ruostetsaari 1989, 1998). The group of main actors that constitute the inner core of energy policy making can be further specified as follows: The inner core of energy elite consists of Ministry of Employment and the Economy, Ministry of Finance and Ministry of Environment. Of electricity producers and wholesalers, most important are Fortum Ltd and Pohjolan Voima Ltd (PVO) – which supervises the interests of forest industries. Most influential interest groups in energy policy making are Confederation of Finnish Industries (EK), Association of Finnish Industries (ET) and Finnish Forest Industries. Also, The Research Centre of Finland (VTT) could be included into this inner core (Ruostetsaari 2010). Associations and organizations have very good opportunities to exercise lobbying on government institutions. In fact, certain interest groups are an integral part of decision-making processes. These interest groups can be considered to have a kind of structural relationship with governmental institutions where they are seen as the natural representative of a particular field (Ruostetsaari 1998). Their views and

The European Commission had previously tried to set mandatory targets for member states concerning renewable energy. The RES-E (Renewable Energy Sources-Electricity) Directive that came into force in 2001 set an indicative target for electricity produced from renewable energy for member states. These targets were set to be mandatory in the Commissions directive proposal but opposition from the member states – including Finland – in the EU Council changed these targets to indicative.

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statements regarding important issues are requested by the government. Some of these stakeholders also have close relationships with particular political parties – the peat industry with the Finnish Centre Party, for example, and the nuclear industry with the Coalition party. According to Ruostetsaari (1989 , 1998), the most important level for lobbying is the ministerial level – where all bills and proposals are prepared prior to parliamentary readings. The second point is the existence of “policy communities” within the Finnish energy sector, at least since the early 1980s. Ruostetsaari considers policy communities (PCs) to be internally cohesive coalitions consisting of public, collective, and market-based actors. Traditionally, PCs have been formed around certain energy resources. During the 1980s and 1990s, there were three evident PCs in the Finnish energy sector that were clustered around domestic energy, natural gas, and nuclear power (Ruostetsaari 1998). The domestic energy PC was particularly clustered around peat in the 1980s but the focus in the 1990s increasingly shifted toward biomass and wind power. The most influential actors of this PC included the Centre party, peat producers – particularly Vapo – the Ministry of Agriculture and Forestry (MAF) and The Central Union of Agricultural Producers and Forest Owners (MTK). Resistance against the goals of this PC came from the Coalition Party, which is clustered around nuclear energy and is considered to be the most important backup party of the PC (Ruostetsaari 1998). It has been and still presently is the most powerful PC. It includes the energy companies, most of the trade union movement and the majority of economic life with its organizations (Ruostetsaari 1998). Ruostetsaari (1998, 215) states that the third PC clustered around gas was increasingly “an alternative to nuclear power” by nature and in the 1990s, he conjectured that this might be damaging for the gas PC. This became evident when the nuclear alternative was chosen over the gas option in the decision-in-principle by the government and parliament in 2002. Thirdly, after Finland joined the European Union in 1995, the conditions of national policy making changed and there has since been an additional level for Finnish stakeholders to protect their interests in. The European Commission is often considered to be the driving force of international climate policy and this is strongly reflected in Finnish renewable energy-related policies. The Commission has repeatedly brought various RE issues onto the political agenda. The renewed Finnish wind power targets are closely related to the EU’s Energy and Climate Package. The fourth point is that the Finnish support system for renewable energy has been original by European comparison. Until 2011, Finland had not implemented feed-in tariffs or green certificates that are commonly used in other EU countries, whereas investment and tax subsidies are most commonly used in Finland. Finland was among the first European nations to liberalize its electricity market, in 1995. Although this ended the monopoly of electricity sales by distribution network owners and resulted in the eventual renunciation of state-controlled energy management, for the state, liberalization meant reregulation rather than deregulation. This is particularly obvious in the case of new renewable energy sources, such as wind power.

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Hence, Finnish support systems for renewable energy are based on discretionary investment and tax subsidies, which give state administration control over the capacity of wind power construction in Finland. In principle, the feed-in tariff (FiT) system is an entirely different kind of mechanism, where the state has no control over construction capacity once the FiT system is introduced. However, the political process that resulted in the implementation of a Finnish feed-in tariff system assures FiT to be structured in such a way that will not compromise the positions of the inner core actors in any significant way.

The Emergence of Feed-in Tariffs for Wind Power The feed-in tariff (FiT) is basically an incentive for power producers that guarantees a certain price for all electricity produced during a given period of time. In most EU countries, a fixed feed-in tariff is used. By this system, the producer sells electricity to an external actor, who has a purchase obligation (e.g., a main grid operator or the owner of a distribution network) for a certain fixed price. This external actor then sells the electricity to the market, and consumers cover the price difference. However, this kind of FiT is opposed by many energy sector actors in Finland and will not be implemented. Reasons for this are examined more closely, later in this chapter. The utilization of wind power has been rapidly expanding in the EU during the last 15 years. In 2008, more wind power facilities were installed in the EU than any other electricity generating technology. Germany, Spain, and Denmark are the leaders in wind power installation. The rapid development of wind power in these countries is due to the implementation of feed-in tariffs, which make the investments profitable (see del Rio Gonzáles 2008; Munksgaard and Morthorst 2008). FiTs are currently in use in 21 out of 27 EU member states. Finnish wind power development has been very modest.16 FiTs have been discussed in Finland since the preparatory process of the Finnish Electricity Market Act in the first half of the 1990s but FiTs for RE have never been seriously considered at a state policy level until recently. A FiT for biogas was mentioned in government platform in 2007 and the latest Finnish Long-Term Climate and Energy Strategy, published in 2008, suggested feed-in tariffs for renewable energy (Finnish government 2008). The implementation of a FiT system in Finland has emerged in three stages. In the first phase, a FiT was implemented for peat in 2007; during the second phase, a working group was established to examine possibilities for a biogas FiT and the most recent development concerned renewable energy, in general.

In the end of 2009, the total capacity of wind power in Finland was 147 MW.

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Stakeholder Experiments on Feed-in Tariffs in Finland: First and Second Phases As emission trading began in 2005, coal substantially weakened the position of peat. The peat tariff was established to counter this trend. The purpose of establishing the feed-in tariff for electricity produced from peat was to prioritize the running order of power plants. Condensing power plants that fire domestic peat fuel were given priority over condensing power plants using coal, natural gas, and oil. This was the first time in liberalized electricity markets when legislative authority changed the otherwise market-dominated running order of power plants.17 This was legitimized through arguments that claimed emissions trading would jeopardize domestic peat fuel if the price of carbon permits rose over a certain limit. In the second phase of Finnish FiT implementation, a working group was established in August 2007 to examine the proposed biogas feed-in tariff as indicated in government platform (Finnish government 2007). As a result, the biogas FiT was not introduced at that time but it was introduced in the beginning of 2011 as part of the third phase of the Finnish FiT implementation process. Stakeholder statements given in peat and biogas FiT propositions show that all of the actors in the “inner core” of Finnish energy politics, as defined by Ruostetsaari (2010), except the Ministry of Trade and Industry that was responsible for preparing the legislation reform, were opposed to FiTs in Finland. Stakeholders presented various reasons for the opposition of peat and biogas FiTs: • FiTs would result in additional costs. • FiTs for peat or biogas could set a pattern, resulting in FiTs for all renewable energy sources. • FiTs would be a new kind of steering mechanism which is in conflict with liberalized electricity markets: It would distort competition in the market and has consequences that are not completely known. • Finland should adhere to investment and tax subsidies. Confrontations between nuclear and domestic policy communities are evident. The Centre Party is the driving force behind both of these FiT processes and the group of actors that is clustered around domestic resources is very supportive of FiT implementation. In the end, a FiT was introduced for peat (the peat-FiT applies to the four largest plants using peat) but the biogas FiT will be reexamined. Opposition toward peat and biogas FiTs was likely motivated by the fear that they would become pattern-setting models – resulting in the future implementation of FiTs for wind power and wood.

When the price of carbon permits is high enough, the marginal costs of peat-based condensing power are higher than that of coal. The Centre Party-led government’s response to this was the implementation of a feed-in-tariff for peat, which came into force in May 2007. FiT covers only condensing power and a limit of 120 MVA was set, which means that the FiT applies only to the four largest condensing power plants. The tariff is calculated from the equation in which the altering variables are the price of carbon permit and the price of coal.

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Third Phase: Feed-in Tariff for Wind Power In November 2008, the Ministry of Employment and the Economy instituted a working group to investigate the implementation of a FiT system for renewable energy. The first intermediate report was released in April 2009 and the final report in September 2009. The working group consisted of civil servants of key ministries – as well as stakeholder representatives that had previously both supported and opposed the FiT system.18 In the intermediate report, only the wind power FiT was discussed but in the final report, a FiT for biogas was also suggested. The stance taken by stakeholders that were previously opposed to FiTs changed in the third phase of the struggle over FiTs. In their official statements concerning the intermediate working group report, very few stakeholders were openly opposed to the FiT for wind power: The opposition had altered into the requirement for the FiT system to be “market based” and “cost efficient.” This formulation had already been written into the Long-term Climate and Energy Strategy published by the Finnish Government in November 2008, which means that the fundamental principles of the Finnish renewable energy FiT were already determined before the working group was even established. Opposition from traditionally powerful stakeholders could be sifted into cautious support or at least non-explicit opposition by structuring the FiT more favorably for the energy industries and energy-intensive industry. In practice, a market-based and cost-efficient system meant that the fixed type of FiT system that included purchase obligations was ruled out. The impact that wind power has on the price of electricity is very much overlooked in discussions regarding the failure in Finnish wind power utilization. A literary review by Pöyry19 (2010) for the European Wind Energy Association (EWEA) indicates that wind power lowers the spot price of electricity due to merit order effect.20 The impact varies between 3 and 23 EUR/MWh due to variations in assumptions and different markets analyzed in the papers. Simulations made in markets other than NordPool are not comparable to the Nordic case, as the impact of wind power on the price of electricity is conditional to the production structure of each particular market. In addition, there are uncertainties involved in the exact figures of each simulation but the point here is that any new production with lower variable costs will reduce the price of electricity. In the Finnish Long-Term Climate and Energy Strategy, the simulations made by Holttinen et al. (2001) are mentioned and the reduction is estimated on the level of 1.2  EUR/MWh, when 6  TWh of wind power is produced annually.

Consumer Agency, the Energy Market Authority and Forest Industries had a member in the working group and Energy Industries, EK, the Federation of Finnish Technology Industries, Fingrid, the Association of wind Energy and MTK had a permanent expert in the working group. 19  Pöyry is a global consulting and engineering company. 20  The impact that wind power has on the price of electricity is due to a low marginal production cost of wind power, which means that wind power is substituted for energy production with a higher marginal cost. The marginal cost of the most expensive electricity sold each hour in the Nord Pool spot market sets the price of all electricity traded. 18 

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Now the real question is why a company producing nuclear or hydropower would invest in a production capacity that would lower the price of all electricity? There are a few major companies in Finnish power generation. Their share of the largest three generators was 57% in 2006. This share is relatively low in comparison with other EU countries. However, according to the EU, the dominance of a few large companies in the power generation market remains a serious problem in Finland (EC 2007). Due to bottlenecks in the transmission lines between Finland and Sweden (and in Nordic countries, in general), Finland occasionally becomes its own market area. In such circumstances, Fortum has the possibility to exercise its market power (Purasjoki 2006).21 As noted in the Pöyry (2010) report, wind power production will lead to a lower power price in the sub-market in such circumstances. The second oversight in Finnish wind power discussions concerned the impact of the new incentive mechanism for investments (other than those made by Finnish energy sector actors). Green Stream Network’s 2007 report (assigned by the energy industries) predicts that the FiT system might bring new investors into Finnish markets. These may include internationally operating project developers and investors of RE, foreign energy companies, smaller project developers with experience in RE investments in their own countries, new small Finnish project developers, and Finnish trade and industry sectors for whom electricity is a significant factor of production and who are possibly interested in power sales. In 2007, Finland was listed as the least interesting country for wind power investment in the comparison between 25 countries (Ernst and Young 2007). On the other hand, a study by Bürer and Wüstenhagen (2009) indicates that FiTs are perceived to be the most effective renewable energy policy from a venture capital and private equity investors’ point of view. This is an important point when trying to understand the Finnish energy sector and its related policy measures as a whole: Energy industries – as well as the Confederation of Finnish Industries – state that the Finnish support scheme is working very well and no additional support is necessary. As long as new investors do not emerge in the Finnish markets, the power is preserved in the hands of this rather small, conventional group of actors.

Who Won? Nevertheless, based on the findings of the final working group report, on March 3, 2010, the Finnish Government drafted a bill subsidizing electricity produced from renewable energy sources. This bill proposed a FiT system for wind power 22 and

This is also common in power markets elsewhere. The German wholesale electricity market suffers from severe market power abuse (e.g., Weigt and von Hirschhausen 2006). 22  The size of the tariff is determined by the authorities and the target price is 83.5 EUR/MWh. The difference between Nord Pool spot area price of Finland and 83.5 EUR/MWh is paid for the producers for 12 years. 21 

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biogas. Although the key players of the Finnish energy sector who opposed the implementation of FiTs lost the battle, the structure of the wind FiT is formulated in such a manner that ensures their interests are well secured: • No purchase obligation was proposed and producers will cover their own energy balances and related costs, which is unfavorable to small producers and channels wind power markets toward professional commercial markets. • Small producers (<500 kVA) are excluded from the system. • A higher tariff of 105.30 EUR/MWh is paid until the end of 2015 or a maximum of 3 years, which gives large Finnish energy companies that already have projects under way an advantage over foreign newcomers. • No stepped tariff for different kinds of wind power (onshore and offshore) was proposed and the proposed tariff is not high enough to make building offshore wind power capacity profitable. Although offshore wind power is growing rapidly in Europe, Finnish actors do not have experience in its production. Furthermore, the Ministry of Finance solved the debate regarding FiT payment exemptions for energy-intensive industries. It presented a critique on the initial financing scheme, in which consumers would have financed the costs of the FiT system by increased electricity costs. As the Finnish Consumers’ Association highlighted in its statement, however, possible exemptions to certain industries violates the principle of equality in the Finnish Constitution. Such exemptions would require an acceptable reason and according to the Association, the competitiveness of industry does not qualify as an acceptable reason. The Ministry of Finance determined that the initial financing scheme, related to public as well as private law, was in violation of the Finnish Constitution and therefore not possible. As a result, financing of the FiT was transferred into the state budget. Ultimately, feed-in tariff was implemented for wind power, biogas, and finally also for small-scale wood.23 Although Finnish Forest Industries opposed especially FiT for wood to the last, the Government could follow through the FiT reform as a part of a renewable energy package that was bundled up with a positive decision-in-principle by the Government for two nuclear power plants – one of which is to a large degree owned by big forest companies. According to the final Act, a wind turbine can be accepted into the FiT system only if it has not received prior state subsidy, does not contain used parts and has a capacity less than 500 kVA. Also, a new regulation was implemented stating that wind turbines are approved to the FiT system only as long as the combined wind power capacity in Finland is less than 2,500 MVA.

The Act came into force on January 1, 2011. The size limit for power plant using wood is 0.1–8 MVA, if the plant uses forest converted chips and by-products of forest industry. There is no upper limit if the plant uses only forest converted chips (but not industrial by-products) – in this case, the tariff is bound to the price of carbon permit.

23 

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On the basis of the evidence presented above, it seems apparent that the power structures controlling the Finnish energy sector have changed very little since the 1980s and 1990s. The process of FiT policy formation proved that the government is able to implement reforms regardless of heavy resistance but on the other hand, consensus kind of decision making also secures the interests of the key actors of the Finnish energy sector. The outcome has been a Finnish feed-in tariff system that is considerably different from basic (e.g., German) FiT models, with a differentiating but fixed tariff for most RE sources with a purchase obligation that is financed by all consumers and without state intervention. In Finland, it appears that traditional market-based actors are able to supervise their interests in policy processes very effectively even in the face of new circumstances. This seems to be particularly true for forest industries, but even the energy industries received a FiT structure that is least harmful to their interests. In all likelihood, the most influential companies within the Finnish energy sector will build the target capacity of 2,500  MW by 2020. The Ministry of Finance ultimately restored order and secured its own position in the Finnish RE support scheme by using constitutional critique to transfer the financing of the FiTs into the state budget.

Discussion In principle, the feed-in tariff is a support mechanism for renewable energy with unexpected consequences. The basic model, consisting of a purchase obligation and fixed tariff, may or may not attract new players of various magnitude, which would influence the position and relative strength of current energy sector actors. It would also help utilize smaller renewable energy resources. In a Finnish context, this type of system would yield radically different outcomes compared to prior energy regulation. One can argue that the political process resulting in a FiT system for wind power is comparable with traditional Finnish policy making, which balances centralized state control with large production units that ultimately influence Finnish energy politics. Thus, FiT implementation is by no means an example of radical change in Finnish energy politics but rather, an example of the consensus kind of policy making that is common to Finnish energy politics. It is only natural that the tariff be structured in a manner most favorable toward those who participate in formulating it. Economies of scale are indisputably cost effective but, on the other hand, have a tendency to centralize influence within the energy sector. In a very enlightening series of papers, Gregory C. Unruh (Unruh 2000, 2002; Unruh and CarilloHermosilla 2006) describes how “industrial economies have become locked into fossil fuel-based technological systems through path-dependent process driven by technological and institutional increasing returns to scale” (Unruh 2000, 817). Overall, it seems that the basic lock-in mechanism in a Finnish context is the one described by Unruh but instead of locking into fossil fuels, Finland has locked into

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a power structure that has a tendency to channel development toward large production units, such as additional nuclear reactors and large wind parks. Concerns over climate change have only enhanced this configuration, not weakened it, as is the case with the global fossil fuel regime. However, changes will occur in the near future. The two different targets set by the EU – one for GHG emissions and another for RE – may seem to overlap but they highlight the central position of RE in future energy systems. The influence of the EU is also central to Finnish national energy policy making. The Finnish FiT implementation process indicates that Finnish consensus kind of energy policy making is hardly the source for radical change in the energy sector. The transition is unlikely to come from inside the Finnish energy regime. Instead, it is more likely to be funneled first, through tightening international commitments and second, through a transformation in the structure of Finnish forest industries. The restructuring of Finnish forest industries is a consequence of the decreasing profitability of the pulp and paper industry during the 2000s. Several plants have been shut down in recent years. The restructuring will bring new focus to different products in the industry. This development is expected to attract more business from the energy sector, particularly within the biggest forest companies, UPM and Stora Enso. This has at least two consequences: First, the decrease in pulp and paper production frees power production capacity. Electricity formerly consumed by production may be sold into the energy market. UPM is already a net seller of electricity in Finland (UPM 2010) and as the fifth and sixth nuclear reactors – significant portions of which are owned by UPM – begin to operate, there are several more terawatt hours of electricity that can be sold into the markets. The second consequence is the production of traffic biofuels, which are expected to reach the commercial phase within a couple of years. It will be interesting to see how these reoriented forest companies will influence the Finnish energy sector. Will the nationally less significant pulp and paper industry lose much of its previous influence in Finnish energy politics, as the Central Union of Agricultural Producers and Forest Owners (MTK) did, when agriculture lost significance in Finland? Or is the power redistributed to some degree, to these reoriented companies? The most probable outcome of consensus policy making in Finland is that the forthcoming implementation of new RE sources will remain in the hands of the “big players” and the emergence of new actors will remain rather minimal. The Finnish energy sector is a unique example of a liberalized, free market where certain actors have overtly large shares of market power and very good opportunities for lobbying in state institutions, which in turn determine the environment of the energy sector. Therefore, only a system that does not increase consumer price, does not decrease spot price, does not add costs for state finances, does not affect the availability and price of wood for forest industries, and does not attract new players into the energy sector could satisfy all the relevant interests of the “inner circle” of Finnish energy politics. In other words, the result would be a system that does not threaten the positions currently enjoyed by actors in the Finnish energy sector.

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References Bürer, M.J., Wüstenhagen, R. (2009). Which renewable energy policy is a venture capitalist’s best friend? Empirical evidence from a survey of international cleantech investors. Energy Policy, 37, 4997–5006. Del Rio Gonzales, P. (2008). Ten years of renewable electricity policies in Spain: An analysis of successive feed-in tariff reforms. Energy Policy, 36, 2917–2929. EC. (2007). Communication from the Commission to the Council and the European Parliament. Prospects for the internal gas and electricity market. COM(2006) 841 Final. Brussels 10.1.2007. Ernst & Young. (2007). Renewable Energy Country Attractiveness Index. http://www.ey.com/ Global/assets.nsf/International/Industry_Utilities_RenewableIndices-Q4-07/$file/Industry_ Utilities_Attractiveness_Q42007.pdf Federation of Finnish Industries. (1983). Taking of an attitude on energy policy. Energiapoliittinen kannanotto (in Finnish). Finnish government. (2008). Long-term climate and energy strategy. Council of State Report to Parliament 6th November 2008. (in Finnish). Finnish government. (2007). The programme of the prime minister Matti Vanhanen’s second government. Available at: http://www.valtioneuvosto.fi/hallitus/hallitusohjelma/pdf/hallitusohjelmapainoversio-040507.pdf GreenStream Network. (2007). Selvitys uusiutuvan energian lisäämisen kustannuksista ja edistämiskeinoista. Raportti Energiateollisuus ry:lle 10.10.2007. (In Finnish) Holttinen, H., Vogstad, K.-O., Botterud, A., Hirvonen, R. (2001). Effects of large scale wind production on the Nordic electricity market. Proceedings of European Wind Energy Conference, Wind energy for the New Millenium, EWEC’2001 July 2-6, 2001 Copenhagen, Denmark 2001. IPCC. 2001. Climate Change 2001. Third Assessment report. Mitigation. Cambridge: Cambridge University Press. Ministry of Trade and Industry. (1999). Strategy for the promotion of renewable energy. Reports of the Ministry of Trade and Industry 4/1999. Energy department. (in Finnish). Ministry of Trade and Industry. Energy Department. (1992). The Finnish Energy Strategy. Council of State Report to Parliament on Energy Policy. Reports C:31. Helsinki. Ministry of Trade and Industry. Energy Department. (1978). Government report to parliament on energy policy. (in Finnish). Munksgaard, J., Morthorst, P.E. (2008). Wind power in the Danish liberalised power market – Policy measures, price impact and investor incentives. Energy Policy, 36, 3940–3947. Painuly, J.P. (2001). Barriers to renewable energy penetration; a framework for analysis. Renewable Energy, 24, 73–89. Purasjoki, M. (2006). Sähkön tukku- ja vähittäismarkkinoiden toimivuus. KTM julkaisuja 36/2006. Pöyry (2010). Wind Energy and electricity prices. Exploring the ‘merit order effect’. A literature review by Pöyry for the European Wind Energy Association. Available on www.ewea.org. Reiche, D., Bechberger, M. (2004) Policy differences in the promotion of renewable energies in the EU member states. Energy Policy, 32, 843–846. Roos, A., Graham, R.L., Hektor,B., Rakos, C. (1999). Critical factors to bioenergy implementation. Biomass and Bioenergy, 17, 113–126. Ruostetsaari, I. (2010). Changing regulation and governance of Finnish energy policy making: New rules but old elites. Review of Policy Research, 27, 273–297. Ruostetsaari, I. (1998). Energiapolitiikka käännekohdassa – järjestöt ja yritykset vaikuttajina vapautuvilla energiamarkkinoilla. Tampereen yliopisto, Politiikan tutkimuksen laitos. julkaisuja 8/1998. [In Finnish. Energy policy at a turning point- associations and companies affecting change in liberalised energy markets, University of Tampere, Department of Political Science].

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Ruostetsaari, I. (1989). Energiapolitiikan määräytyminen. Acta Universitatis Tamperensis, ser A vol 278. Tampere: Tampereen yliopisto. [In Finnish. Determining energy policy. University of Tampere]. Statistics Finland. (2008). Energy consumption. available at: http://www.stat.fi/til/ekul/index.html Unruh, G. C. (2000). Understanding carbon lock-in. Energy Policy, 28, 817–830. Unruh, G.C. (2002). Escaping carbon lock-in. Energy Policy, 30, 317–325. Unruh, G.C., Carillo-Hermosilla, J. (2006). Globalising carbon lock-in. Energy Policy, 34, 1185–1197. UPM 2010. Annual Report 2009. available at http://w3.upm-kymmene.com/upm/internet/cms/upmmma. nsf/lupgraphics/UPM_Annual_Report_2009.pdf/$file/UPM_Annual_Report_2009.pdf Varho, V. (2007). Calm or storm? : Wind power actors’ perceptions of Finnish wind power and its future. Helsinki: University of Helsinki, Faculty of Biosciences, Department of Biological and Environmental Sciences, environmental sciences. Verbruggen, A. (2008). Renewable and nuclear power: a common future? Energy Policy, 36, 4036–4047. Weigt, H., von Hirschhausen, C. (2006). Price formation and market power in the German wholesale electricity market in 2006. Energy Policy, 36, 4227–4234.

Chapter 8

Climate Change Mitigation and Adaptation in Swedish Forests: Promoting Forestry, Capturing Carbon, and Fueling Transports E. Carina H. Keskitalo, Jenny Eklöf, and Christer Nordlund

Keywords  Sweden • Forestry • Mitigation • Adaptation • Biofuel

Introduction Sweden is a land of forests. In fact, almost 60% of the surface area is covered by forest (both productive and nonproductive). Since the end of the nineteenth century, these woodlands have primarily been utilized by the forest industry but reindeer husbandry in the north and tourism and recreation, including hunting, berry picking, and other local, customary activities also exploit the forest landscape. Ownership is highly diversified. Of the estimated 23 million hectares of productive forest land, some 40% is owned by large forest companies and the government and approximately 50% by some 350,000 small, nonindustrial, private owners.1 Hence, many different individuals, companies, and organizations have an interest in the way the forests are treated and used. Sweden is also a country where environmental questions are taken seriously at the political level. Throughout the twentieth century, the forest landscape has generated significant environmental concern. Since the establishment of Sweden’s first

The total export value of forestry and forest products makes up about 10% of all exported products from Sweden, and about 4% of Sweden’s GNP (Swedish Forest Agency 2008). Pine and spruce are the most common species (39% and 42%, respectively) and also the most important for forestry and the forest industry. Production centers on paper and cardboard and, to a lesser extent, wood production and bioenergy (SOU 2007: 60).

1

E.C.H. Keskitalo (*) Department of Social and Economic Geography, Umeå University, 901 87 Umeå, Sweden Forestry in Rural Studies Unit, Department of Forest Management, Swedish University of Agricultural Sciences, 901 83 Umeå, Sweden e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_8, © Springer Science+Business Media, LLC 2011

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national parks in 1909, some five million hectares of the Swedish area has become protected, including 712,000 ha of productive woodland. Today, the terms sustainable forests and biodiversity are not merely catch phrases but in fact, they are two of the major goals of Swedish environmental policy (Lundgren 2009). The significance of forests as providers of ecosystem services and as carbon sinks has also greatly gained relevance recently, particularly in light of the debate on climate change. The role that forests play in setting climate goals has also been noted. The Swedish Climate Committee Report of 2008 argues that Sweden should set an example in global responsibility by establishing ambitious targets. As Sweden has set national targets to reduce the level of emitted greenhouse gases (GHGs) while increasing supplies of renewable energy, biofuels have assumed center stage in political discussions. Energy used for transportation has been perceived as especially problematic. Various regulatory instruments and subsidies have succeeded in advancing the introduction of ethanol (to a lesser extent, biogas and biodiesel) on a large scale in Swedish road transport. Political anticipations for domestically produced ethanol using cellulosic biomass have been high. Since the current levels of GHG emissions most likely will result in climate change even if emissions were to cease altogether today, Sweden has also started to consider what adaptive measures need to be implemented domestically (SOU 2007b: 60). This signifies a change in Swedish policy, as adaptation had previously been considered an issue concerning developing countries. Adaptation has also received attention due to storms such as “Gudrun,” in 2005, which resulted in large storm fellings and created great concern within the forest industry regarding the potential for such storms in the future. The forestry sector plays a pivotal role in both climate change mitigation and adaptation. A series of governmental inquiries have been implemented to assess the role of forests in relation to environmental and energy policies, normally reflecting a consensus standpoint achieved through negotiations between politicians, interest groups, and scientific experts (Johansson 1992). However, the implementation of policy recommendations is often contested, as they challenge established interests in one way or another. This chapter focuses on policy development with regard to climate change policy on mitigation and adaptation, as it applies to Swedish forests. In the first half of the chapter, an outline of Swedish mitigation and adaptation goals and their possible impact on the forest environment is provided. In the second half, the development of motor biofuel production and how it relates to mitigation and established forestry interests is explored. The current debate on biofuel is examined to highlight the extent to which forests constitute a system of multiple value conflicts as well as tradeoffs. As an issue that has over time changed in the way it has been perceived, the biofuel debate can thus serve as an illustration of the ­multiple interests that impact the way in which adaptation and mitigation aims may be implemented. The findings indicate that the multiple-use character of the forests translates to many different and sometimes conflicting plans for its management. Recent developments are likely to increase the focus on forest resources and resource development, with implications for a variety of user groups and Swedish forest politics on a whole.

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Theoretical Background and Methodology This chapter explores mitigation and adaptation to climate change in relevance to forest systems. Mitigation has long been the focal point of climate change policies, including such agendas as the goal of an oil-free society and an increased interest in alternative fuels, such as biofuels. These are focused upon here as important, forestrelated regulatory measures. The forests’ ability to capture carbon dioxide (CO2) within its growing biomass has seldom been calculated as part of formal mitigation policy. Adaptation offers an additional dimension to mitigation by addressing the realization that even if emissions were to suddenly cease, the environment would still need to adapt to the effects of the greenhouse gases already emitted (cf. Smit and Wandel 2006). Adaptation does not suggest “giving up on mitigation” but rather, it constitutes a necessary addition to mitigation policies. Some effects of the projected climate change with regard to forests include a longer growing season, heat stress or drought, winter thaws and re-freezing in the spring and an increased likelihood of extreme weather events, such as storms (Wolf et al. 2008; Inter-governmental Panel on Climate Change [IPCC] 2007). While increases in wind and storms as a result of climate change are somewhat contested and will not take place in all areas, Blennow et al. (2010) note that forest will become increasingly sensitive to wind damage in the future under management rules of today, and that risks exist for increases in average and extreme wind speeds in particular in southern Sweden (cf. Blennow and Olofsson 2008). With regard to all these concerns, forest companies and owners, including the state, must make improvements in planning and implement major adaptations to avoid such consequences as well as to mitigate climate change. Adaptation measures may include altering the forest composition by selecting alternative plant materials and planting diversified stands rather than monocultures. The use of forest for a number of different purposes, such as biofuel, will impact the choices that are made for instance with regard to adaptation measures. The chapter draws upon a variety of published sources, including a series of government and mass media reports. Chief among these are governmental committees or investigations (so-called Swedish Government Official Reports, abbreviated SOU and further referred to by year and report number) that target mitigation and adaptation in particular, as well as government reports that discuss biofuels. Sections concerning the biofuel debate also draw upon media reports that highlight the uncertain and contested nature of motor biofuels and include statements from experts and stakeholders alike. Until recently, climate change adaptation in the forest industry had received relatively limited attention. As relatively little had been published on forestry companies’ own strategies for adaptation to climate change at the time of writing, the chapter supplements government sources with information on strategies and measures expressed at a workshop on forest companies’ and forest owners’ adaptive and mitigative strategies, held in preparation of the development of legal measures on adaptation, in February 2009 at the Royal Swedish Academy for Agriculture and Forestry (KSLA) in Stockholm.

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Limitations to the impacts and systems described in this chapter include other possible wide-ranging effects of climate change than those directly targeted for ­forest systems, such as a rise in sea levels and increases in flooding, which are not addressed per se. While forests ultimately impact many different industries and interests indirectly, the chapter will predominantly focus on forestry alone rather than include multi-use forest practices (such as local use).

Swedish Mitigation Goals in Relation to Forests Traditionally, Sweden’s climate policy has focused on mitigation, as documents issued by the Swedish Ministry of Sustainable Development (2005) and the Swedish Government (2001, 2005) reveal. The key document outlining current mitigation goals is the Climate Committee report Swedish Climate Politics (SOU 2008: 24) and the subsequent Climate and Energy Bill issued in March 2009 (Government Offices of Sweden 2009). The Climate Committee report outlines Sweden’s goals – as a member of the European Union – in setting targets for decreasing GHG levels by 30% of 1990 levels by the year 2020, without compensating for carbon sinks. In order to assess the probability of reaching this goal, the government intends to present annual progress reports to Parliament on Swedish GHG emissions in total and per sector. A more comprehensive report will be provided every 4 years. Targets for the period 2008–2012 remain at the previously set level of at least 4% below 1990 emissions, without compensating for carbon sinks or flexible mechanisms. The goal for 2050 is a 75–90% reduction in GHG emissions, compared to 1990 levels. It has been suggested that these goals be subject to reconsideration by the government in accordance with eventual global changes that may impact the formulation of targets, calculations, and future results. Sweden’s action plan includes international cooperation paired with successive and continuous domestic responses to revise energy policy, planning, and infrastructure. Among these are improved cross-sectoral actions and financial incentives, decreasing emissions permitted under the EU system for CO2 allowances and reducing emissions in sectors not yet included within that system. The importance of forests and forest-based products is often discussed in terms of carbon sinks: CO2 is largely bound in carbon sinks within growing forest and ground vegetation, while also simultaneously being emitted from agricultural soils (e.g., dried-up lake beds and peat moss). CO2 is additionally bound in wood, pulp, and paper products. In 2006, an estimated 70 million tones of CO2 was bound in such products. However, carbon sinks are notoriously difficult to assess and require data on carbon flow to and from the forest, future logging quotas, the dynamics of peat soils (where “peat” is currently defined by the EU as a fossil fuel and thus not included in carbon sink dynamics) and the impact of storms and pests. Furthermore, carbon sinks may impact biological diversity either positively or negatively, depending on how future policies are developed. Under the UNFCCC (United Nations Framework Convention on Climate Change), carbon sinks should be promoted and countries under the Kyoto Protocol can include CO2 storage within carbon sinks

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under certain rules (SOU 2008: 24). Since Sweden has relatively low GHG ­emissions but large carbon sinks and a substantial forest industry, the report acknowledges that the development of carbon sink regulations will have an especially significant impact for the country (SOU 2008: 24). In addition to this foci, the Forest Bill states that the Swedish Forest Agency should develop a forum for dispensing forest management advice in order to support the role of forestry as a bioenergy producer; limit GHG emissions from forest land and improve its function as a carbon sink (Swedish Ministry of Agriculture 2007). The Climate and Energy Bill of 2009 emphasizes bioenergy, including biofuels, as a significant component of Swedish climate strategy and the 2009 Government Budget Bill allotted nearly SEK 900 million [approx. 100 million euro] over a 3-year period to support the development of second-generation biofuels. Debates exist on whether an increased focus on biological production deduces from other uses of the wood material. As a result, the Swedish Forest Agency and the Swedish Environmental Protection Agency have concluded that bioenergy production should not be promoted at the cost of other environmental considerations. The Swedish Forest Agency and the Royal Swedish Academy of Agriculture and Forestry have suggested that the focus on developing biofuel production should be extended to developing a more extensive knowledge on increased wood production (Swedish Ministry of Agriculture 2007). Of course, more can be and is being done in mitigation efforts, including rationalizing energy use, developing renewable energy sources (wind power), and revising transportation systems (switching from road to railway goods transport). Regardless of how much energy Sweden exerts on mitigation, however, it will be impacted by the effects of climate change and must be prepared also to adapt accordingly.

The Impact of Climate Change on Swedish Forests The observable impacts of climate change are evidenced by some unusually warm recent years, such as 2006 and 2008. The Commission on Climate and Vulnerability notes that the last 15 years have seen unusually large increases in temperatures and precipitation (SOU 2007b: 60). There have also been severe storms, such as “Gudrun” in January 2005 and “Per” in January 2007; hitherto rare extreme events that may potentially become more common in the future under further climate change effects. Gudrun alone felled some 75 million m3 of timber – twice that of the hurricanes of 1969 and equivalent to the national average for an entire year of clearing. Gudrun also caused major infrastructural damage, including disruptions in electronic, rail and road communications, costing an estimated SEK 21 billion [approx. two billion euro], whereof half was forest industry related. Here, unseasonably mild weather and a lack of ground frost allowed Gudrun to wreak great havoc in the forests, as did the forest structure, considering the forests’ composition including large areas of vulnerable spruce species. Hurricane Per, in turn, felled about 16 million m3 of timber in southern Sweden (SOU 2007b: 60).

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Climate change is expected to have both positive and negative effects on forests. Projections indicate a warmer climate, an increase in winter precipitation, more frequent extreme weather events, pest attacks, a longer vegetation season, the emergence of new tree species and the northward expansion of existing broadleaf forests, like oak and beech. Pine, spruce, and birch growth rates may also increase to levels 20–40% greater than today. The largest growth rate increase is expected to occur in the north, whereas drier summers may negatively impact spruce growth in southern Sweden. According to the Commission on Climate and Vulnerability, “spruce and birch will become more competitive compared to pine in Norrland, while the reverse is true in Svealand and Götaland. In the south of the country, drier summers will mean that an increase in growth as regards spruce will change to a decrease during the latter part of the century” (SOU 2007b: 60, p. 328). Increased growth may result in increased earnings for the forest industry, which could be further amplified by shorter rotation periods and the cultivation of species that are currently restricted to a northern limit, such as oak, beech, and hybrid aspen and poplar. To restrict damage incurred by grazing wild game (expected to increase in number with the change in climate), costly fencing may need to be erected. Conditions for non-native conifers such as hybrid larch, Sitka spruce, and Douglas fir may improve. However, with increased growth, conifer wood density will decrease, potentially resulting in poorer forest quality. While oak and pine will likely benefit from the reduced summer precipitation in southern Sweden, droughtsensitive species, such as spruce and birch, will most probably suffer adverse effects (SOU 2007b: 60). The Commission on Climate and Vulnerability states that the majority of damage to forests may be incurred by insects, fungi, grazing animals, storm winds, and heavy, wet snow. Rapid growth resulting in taller trees may increase stormfellings, even if the potential increase in storm activity should fail to materialize. Extreme weather events and storms, decreases in ground frost and increasingly wet winters will also make logging more difficult in southern Sweden, mainly by impeding access to winter roads and logging sites. Spruce, the species with the highest production value, is especially threatened, particularly by increased storm and pest damage, as well as by drought. With warmer temperatures, root rot in spruce, caused by the bracket fungus, may also increase and spread throughout much of the country, requiring redoubled forest management efforts, particularly during the thinning season. Pine weevil and spruce bark beetle infestations may increase, particularly as the spruce bark beetle may be able to swarm several times a year. Furthermore, migrations of the pine processionary moth and pine wood nematode, currently not native to Sweden, could potentially occur in a warmer climate. Finally, in southern Sweden, the cost of combating forest fires could rise from SEK seven to eight ­million annually, to as much as SEK 200–300 million [approx. up to 30 million euro] (SOU 2007b: 60). In seminars preceding legal actions as a result of the Commission on Climate and Vulnerability, representatives of the Swedish forest industry confirm the possibility of these risks, further highlighting the necessity of taking immediate mitigative and adaptive action (KSLA 2009). Forest industry representatives have forewarned that wetter winter ground cover may result in larger windfall hazards and that shorter winters may potentially result in higher survival of game, hence increasing grazing

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damage (KSLA 2009). In addition, previous studies of stakeholders’ perceptions ­concerning weather and climate change demonstrate that some forest industry veterans note differences between present conditions and those they experienced at the beginning of their careers, 20 or 30  years ago. In a study conducted in southern Norrbotten County, interviewees noted warmer temperatures, less snowfall due to changing wind patterns and “shifts” in the seasons. For instance, while Easter has here traditionally marked the cut-off date for using winter roads, thaws were noted to have occurred several times in the middle of winter since 2000, in some cases rendering the transport of logged wood out of the area impossible. Similar changes have also been noted in autumn. This limits the reliability to predicting when winter roads and soft ground will be sufficiently frozen to offer access for logging (Keskitalo 2008a).

A Structure for Adapting to Climate Change While the Swedish perspective on climate change adaptation has predominantly focused on developing countries (Swedish Ministry of the Environment 2008), in recent years, Sweden has also begun discussing adaptation measures that need to be implemented domestically. To date, the Commission on Climate and Vulnerability report (SOU 2007: 60, October 2007) remains the most significant governmental source of information regarding climate change risks in Sweden and provided a basis for adaptation proposals included in the 2009 “Bill on An Integrated Climate and Energy Policy” (Government Offices of Sweden 2009). The Commission establishes a structure for responding to adaptation challenges in Sweden. It suggests that funding for climate change adaptation should include large-scale investments aimed at minimizing vulnerability to extreme weather events and at attaining long-term change. Furthermore, it suggests that the State Meteoro­ logical Institute (SMHI) should be responsible for knowledge production regarding climate change, the Swedish Environmental Protection Agency should follow and report on issues regarding climate change adaptation and all sector agencies, including the Swedish Forest Agency, should be responsible for adapting to climate change in their own particular areas of expertise (SOU 2007b: 60). The report argues that adaptation measures need to be initiated immediately and in specific locales, given the risks associated with flooding and soil erosion in many areas. The County Administrative Boards should play a major role in providing support to municipalities by undertaking regional analyses of climate change impacts, summarizing and disseminating information, following up on sectoral and private adaptation work, and initiating the development of catchment level groups. Climate change issues need to be included in forest-related training and education and in the communication between individual forest owners and the Swedish Forest Agency’s regional organizations. The Commission also states, “the deregulated forestry policy means that, to a large extent, it is the forest owners’ own decisions now and over the next few decades that will govern the state of the forest this century, which is extremely important for one of our most important business sectors as well as for other social functions” (SOU 2007b: 60, pp. 340–341).

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Furthermore, the investigation indicates the need for more extensive knowledge regarding local climate variations; methods of risk-reduction (including matching various tree species with suitable forestation areas); adaptive measures for practical forestry; broadleaf tree management of mixed stands and new species; methods of determining wind and fire damage and tools for minimizing such damage and adaptation to the dynamics of pest and game population increases. Technical innovation to minimize logging damage to unfrozen ground and prevent negative impacts to biodiversity is also requested. To this end, the Commission on Climate and Vulnerability (SOU 2007: 60) ­suggested several damage control measures for implementation at Swedish Forest Agency level: • Swedish Forest Agency instructions should be amended to include the use of adaptive measures in a changed climate. • The Agency should be commissioned to lead a review of the Forestry Act, including all associated directives and general advice as they pertain to climate change and further assess whether the environmental objective “Sustainable Forests” is in any way affected by climate change parameters. • Together, with the Swedish University of Agricultural Sciences, the Agency should develop a system for monitoring and evaluating forest damage and climate-related parameters costs, including game, storms and insects, and establish trial nurseries for tree species selection and management. • The Agency should undertake a climate change awareness-raising campaign aimed at forest owners (allotting it SEK 10 million, or approx. 1 million euro, over 3 years).

Developing Forest Adaptation Measures The Commission on Climate and Vulnerability included several sub-reports that examined forests and provided a broader understanding of potential adaptation measures than was offered by the Commission alone. It is noted that forest management in particular plays a large role in determining the sensitivity of forest to climate change impacts, as shorter rotation periods, early thinning, strategic logging to avoid wind exposed edges, together with efforts to combat spruce bark beetle infestations through the removal of dead wood and the setting of traps, could all help. Focusing intensely on pine, mixed stands, and oak in southern Sweden could be used to counter drought risk, increase variation and dilute other risk factors. In addition, the Commission suggests that current insurance policies against fire and wind damage are in need of immediate re-evaluation, as they seldom provide adequate protection. In summarizing these needs for adaptation, the Commission on Climate and Vulnerability notes that: There is considerable uncertainty surrounding exactly how the climate will change and future demand for different tree species. Landowners must however be prepared for the fact that the risks will increase over time, particularly in traditional forestry targeted at ­maximum production. For many, the increased production will make up for the damage, although individual landowners may be seriously affected (SOU 2007b: 60, p. 336).

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As a result, means of increasing variation and minimizing risks are focused upon. These could include, planting mixed stands of conifers, birch, pine, and oak on drier land or planting rapidly growing species in some stands, as well as increasing variation in thinning and felling regimes and including continuity forestry in some areas. Knowledge development is also necessary, as “[t]here is insufficient knowledge about optimum management, mixed stands and species other than spruce and pine, however, and this needs to be developed in order to achieve good-quality, widerranging advice” (SOU 2007b: 60, p. 337). Consequently, the investigation concludes that there is: a need for an overhaul of the rules and recommendations as regards the choice of tree species, provenance choice, clearing, thinning and final felling, as well as for fertilizing, the use of non-native tree species, rotation periods and rules aimed at minimizing pests. This overhaul should be targeted at strengthening the potential to achieve the forest policy’s two objectives of a good yield and the protection of biodiversity in sustainable forestry in a changed climate (SOU 2007b: 60, p. 337).

Game management also requires adjustments. By increasing hunting quotas, for instance, seedlings and young trees could be protected. Allowing grazing game greater access to broad-leaf forests would result in less damage to young trees. Preventative measures hindering forest fires need to be further developed, as does monitoring for damage caused by storms, insects, fungi, grazing, logging, and transport (SOU 2007b: 60). In relation to this point, while a previous Forest Bill does not target adaptation directly, it suggests that the Swedish Forest Agency should evaluate the limitations for Contorta pine, given its proven resilience against pests (Swedish Ministry of Agriculture 2007). The inflated costs stemming from accessibility problems requiring the use of technical aids, the clearing of ditches and the development of new forest roads could be largely minimized simply by increasing present forest stocks (SOU 2007b: 60). The investigation also states that the Swedish Road Administration needs to consider climate change when planning road maintenance. Many of these potential measures were presented by government representation at the conference at the Royal Swedish Academy for Agriculture and Forestry in February 2009. Participating forest industry representatives generally described adaptation measures such as these as sound and noted that some of the proposed changes were already being implemented, for instance in test areas. Among the adaptations being undertaken or tried by some of the parties were development and testing of new plant material, including exotic species and also adjustment of silvicultural and management programs to a shorter harvesting cycles in order to minimize storm damage. In addition, adaptations underway were improving winter roads so that they remain accessible through warmer weather conditions, and development of forestry machinery that is operable on un-frozen, waterlogged ground (KSLA 2009). To combat some of the potential environmental impacts resulting from the implementation of these measures (such as higher density forest stands and the introduction of exotic species), participants suggested that environmental consideration could be increased through the maintenance of buffer zones and control of invasive species. For some species, climate change would also potentially result in changes in migration paths that deviate from natural biological frameworks, which could in turn require modifications not only to hunting and game management but changes

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in the regulative framework for exotic species in order to support mixed species stands. One participant stressed that the impact of climate change on forestry would lead to a general increase in the importance of planning, including logistics, risk analyses, fire, and other crisis management, monitoring and adaptive management (KSLA 2009). In general, forestry would thus need to include climate change as a parameter in forest planning. One possible consequence of this would be that planning for optimum production would be less important than planning for optimum resilience or robustness to be able to cope with disturbance, for instance by increasing diversity and limiting risks. In previous research on how adaptation influences the forest industry and its stakeholders (Keskitalo 2008a, b), it has been noted that the industry recognizes the damage that pests can cause, changes in temperature and precipitation, seasonal shifts, as well as the impacts of increased tree growth and potential shifts in benefited tree species. Research on regional and local levels in selected cases (interviews conducted 2003–2005) highlighted adaptations to improve site accessibility impacted by thawing and effects on winter roads. Adaptations in these cases are thus targeted effects with direct impact on productivity. Adaptation to long-term changes, such as forest growth rate and associated changes in quality or benefited species, were seen in the context of a market framework and were thus less discussed. Some interviewees for instance mentioned that potentially lower prices for poorer quality could be offset by higher production levels due to increased tree growth (Keskitalo 2008a, b). Considering the emphasis currently given to adaptation, it remains to be seen whether adaptation suggestions with a long-term scope, such as those suggested by major forest stakeholders at the 2009 conference (KSLA 2009), will become implemented more broadly as well as trickle down to be incorporated into the planning regimes of individual forest owners.

The Case of Biofuels: Forests as Providers of Renewable Bioenergy and Transport Biofuels Swedish mitigation and adaptation goals in relation to forestry and the forest environment may thus generally impact the ways in which forest production is undertaken and potentially come to require changes in products. This makes biofuels an increasingly important forest product and a relevant case to highlight the particular problems in changing the forestry production system. In Sweden, contrary to the food crop-based production of ethanol common to many parts of the world, ethanol production has predominantly been based on cellulosic feedstock. In the first half of the twentieth century, pulp industry waste was converted into sulfite alcohol. This process received state support and the alcohol was used as an alternative form of emergency energy throughout the two World Wars. Now, in the first decade of the twenty-first century, concerns about global warming have propelled ethanol to make a comeback. Once again, lignocellulose aspires to replace oil,

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e­ specially in the heavily oil-dependent transportation sector and great expectations are related to the burgeoning production of so-called “second-generation” cellulosic biofuels. In Sweden, the motive of energy security (reduced oil dependence), environmental concerns (primarily climate change), and financial gains (new industrial opportunities) have directly been connected to wood and forests – hence the important roles played by forestry and pulp-and-paper industry actors. Biomass (i.e., plant and animal matter) may be described as stored or captured solar energy, produced by photosynthesis. Bioenergy, furthermore, is the utilization of biomass to produce heat, electricity or motor fuel. Since the 1970s, different governmental support systems have favored a transition from oil to alternative energy sources, thereby reducing oil’s share of the total energy supply from 75% in 1970 to 31% in 2004 (SOU 2007a:36). Meanwhile, biofuels have increased their share, accounting for about 20% of Sweden’s total energy supply in 2008 (Swedish Energy Agency 2009b). Wood fuels (chips, pellets, sawdust), forestry residue (stumps, bark, branches, roots), pulp-and-paper by-products, energy crops, fuel wood, peat, animal waste, and sewage sludge, account for the bulk of Swedish biofuels (Formas fokuserar 2007). Nuclear and hydro-electric power still dominate Swedish electricity production but the use of biofuels has become more common in district heating systems and combined heat and power plants (CHPs). Different conversion technologies – thermo chemical, biochemical, and mechanical – are used to process biomass into solid, liquid or gaseous fuels (McCormick 2007). In the field of transport biofuels, so-called “first-generation” biofuels are produced using sugar-, starch- or oil-plant feedstocks. “Second-generation” biofuels, on the other hand, use lignocellulosic feedstocks, such as forestry residue, pulp-and-paper mill waste or energy crops (e.g., willow or eucalyptus). However, what constitutes a first- or second- or even third-generation motor biofuel is not always clear. According to some, it is not the feedstock itself but the conversion technique used that sets first-generation biofuels apart from second-generation ones.2 Furthermore, referring to the utilization of cellulose biomass as such or the application of gasification techniques in the conversion stage as something “new” is somewhat misleading. In the 1920s and 1930s, many European countries, as well as the USA, championed ethanol and witnessed the introduction of different commercial blends (usually varying proportions of ethanol and gasoline), such as Swedish “Lättbentyl.” At the time, Swedish ethanol was being derived from pulp mill waste, so-called sulfite alcohol (Sundin 2007; Persson 2007). Gasification techniques have a long history of being used in the conversion of coal and oil (Sandén and Jonasson 2005). Biofuels have the potential to replace oil in the heating, electricity, and transportation sectors. Unlike fossil fuels, they have been considered to be environmentally friendly, mostly because they constitute renewable energy sources. Furthermore, as the carbon absorbed by trees offsets the emissions produced from burning them, wood biomass is often considered to be “carbon neutral.” In addition to these First-generation methods use traditional ways of fermentation or esterfication, whereas secondgeneration methods use different high-tech enzymes, microorganisms or gasification techniques (Jonsson 2007; SOU 2004, p. 133).

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­benefits, biofuels have been associated with enhanced energy security (reduced imports, increased domestic production), economic gains for agriculture, forestry and energy businesses, regional employment opportunities, and techno-scientific export opportunities. Sweden’s efforts to replace fossil fuels with renewable energy sources (in addition to bioenergy, hydro, solar, and wind energy has also been promoted) have been applauded as an example of successfully implemented environmental policy. Evidently, the shift has transpired without jeopardizing economic growth (Government Bill 2008/2009:162). Despite all these advances, the transportation sector has continued to remain problematic, however. Globally, the transportation sector is responsible for about a quarter of all energyrelated greenhouse gas emissions (Worldwatch Institute 2007). On a European level, the EU target of 2003 stipulated that the biofuel share of all transport fuels should reach 2% by 2005 and 5.75% by 2010 (Directive 2003/30/EC). The 2005 target was met only by Germany and Sweden (EuroObserv’Er 2007). In 2008, renewable fuels accounted for 4.9% of all motor fuel used 57% of which was ethanol (Swedish Energy Agency 2009a, b). Early calculations concluded that ethanol boasted many advantages: it could be blended with gasoline, be readily imported, fit the existing infrastructure for fuel supply and above all, it clearly reduced the amount of CO2 emitted by traffic. Various regulatory measures, state subsidies, fiscal measures, grants and incentives were established to support a broad introduction of transport biofuels during the first years of the twenty-first century.3 In May 2009, for example, the new-car market share of so-called “green cars” had continued its steady growth trend and reached about 40% (BilSweden 2009). Despite the steady growth of biofuel, domestic production of renewable motor fuel has so far been modest in Sweden (EuroObserv’Er 2009). Nevertheless, numerous governmental inquiries (conducted in the preparatory stage of making policy proposals), as well as scientific and industrial reports and assessments, have pinpointed second-generation biofuels as holding the key to a fossil fuel-free, sustainable society. These expectations have once again shone the spotlight on Swedish forests in the quest to reconcile a secure energy supply with climate change mitigation. Forests, often referred to as the “green gold” of Sweden, have been considered a national treasure for generations. Lately, the idea that the country is in possession of a resource that is dormant and needs to be roused from its slumber has often surfaced in discussions regarding the use of forests in biofuel production. Cellulosic motor biofuels have long existed within a framework of future visions, potentials, and promises, but it was only during the years following the turn of the century that second-generation biofuels became a serious contender within policy circles. In 1995, a governmental commission concluded that ethanol derived from starchy grain crops could not compete commercially. Research and development aimed at using cellulosic wood fuels instead of grain crops was believed to have the potential Motor biofuels became tax exempt in 2004. New legislation was passed in 2005, making it mandatory for larger gas stations to offer customers at least one biofuel alternative. This resulted in the establishment of numerous ethanol pumps throughout the country. The government also enacted a green car bonus. In many municipalities, green cars were offered free parking or exemption from congestion charges.

3

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to lower production costs (SOU 1995:139).4 According to the Communication Commission of 1997, motor biofuels could at best function as a “safety margin” in reducing CO2 emissions from the transportation sector. Reducing fuel consumption was the predominant method by which large reductions could be envisioned (SOU 1997:35). This viewpoint changed dramatically in the following years and the Oil Commission of 2006, in particular, underscored the importance of domestically produced second-generation cellulosic biofuels.

Promoting Second-Generation Biofuels, Renouncing First-Generation Ones The Oil Commission’s final report, On Our Way to an Oil-Free Sweden, was presented just before the social-democratic government was replaced by the four-party right-wing “alliance,” in the wake of the general elections of 2006. The report preceded the intense media debate on transport biofuels that started to escalate in 2007. The visions and conclusions expressed in the report therefore reflected a less problematic picture than the one that would later represent the official standpoint. The final report suggested a variety of methods to reduce the use of fossil fuels in road traffic by 40–50% by the year 2020, such as increasing the number of energyefficient cars and producing transport biofuels equivalent to 12–14 TWh/year (Oil Commission 2006). The report suggested that the state should support the development of large-scale domestic fuel production from forests and farmland, provide necessary funding for the setup of demo plants, invest in research and development, and promote commercialization. However, one of the commission members, science advisor Christian Azar, did not fully subscribe to the goals and conclusions drawn in the commission report. Besides advocating the import of tropical ethanol free of tariffs, he also expressed doubts as to whether domestic biofuel production of 12–14 TWh/year was realistic. In this perspective, the commission’s target of domestic biofuel production of 12–14 TWh/ year raises certain doubts. Given that first generation biofuels are not likely to reach that target (it would claim half of Sweden’s crop land), something that the commission is well aware of and that it still is uncertain how effective (both in terms of costs and techniques) second generation biofuels will be, there is no reason to commit to such a target (Oil Commission 2006, p. 44).

First-generation biofuels spawned media frenzy. So-called “ecocars” and “ecofuels” became items of debate in 2007–2008. Critical media reports focused primarily on first-generation biofuels and revolved around two different problems: first, how biofuel crops competed with food production and contributed to higher prices, riots and starvation in certain parts of the world and second, their detrimental ­environmental impacts, including deforestation. In light of this, calculating the actual reduction of

4 Different biomass gasification techniques and black liquor gasification were also mentioned as potential contenders.

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GHG emissions no longer seemed as clear-cut as it had previously appeared. The very basis for advocating transport biofuels and their alleged “environmental friendliness” was called into question. In 2007 and 2008, skyrocketing food prices were causing unrest in several developing countries around the world. Jean Ziegler, the UN Special Rapporteur on the right to food, pinpointed European and US biofuel policies as the main cause behind the current food crises. By using dramatic language and calling the use of arable land to make fuel a “crime against humanity” and the rising costs for food a “silent mass murder,” he garnered significant media attention (Ferret 2007; TT Reuters 2008; Environment News Service 2008). He also repeated his demand for a 5-year moratorium on liquid biofuels. Ziegler’s belief that policies for growing agrofuels were to blame for price increases also received support from a World Bank report issued in April 2008 (World Bank 2008). The International Monetary Fund had also previously arrived at similar conclusions (Mercer-Blackman et  al. 2007). Increasingly, a distinction between “good” and “bad” ethanol or biofuel more generally, was coming into play. The issue was no longer a simple matter of replacing fossil fuels with renewable fuels derived from biomass. It suddenly became necessary to closely examine the whole production chain, from well to wheel, in order to choose the right biofuel for the job.5 Distinguishing “sustainable” biofuels from “non-sustainable” ones has become a priority within scientific and political circles. This in itself indicated that it could no longer be taken for granted that biofuels were, by themselves, sustainable, or directly contributing to sustainable development. The British Royal Society issued a report in January 2008 that assessed some of the future prospects and challenges facing sustainable biofuels. According to the report, biofuels need to be produced under specific conditions that take into account not only local but also regional and global impacts, assess the implications of land use (including unintended consequences) and deal with the environmental and economic aspects of “the complete cycle – growth of the plant, transport to the refinery, the refining process itself (including potential by-products such as specialty chemicals), wastes produced, distribution of the resultant fuel to consumers, end use, and potential for pollution” (Royal Society 2008). Only then could the impact of biofuels (and hence their sustainability) be fully determined. Following these assessments, anticipations for second-generation biofuels – believed to be produced more efficiently (the energy in/energy out balance), reduce carbon emissions more dramatically and above all, not compete with food production – became even greater. In 2009, the EU also amended the biofuel directive of 2003 (Directive 2009/28 EC). Most of the objections to transport biofuels concerned first-generation varieties derived from food crops such as sugar cane, corn, and wheat. Since second-­ generation biofuels are derived from feedstock not traditionally intended for human 5 A quick glance at some recent titles is illustrative: “Growing Fuel: The Wrong Way, The Right Way” (2007); “The Clean Energy Scam” (2008); Biofuels: Is the Cure Worse than the Disease? (2007); Another Inconvenient Truth: How Biofuel Policies are Deepening Poverty and Accelerating Climate Change (2008).

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consumption, they have seldom been accused of causing or aggravating food ­insecurity or adversely affecting food prices in developing nations. If cultivation becomes necessary, cellulosic energy crops are able to grow on marginal, unused land and thus, do not compete with other forms of land use and cultivation (Börjesson et al. 2008). Political reactions to the biofuel debate and the increasing importance of distinguishing first-generation biofuels from second-generation ones and sustainable varieties from unsustainable ones became apparent in the discussions preceding the Climate and Energy Bill of 2009. While recognizing the importance of motor biofuels in efforts to transform the transportation system, the government emphasized the significance of arriving at globally accepted sustainability criteria for their production (Government Bill 2008/2009:162). Nevertheless, the belief that second-generation biofuels could benefit national competitiveness and export and considering that Sweden was purportedly in the “frontline” of biofuel technological development, the 2009 Government Budget Bill allotted almost SEK 900 million [approx. 100 million Euro] to the development of second-generation biofuels over a 3-year period (Government Bill 2008/2009:1). Consequently, a new goal was ­formulated: the Swedish automobile fleet would be independent of fossil fuels by 2030 (Government Bill 2008/2009:162).

Conflicting Interests Although the Swedish government continues to support the introduction and development of second-generation biofuels (alongside other measures), these fuels have not emerged from the biofuel debate unscathed (Zetterberg 2009; Frank et al. 2009). Several matters have prompted negotiations – the primary one pertaining to the ­supposed limits and potential growth of cellulosic biomass. Using cellulosic biomass to produce bioenergy, especially transport fuel, has raised concerns regarding the availability of biomass, as such. If the biomass demand is to increase in the future – as many national and international environmental and energy policy agreements suggest – will there be enough biomass to meet the demand? The emphasis on biomass as a renewable resource had temporarily clouded the fact that it is not an unlimited resource. Many (but not all) current controversies pertaining to cellulosic biofuels revolve around the limits or potentials of forests as providers of bioenergy. Some environmental organization’s caution against enacting policies that increase the global demand for forest feedstock is due to the fact that deforestation is a serious environmental threat in many parts of the world. Introducing just one new player into the industrial exploitation of global forests could seriously compromise the forests’ capacity as carbon sinks, hence adding to the problem of detrimental climate change instead of mitigating it (Smolker et al. 2008). The argument that the problem of deforestation needs to be solved prior to any large-scale production of lignocellulosic ethanol be undertaken, for instance, has also been voiced by Swedish forest industry representatives. Leif Brodén, chairman of the Swedish Forest Industry Federation, has publicly reiterated that Swedish forests store more

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than double the amount of carbon emitted in Sweden (Gyllenstierna 2008). According to Brodén, the primary role of forests should therefore remain as carbon capturers and not motor fuel producers. The forest industry has repeatedly cautioned against what it deems as a detrimental competition between established timber, pulp-and-paper industries, and ­bioenergy needs.6 Thomas Kåberger, former chairman of the Swedish Bioenergy Association and current director-general of the Swedish Energy Agency, has tried to downplay the negative effects of increased competition for forest fiber (Kåberger 2008). However, the fear seems deeply entrenched, as evidenced in the Swedish Forest Industries Federation EU Manifesto of 2009: First goods, then bioenergy. Replacing fossil energy with renewables is important for the climate. However, misdirected objectives for increased utilization of bioenergy can lead to production of biofuels taking precedence over production of more highly processed and climate-friendly products such as sawn wood products, paper, and cardboard. The EU’s support for renewable energy must not militate against effective use of wood for products. (Swedish Forest Industries Federation 2009, p. 11)

However, the forest industry is still eager to be taken seriously as a reliable biofuel provider and believes that the extraction of biofuel from forests should increase. “Reducing dependence on fossil fuels will be a key mission in the switch to a sustainable society. By increasing the extraction of biofuel from the forest from the current 7 TWh by an additional 20 TWh annually, the forest industry will be making a valuable contribution” (Swedish Forest Industries Federation 2008). These statements echo the opinions of the International Council of Forest and Paper Associations [ICFPA], who announced that carbon storage, paper recycling, and wooden building material are crucial for seeing the industry as “essential to combating climate change” (ICFPA 2008).

Conclusion Although there is a general consensus on the severity, scope, and developmental pace of climate change, the means to combat climate change and its effects through policies for mitigation and adaptation in Sweden’s forest sector are manifold. The suggestions expressed in these policies are relatively comprehensive and attest to the fact that mitigation (and to some extent adaptation) connected to climate change constitutes a high priority in Swedish society. The multiple-use character of the forest means, however, that many different – and often conflicting – plans exist for its use and management. On the one hand, the forest is looked upon as a provider of wood, biodiversity, and ecosystem ­services and as a significant carbon sink, which needs to be carefully managed in order to grow in a sustainable manner. On the other hand, the forest is viewed as a potential resource for a large-scale domestic production of second-generation biofuels.

6 A review of the forest industry’s periodical Skog & Industri (previously Skogsindustrierna) in the last 9 years indicates a skeptical or highly ambivalent attitude toward rising biofuel demands.

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For some, this scenario may appear like a “win-win” situation but it may just as easily prove to be an unsolvable dilemma. The biofuel case indicates that while biofuels may ultimately replace some fossil fuels, such efforts may come at the cost of more intensive forestry practices and harvesting. These may in turn have consequences for implementing some of the adaptation measures suggested as relevant, for example, by the Commission on Climate and Vulnerability.7 In addition, so far, it remains unclear to what extent and depth adaptation measures are integrated in planning over large areas and to what extent the measures may trickle down to small-scale forest owners. Measures such as widespread awareness-raising campaigns and integration into planning by forest owners’ associations, for instance, may be required in order to ensure effective adaptation to future climate change impacts. Such tensions between different policies and interests are likely to increase the focus on forest resources and resource development, with implications for ­different user groups and Swedish forest policy in general. Acknowledgments  Portions of this text were initially compiled for a preliminary report under a EU COST-Action on Forests project FP0703 on climate change impacts, adaptation, and mitigation in European forests, later included in a working paper within the research program “Future Forests” (Ellison and Keskitalo 2009). Other parts were written within the research project “The Fuel of the Future?” (funded by the Swedish Research Council Formas). The research program “Future Forests” (funded by Mistra, participating universities, and the Swedish forest industry) has provided the funding for the re-working of these contributions into the present chapter.

References BilSweden. (2009). Press release 1 June 2009, data published on the website: http://www.bilsweden. se/web/Nedgangen_pa_bilmarknaden_fortsatter.aspx Formas fokuserar. (2007). Bioenergi – till vad och hur mycket?, Formas: Stockholm. Doornbosch, Richard and Steenblik, Ronald. (2007). Biofuels: Is the Cure Worse than the Disease? Round Table on Sustainable Development. OECD: Paris. Worldwatch Institute (2007). Biofuels for Transport: Global Potential and Implications for Sustainable Energy and Agriculture. Worldwatch Institute: London & Sterling, VA. Blennow, K. & Olofsson, E. (2008). “The probability of wind damage in forestry under a changed wind climate”, Climatic Change, 87, 347–360. Blennow, K., M. Andersson, J. Bergh, O. Sallnäs, E. Olofsson, (2010). “Potential climate change impacts on the probability of wind damage in a south Swedish forest”, Climatic Change, 99, 261–278. Börjesson, Pål, et al. (2008). Hållbara drivmedel – finns de?, Rapport nr 66, Miljö- och energisystem, LTH: Lund.

In the case of motor biofuels, it should be clear that state support in terms of research and development, funding, subsidies, favorable regulations, tax exemptions, etc., will become increasingly controversial if the transition from first- to second-generation biofuels takes longer than predicted, if resistance to first-generation biofuels spills over to second-generation biofuels and if secondgeneration biofuels fail to deliver full-scale solutions that manage to stand the test of market competition. In their article, Ullmanen et al. (2009) expect what they call the Swedish biofuel “niche protection” to be discontinued due to the growing strength of a global “anti-biofuel discourse.” 7

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Commission on Climate and Vulnerability. (2007). Sweden facing climate change – threats and opportunities. Swedish Government Report SOU 2007: 60. Stockholm: Swedish Government. Directive 2003/30/EC of 8 May 2003 of the European Parliament and the Council on the promotion of the use of biofuels or other renewable fuels for transport. 17 May 2003. http://eur-lex. europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:123:0042:0042:EN:PDF Directive 2009/28/EC of 23 April 2009 of the European Parliament and the Council on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC. 5 June 2009 http://eur-lex.europa.eu/LexUriServ/ LexUriServ.do?uri=OJ:L:2009:140:0016:0062:en:PDF Ellison, D., Keskitalo, C. (2009). “Climate politics and forestry: On the multi-level governance of Swedish forests”. Drivers Working Paper for the MISTRA program, Future Forests: Sustainable Strategies under Uncertainty and Risk. Environment News Service (2008). “UN: Biofuel Production ‘Criminal Path’ to Global Food Crisis”, 28 April 2008. Retrieved from www.ens-newswire.com on October 14 2008. EuroObserv’Er, Biofuels Barometer – May 2007. http://www.energies-renouvelables.org/observ-er/ stat_baro/observ/baro179_b.pdf EuroObserv’Er, Biofuels Barometer – July 2009. http://www.eurobserv-er.org/pdf/baro192.pdf Ferret, Grant. (2007). “Biofuels ‘Crime Against Humanity’”, BBC News. 27 October 2007. Frank, H. et al. (2009). “Orealistiskt mål för biobränslen”, Svenska Dagbladet, May 28 2009. Government Bill 2008/09:01, Putting Sweden to Work: Safeguarding Welfare. Stockholm. Government Offices of Sweden (2009). En sammanhållen klimat- och energipolitik. Klimat. (Regeringens proposition 2008/09:162. [Government Bill 2008/09:162]). Stockholm: Government Offices of Sweden. National Geographic. (2007). Growing fuel: The wrong way, the right way, National Geographic, 212 October. Grunwald, M. (2008). The clean energy scam. Time. 27 March 2008. Gyllenstierna, T. (2008). “Räkna med skogens värde: Leif Brodén, ny ordförande för skogsindustrierna”, Skog & Industri, no. 2. ICFPA statements, “The Forest Products Industry is essential to combating Climate Change”, December 6, 2008. IPCC. (2007). Climate Change 2007: Impacts, Adaptation and Vulnerability. Cambridge: Cambridge Univ. Press. Johansson, J. (1992). Det statliga kommittéväsendet: Kunskap, kontroll, konsensus. Stockholm University: Stockholm. Jonsson, P. (2007). Biodrivmedel: En litteraturöversikt, VTI Report no. 563. VTI: Linköping. Keskitalo, E. C. H., (2008a). “Vulnerability and adaptive capacity in forestry in northern Europe: a Swedish case study”. Climatic Change, 87, 219–234. Keskitalo, E. C. H. (2008b). Climate Change and Globalization in the Arctic: An Integrated Approach to Vulnerability Assessment. London: Earthscan Publications Ltd. KSLA. (2009). Presentations at Seminar”Vilka beslut fattas idag inom skogssektorn för att möta klimatförändringarna?” (including presentations from Sveaskog, Norra skogsägarna, Södra skogsägarna, Stora Enso, Holmen skog, Skogsstyrelsen, Miljödepartementet, WWF, Svenska jägareförbundet, Svenskt friluftsliv). KSLA, Stockholm, February 5, 2009. Kåberger, T. (2008). Bioenergi inget hot mot industrin. Tidningen SkogsVärden, no 3. Oxfam International. (2008). Another inconvenient truth, how biofuel policies are deepening poverty and acceleration climate change. Oxfam Briefing Paper 114. Oxfam: UK. McCormick, K. (2007). Advancing bioenergy in Europe: Exploring bioenergy systems and sociopolitical issues. Lund University: Lund. Mercer-Blackman, V., Samiei, H., Cheng, K. (2007). Biofuel demand pushes up food prices. IMFSurvey Magazine: IMF Research.17 October 2007. http://www.imf.org/external/pubs/ft/ survey/so/2007/RES1017A.htm. Lundgren L.J. (ed.) (2009). Naturvård bortom 2009: Reflektioner med anledning av ett jubileum. Kassandra: Brottby. Persson, B. (2007). Sulfitsprit: Förhoppningar och besvikelser under 100 år. DAUS Tryck och Media: Bjästa.

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Kommissionen mot oljeberoende (2006). På väg mot ett oljefritt Sverige. Oil Commission. June 2006. The Royal Society. (2008). Sustainable biofuels: Prospects and challenges”, Policy document 01/08. London. Sandén, B.A., Jonasson, K.M. (2005). Variety creation, growth and selection dynamics in the early phases of a technological transition: The development of alternative transport fuels in Sweden 1974–2004”, ESA-report 2005:13. Göteborg. Smit, B., Wandel, J. (2006). Adaptation, adaptive capacity and vulnerability. Global Environmental Change, 16, 282–292. Smolker, R., Tokar, B., Petermann, A. (2008). The True Costs of Biofuels: Impacts on Food, Forests, Peoples and the Climate, report from Global Forest Coalition and Global Justice Ecology Project. SOU. (1995: 139) Omställning av energisystemet: Slutbetänkande av Energikommissionen. Report from Governmental commission no. 139. Stockholm. SOU. (1997: 35) Ny kurs i trafikpolitiken: Slutbetänkande av Kommunikationskommittén. Report from Governmental commission no. 35. Stockholm. SOU. (2007: 36) Bioenergi från jordbruket – en växande resurs. Report from Governmental commission no. 36. Stockholm. SOU. (2007: 60) Sweden facing climate change – threats and opportunities. Report from Governmental commission no. 60. Swedish Commission on Climate and Vulnerability. Stockholm. SOU. (2008: 24) Svensk klimatpolitik, Report from Governmental commission no. 24. Stockholm. Sundin, B. (2007). “From waste to opportunity: Ethanol in Sweden during the first half of the 20th century”, Report. Umeå. Swedish Energy Agency. (2009a). Transportsektorns energianvändning 2008, ES 2009:04. Stockholm. Swedish Energy Agency. (2009b). Facts and Figures, Energy in Sweden, ET 2009:29. Stockholm. Swedish Forest Agency. (2008). Swedish Statistical Yearbook of Forestry. Jönköping. Swedish Government. (2001). Sveriges klimatstrategi. Proposition 2001/02:55. Stockholm. Swedish Government. (2005). Nationell klimatpolitik i global samverkan. Regeringens proposition 2005/06:172. Stockholm. Swedish Ministry of Sustainable Development. (2005). Sweden’s fourth national communication on climate change under the United Nations Framework Convention on Climate Change. Ds 2005:55, Stockholm. Swedish Ministry of the Environment. (2008). The Government’s climate policy. April 2008 Information sheet from the Swedish Ministry of the Environment. Stockholm. Swedish Ministry of Agriculture. (2007). Forest Bill 2007/08:108. En skogspolitik i takt med tiden [“Forest Policy in step with the times”]. Stockholm: Ministry of Agriculture. The Swedish Forest Industries Federation. (2008). The Swedish Forest Industries Federation Climate Manifesto: 5 undertakings and 1 demand. Stockholm. The Swedish Forest Industries Federation. (2009). The Swedish Forest Industries Federation’s EU manifesto: Our recommendation to Europe’s leaders and Sweden as the country holding the EU presidency. Stockholm. TT-Reuters (2008). “Hårda ord från FN om höjda matpriser”, 22 April 2008. Ullmanen, J., Verbong, G., Raven, R. (2009). Biofuel developments in Sweden and the Netherlands: Protection and socio-technical change in a long-term perspective. Renewable and Sustainable Energy Review, 13: 1406–1417. Wolf, A.T., Callaghan, V., Larson, K. (2008). “Future changes in vegetation and ecosystem function of the Barents Region”, Climatic Change, 87, 51–73. World Bank Report. (2008). Rising food prices: Policy options and World Bank response. April, 2008. The World Bank: Washington DC. Zetterberg, Lars m.fl., (2009). “Fullt möjligt nå klimatmål”. Svenska Dagbladet, May 19 2009.

Part III

Modeling Local Sustainable Development for the North

Chapter 9

Energy Policy or Forest Policy or Rural Policy? Transition from Fossil to Bioenergy in Finnish Local Heating Systems Taru Peltola

Keywords  Energy production systems • Bioenergy • Local heating systems • Finland

Introduction This chapter explores change in energy production systems. It focuses on a specific case: the introduction and development of small-scale bioenergy heating business concept in Finland since the early 1990s to the present. I will describe how this new concept for bioenergy was introduced to local-level energy production and enabled the replacement of fossil energy sources with renewable energy. The case is thus a positive example of how possibilities for more sustainable energy production are created within rigid technological systems, loaded with institutional, economic and technological momentum. Rather than suggesting a recipe or a model for change towards renewable energy systems, the case presented here discusses the complexity of transition and the possibilities to make interventions in energy production systems. The importance of managing the transition towards renewable energy technologies has grown along the EU targets to tackle climate change by increasing the share of bioenergy. The Finnish case questions the possibility for straightforward governing of technological change. I will argue that the development of bioenergy business concept was possible because two industrial systems, energy production and forestry, became intertwined with each other in a particular way. These sectors were also related to  rural policies which grew from particular social and economic circumstances. The interconnections between sectoral developments offered local actors, such as

T. Peltola (*) Finnish Environment Institute, Joensuu, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_9, © Springer Science+Business Media, LLC 2011

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municipalities, forest owners and rural entrepreneurs, a chance to draw new resources for the development of small-scale energy production activities. The relevance of such grass root efforts to build alternative production systems and to challenge the standard mainstream regimes of energy production and forestry will be discussed in the final section of this chapter. The chapter is based on my thesis (Peltola 2007a) and two research projects on the development of bioenergy in Finland since the 1990s.1 These projects explored regional bioenergy projects (Peltola 2003; Leskinen et al. 2006), heating businesses and timber procurement for energy production (Åkerman et al. 2005, 2010; Peltola 2007b; Peltola and Leskinen 2009), discursive and material practices related to bioenergy (Åkerman 2005; Åkerman et  al. 2010), technology development (Peltola 2005) and public decision making on energy issues at municipal level (Åkerman and Peltola 2002, 2006; Peltola 2007a, b, c). Both national level development paths (e.g., changing discourses and technology development) and a number of local case studies focusing on local energy production histories, decision-making processes and evolving business strategies were analyzed. The research materials included thematic interviews with various groups of actors (small businesses, forestry professionals, power companies, civil servants, ministry officials, engineers and others involved in bioenergy production in various localities in Finland), decision-making documents (e.g., cost–benefit calculations, minutes), policy documents (e.g., guidelines, reports, statements), newspaper material from national and local papers, conference proceedings and reports. For this article, I have complemented the material by collecting written documents and previous studies on the role of bioenergy in Finnish energy policy since the 1980s. Drawing from the pool of this material and the results from previous analyses, I will interpret the bioenergy development from a particular perspective: how to explain and understand change in energy production systems. The research material is used here to name key practices, discourses and policies through which small-scale bioenergy production was enacted as a legitimate and viable form of local energy production.

How to Understand Socio-Technological Transformations? Transformation of technological systems, such as energy production systems, has been widely discussed within science and technology studies. It is frequently argued that technological change is never solely about changes in technical systems, infrastructures and machineries but requires the modification of social networks and The projects “Sustainable use of natural resources in deregulated energy environment system” and “Socio-economic conditions for sustainable use of wood fuel” were funded by the Academy of Finland and carried out at Tampere University, Department of Regional Studies in 1998–2004.

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processes (e.g., MacKenzie and Wajcman 1999; Bijker 1995; Bijker et al. 1987). In particular, the role of institutional inertia in socio-technological transformations has been pointed out. Concepts such as momentum, path dependency and technological push have been employed to grasp the sluggishness or the tendency to ­follow predetermined development paths (Hughes 1995). On the other hand, more recent approaches such as transition management (Geels and Schot 2007; Geels 2004; Smith et  al. 2005) have taken up the challenge to understand how transition towards sustainable production can be managed and supported. Both approaches point out that technology is not autonomous or separate from the rest of the society but develops as a function of social, cultural and economic processes. My analysis of the Finnish small-scale bioenergy business development is sympathetic to these approaches but also challenges them by emphasizing that change can take place as a result of many interrelated and unintended developments. Most importantly, the case of small heating businesses challenges the view that technological change is a function of a particular technological regime or paradigm that sets rules for rational choice. The case exemplifies a top-down managed change within one sector. Yet, the top-down processes were not unimportant. The transition management debate has rightly pointed out that changes often take place as a result of multi-level developments. While attributing paradigm shifts as a source of change pays little attention to the role of modest changes. This is the view I adopt here when I interpret the changes in Finnish local bioenergy production. Measured both in terms of biomass and energy flow, small-scale bioenergy production is not a major breakthrough or paradigm shift towards biomass-based energy production. However, its significance should be evaluated in other than quantitative terms: it has triggered important qualitative changes in both energy and forestry sectors. These changes include transformation of production practices, discourses, ways of thinking and social networks. These modifications may be important in future as they pave way to new possibilities.

Energy and Forest: The Historical Path Towards Centralized Energy Production Paradigm If one should name one single element that characterizes the development of Finnish energy production, it would be forest industry. The interests of forest industry and energy sector have been intertwined throughout the century-long history of that industrial branch. With its 31% share of electricity consumption, pulp and paper industry has been the largest energy consumer in Finland (Statistics Finland 2008). Forest industry has also been engaged in the production of energy: 40% of electricity consumed by this industrial sector is produced in power plants directly owned by forest companies (Finnish Forest Industries Federation 2008). Moreover, forest

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industry plays a significant role in the energy markets through its ownership of energy companies. In 1969, the three largest forest companies founded Teollisuuden Voima, a power company which was the first to build nuclear power in Finland. Being an energy-intensive industrial sector, forest industry has been keen on securing its competitiveness by investing in low-cost energy production. As a consequence, nuclear power started to replace hydro power as a source of energy and nowadays 30% of forest industry power consumption is covered by nuclear energy. On the other hand, forest companies have also engaged in the production of bioenergy; currently, the share of bioenergy consumed by forest companies is 32% thus exceeding the share of nuclear power (Finnish Forest Industries Federation 2008). Majority of bioenergy is produced by utilizing process waste such as black liquor, saw dust, bark and other solid wastes in forest industry–owned power plants. This has contributed to the high level of the overall share of bioenergy in the Finnish energy sector. Finland has been ranked third among the EU member states: in 2007, 25% of total energy consumption was covered by renewable energy sources. Unlike the two leading countries, Sweden and Latvia, which use a lot of hydropower, the high share of renewables in Finland was mainly achieved through using wood biomass; as much as 20% of total energy consumption was covered by bioenergy produced from wood biomass (Statistics Finland 2008). The development of Finnish energy production infrastructures hand in hand with forest industry has supported a centralized energy production paradigm: large-scale, centralized production units have been established for industrial energy consumption. The expanding industrial production in Finland after the Second World War was based on large industrial agglomerates. These also controlled energy production. Large-scale forest industry steered the development of energy production infrastructures through investments. In addition, the role of state increased during the latter half of the twentieth century. The state had an explicit aim to secure energy for the expanding industrial production and it acted through state-owned power companies (Sairinen 1987). Also, bioenergy production has largely followed this centralized pattern as forest industry has been the largest producer of bioenergy. Compared to this, smallscale heating businesses are a novelty in the Finnish energy sector. Firstly, they are a decentralized form of bioenergy production as a contrast to centralized power production in large forest industry–owned units. The scale of production differs also from household-level firewood use. Small heating businesses operate heating plants and provide energy for public buildings such as schools, hospitals and elderly homes or small district heating systems in residential areas, villages and towns. Secondly, bioenergy heating businesses are new actors in the field of energy production dominated by large energy companies. Owned and operated by local farmers and forest owners, these businesses have introduced a new, rural livelihoodbased rationality to energy production. This rationality differs from the engineering rationality of public energy businesses which puts emphasis on business economic criteria in evaluating the feasibility of investments and assesses the fuel choices in terms of local development. The birth of new actors in the field of energy production is related to historically formed conditions both in energy and forestry sectors, and I will review these in the following sections.

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Bioenergy Heating Businesses and Local Energy Production in Finland Increasing the share of renewable energy became an issue in the Finnish energy sector in the late 1970s. After the oil crises, there was a need to reduce the dependency on oil markets and to produce energy more efficiently. During the decades following the Second World War, Finland had turned from a biomass-based to a fossil-based economy and even rural areas and small towns exploited oil as a primary source of energy (Sairinen 1987). The sudden rise of oil prices showed the economic vulnerability of fossil energy production systems. Consequently, governmental subsidy schemes were introduced to support investments in public district heating systems and the use of renewable energy sources. Following from this, district heating became fashionable and even many small towns invested in expensive heating pipelines to improve energy efficiency (Wessberg 2002). Also investments to wood chip heating infrastructures were made. The explicit goal to increase renewable energy dates back to this post-oil crises era as the Ministry of Trade and Industry set several committees to explore the possibilities and measures to increase renewable energy production (Tirkkonen 2000). The target to replace three to four million tons of oil with renewable energy was primarily supposed to be met by targeting investment subsidies to biomass plants and by increasing bioenergy production in state-owned production units (e.g., in military bases). The political goal to increase the share of renewables remained in the governmental energy policy programs throughout the 1980s but it did not have a real effect on actual production technologies. When the oil prices started to decrease again in the early 1980s, many of the newly built biomass-based heating systems were transformed back to oil-based heating. Also the use of natural gas started to increase in the mid-1980s when the gas delivery network was expanded. It has also been estimated that Finnish energy policy favored oil and natural gas due to bilateral trade with Soviet Union at that time (Hakkila et al. 1998). These factors increased the inertia of the existing energy production system and made the adoption of bioenergy production sluggish. The primary reasons for the failure of biomass-based energy production were technical and logistical problems that made bioenergy expensive and insecure source of energy. Timber procurement for energy production was poorly organized. It was based on employment subsidies targeted at forest work. These were legitimized by the economic situation but timber supply for heating could not be secured by temporary employment contracts. In the early 1990s, however, the use of wood-based bioenergy started to grow rapidly. By 2008, the use of so-called forest fuels, that is, wood biomass harvested directly from forests, became sixfold compared to the early 1990s situation (Ylitalo 2009). In addition, the use of industrial waste wood increased. The growth of bioenergy production was based on two separate development paths. First, pulp and paper industry developed methods for integrated harvesting of wood fuel and pulpwood to increase the production of bioenergy in large power plants. This development followed the logic of technological push from the dominant timber production paradigm: for forest companies, it was natural to exploit the side products of

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loggings (leftovers and later even stumps from clear cuttings) and the existing logistical system including machinery and transportation to respond to the rising pressure to develop bioenergy production. Second, the use of bioenergy was reintroduced in the municipal heating sector through the adoption of small heating business concept. Small-scale heating business concept was adopted from Sweden and first three heating businesses were founded in 1992 in the Swedish-speaking west coast of Finland. Today, the number of heating plants maintained by small heating businesses has exceeded 400 (Fig.  9.1). Interestingly, there was no explicit technological push for such a rapid growth from three spontaneously emerged businesses to hundreds of imitators. On the contrary, the analysis of municipal decisions on fuel choices reveals that the existing oil-based paradigm of local energy production was strong and challenging it required active reframing of local energy production issues and even led to conflicts (Åkerman and Peltola 2002, 2006; Peltola 2007b). Heating businesses are typically cooperatives or other kinds of small businesses owned by local forest owners and loggers. They offer heating services to public heating systems (district heating systems or single public premises). Heating services include the production and delivery of fuel, energy production and the maintenance of heating plants and networks. The adoption of the heating business concept required changes in the social organization of many activities. Forest owners, who had been producing industrial raw material in their forests, became energy producers and started to use forest resources for a completely different value chain. The transition to renewable energy also required the development of new production practices, skills and technical innovations. The business model, knowledge, skills and technologies started to spread from locality to locality. This transformation towards renewable energy cannot be explained by any single change, such as a change of energy policy or technical development. Instead, the development is closely tied to various institutional and

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practical developments both in energy sector and forestry, and also to rural policy (Åkerman et al. 2010).

Bioenergy as an Energy Policy Goal Compared to the post-oil crises situation, bioenergy entered the agenda of Finnish energy policy in a new form in the early 1990s: it was seen as a remedy to a global environmental challenge, climate change. Towards the end of the decade, bioenergy was listed as one of the most efficient means to reduce CO2 emissions in Finland’s country report to the UN Framework Convention on Climate Change (Tirkkonen 2000). Before that, the use of biomass in energy production was related to national goals such as self-sufficiency, reduction of dependency on fossil fuel markets and improving employment. In the early 1990s, bioenergy was attached to a different political landscape characterized by novel political issues and goals, actors and measures. In 1994, Finland introduced a carbon tax – as a first country in the world (Vehmas 2002). The new climate and energy policy treated biomass differently from fossil energy sources, and forest biomass was indicated as the biggest possibility to increase renewable energy production. In 1995, the government launched a goal to increase the share of bioenergy by 25% by 2005 (Tirkkonen 2000). The energy programs of the 1990s were followed by the Action Plan for Renewable Energy Sources which set targets to increase the use of wood-based fuels, with special emphasis on forest fuels (MoTI 1999). New instruments to fulfil the renewable energy policy goals were introduced: wood-based fuels were defined as free of the carbon tax in heating, carbon tax levied on electricity production was refunded to the producers and new investment subsidy schemes were introduced. Most importantly, however, the policy focused on supporting research and development. Technology development was named as the one major obstacle in the path towards renewable energy production. In relation to this, the Ministry of Trade and Industry launched a technology program for renewable energy in 1993–1998. This was followed by another technology program dedicated to bioenergy in 1999–2003. The latter was run by the National Technology Agency, and it aimed to develop technology for large-scale harvesting of wood biomass, that is, integrated harvesting of pulpwood and forest fuel (Hakkila 2004). This was seen as an important measure to tackle the problems of technical feasibility and economic profitability in bioenergy production. The idea to develop large-scale bioenergy production integrated to forest industry and timber production exemplifies the path-dependent nature of Finnish energy production system geared towards large production units and centralized production practices. The technological push has been visible also in the way how the use of timber resources in energy production has been legitimized. The following quotation from a talk given in an international bioenergy conference by a forest company representative exemplifies the discourse: “A necessity is that energy wood operations

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support the industry wood procurement” (Poikola 2003). By this statement, it is meant that raw material production for bioenergy should not compete with the timber procurement of forest industry because it could lead to rising timber prices. Bioenergy production is legitimate as long as it is based on using raw material sources which are not of interest to forest industry. Traces of this argument can be found already in the early 1990s governmental energy programs and reports which address bioenergy as a possible solution to climate change (Tirkkonen 2000). The technological push from forestry has supported a particular form of bioenergy: use of logging residues as the major source of bioenergy. In turn, the use of renewable energy sources in dispersed, small-scale energy production has not been a primary goal in the Finnish energy policy. For example, in its report, the Ministry of Trade and Industry has stated that “small unit size and ‘dispersed’ location causes additional costs” (MoTI 1997). Small-scale energy production has not been regarded as a feasible strategy to build renewable energy production since it is incapable of utilizing the economies of scale. However, in 2002, the focus of technology development started to become more diverse. In that year, a sub-program for small-scale bioenergy was launched as a part of the Tekes technology program to support small bioenergy businesses (see Hakkila 2004). Although this action was taken only 2 years after the program had begun, small-scale heating businesses and their technological needs were recognized as a part of Finnish energy policy. Small-scale activities were given resources in addition to the large-scale bioenergy production, and as a consequence, the visibility and status of local activities improved. Before, local-level bioenergy was mainly associated with household-level firewood use or with public employment programs for unemployed rural workers. Now, it was seen as a business activity worth financing through R&D support. Yet, its role was marginal in the technology program, which emphasized the industry-driven model. For example, in the international conference organized by the FINBIO Bioenergy Association in 2003, only 9 out of 119 presentations dealt with small business concept and the technology development needs in this field (see FINBIO 2003). The overview of the energy policy tools and discourses point out that in the energy sector there were no strong drivers to develop small-scale bioenergy. In national energy policy, bioenergy production was coupled with the climate policy. Despite this, there was not much indication of climate discourse being the primary trigger of the local-level bioenergy development. In fact, climate change–related arguments in favor of bioenergy seemed to be almost totally absent in the municipal debates we studied (see Åkerman et al. 2005; Åkerman and Peltola 2006; Peltola 2007b). If it appeared at all in the local energy policy horizon, it came up as a long term factor which created an atmosphere of trust in the direction of energy policy. Only investment subsidies for bioenergy were mentioned of all energy policy tools by local decision makers. However, local bioenergy investments were primarily initiated by other discourses, problem settings and practices, fundamentally grounded in forestry. I will now turn to these factors that supported small-scale bioenergy production in other sectors than energy policy.

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Bioenergy as a Means to Improve Forest Management Based on the case analyses of local decision-making processes, it can be concluded that the interest in using wood biomass as a source of local energy production was related to and triggered by discourses and practices of forest management (Åkerman et al. 2005, 2010; Åkerman and Peltola 2006; Peltola 2007b). Importantly, changing forest structure had led to concerns about decreasing productivity of forestry because of forest owners’ ignorance of forest management. The situation leading to the rising concerns dates back to the 1950s and 1960s when extensive regeneration and draining programs were started in Finnish forests. These programs were part of the forest policy aiming to maximize the sustained yield of timber and to secure raw material for pulp and paper industry (Jokinen 2006). The maximum sustained yield was supposed to be reached through programmatic management of forests, including right timing of thinning the young forest growth. In early 1990s, as a result of the forest policy adopted in Finland after the Second World War, there were more young forest areas in need of thinning than ever before. Due to the high costs of thinning, many forest owners had ignored the recommendations for “good forest management.” The unwillingness of forest owners to follow the conduct was recognized as a nationwide forest policy problem and the Ministry of Agriculture and Forestry launched new funding principles for forestry: a special subsidy scheme for young forests was introduced to tackle the problem of unmanaged forests (Åkerman et  al. 2010). Part of the sustainable forestry funds was directed at bioenergy production because use of wood as fuel in local energy markets was seen as an additional incentive for forest owners to thin their unmanaged forests. Even-aged young forest areas turned out to be a suitable raw material base for small-scale bioenergy – partly so because forest industry was not interested in extracting this raw material base as unprofitable. Sustainable forestry funds have been an important tool in forest policy but through the measures targeted at the management of young forests, it started to support changes in the local energy sector. There was resonance between forestry and energy production: on the one hand, the problem of unmanaged young forests and the subsequent policy measures to tackle this problem were used as an argument in favor of bioenergy in municipal decision making and, on the other hand, the policy itself (subsidies) helped to form markets for an unused resource (stems from young forests). Local forest owners were persuaded to begin bioenergy businesses by addressing the potential to improve farm-level profitability of forestry. Public support usually functions like this: it creates a niche for new innovations and helps to gain room in the markets (Geels and Schot 2007). However, in this case, the niche for small-scale bioenergy was a side effect of policy measures aimed to tackle forestry problems, not a result of direct interventions in energy sector. Simultaneously, with the changing focus of forest policy, another change ­supporting local bioenergy businesses can be traced in forestry sector. A new law was passed in 1996 to define duties for Regional Forestry Centres which act as regional forestry authorities. Regional Forestry Centres are responsible for the

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implementation of Forest Act. They, for instance, monitor loggings and report expenditure spent from sustainable forestry funds. The new law extended their duties to include responsibility for promoting rural forest-based livelihoods (Leskinen 2006). This made Regional Forestry Centres to launch bioenergy projects (Peltola 2003; Leskinen et al. 2006). Project work supported small-scale bioenergy businesses and gave way to a new network of forestry experts, bioenergy advisors. Bioenergy advisors were project workers who developed expertise and skills in managing bioenergy production. Their expertise included, for example, knowledge of suitable logging sites for raw material, technologies and energy production contracts. They also negotiated with and lobbied municipal decision makers and technical staff of local councils. For example, one of the heating business case studies in an eastern Finnish municipality showed the close collaboration between the local council and forestry centre (Peltola 2007b). The latter organized excursions to bioenergy demonstration plants, helped with paper work and applications for subsidies, gave technical assistance and provided statistical information for decision makers about the availability of forest resources. The regional bioenergy advisors’ role was also to develop social skills and contacts necessary to promote bioenergy. The network was important in developing the concept of small-scale bioenergy businesses and helped to spread the concept throughout the country by bringing together forest owners, engineers, politicians, loggers and technology developers. Through its annual meetings and project collaboration, the network made mutual learning possible and triggered technology development in the field (Peltola 2003; Leskinen et al. 2006). This activity reflects a path creation process in which actors make delibrate efforts to create alternative production regimes (Lovio et al. 2011). Through these projects run by the advisors, bioenergy gradually became an additional (although rather separate) area of forestry and forestry organizations. The bioenergy advisory network was actually supported by the governmental energy advisory organization Motiva, which gets its funding from the Ministry of Trade and Industry. Motiva, for example, organized information campaigns and collected data on best practices related to small heating businesses (Peltola 2007b). The organizational link between energy and forestry policies strengthened the role of bioenergy in forestry organizations. The path creation process was targeted at making an intervention in local energy markets but it also left its marks to the forestry sector.

Bioenergy as a Source of Rural Livelihood During the time of introduction of small-scale bioenergy heating businesses in the early 1990s, Finland suffered from economic recession. In particular, rural areas were experiencing structural changes affecting rural livelihoods. Finland was in the process of joining the EU which further increased gloomy prospects in rural areas. In this socio-economic situation, bioenergy was suddenly regarded as a remedy for poor rural economy. In newspapers targeted at forest owners and rural residents,

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more and more news about new businesses emerged. In her analysis of the media material, Maria Åkerman (2005) identified a new discourse in which bioenergy was seen as a new pride of rural areas. Along this, the small businesses got an extremely positive identity and the rural workers involved in them were recognized as new rural professionals (Peltola and Leskinen 2009). The new discourse was employed in local policy making. Municipal decisions to replace fossil energy sources with wood-based bioenergy were legitimized by local economic effects that could be gained by using local instead of imported resources (Peltola 2007b; Åkerman et al. 2010; Åkerman and Peltola 2006). The detailed analysis of one such decision-making process in a small town in central Finland shows how the economy of energy production was reframed: the costs and benefits of bioenergy investments were evaluated in the context of rural livelihood and forestry instead of energy production units (Åkerman and Peltola 2006). The rationale for fuel choice did not follow the business economic logic usually adopted in evaluating public energy investments but the criteria for decision making were extended to include issues such as local employment effects and impacts on forest management. Similar arguments were made in other localities as well. One of the case study municipalities in Eastern Finland even made a decision to support the newly founded heating business by allowing the price of bioenergy to rise at the same level than oil-based heating even though there would have been a possibility to reduce the energy costs through competition (Peltola 2007b). The decision was based on the argument that the total sum of money spent on local energy production will benefit the local economy in various ways. Public expenditure in energy production was seen as a means for rural development and thus it was not meaningful to cut energy costs down. The EU played a significant role in the development of the small business concept in local energy production. Although it was initially blamed to cause problems for rural development, it, on the other hand, offered new funding possibilities: structural funds were drawn to bioenergy projects, for example. In 2000, the unit leader in EU DG TREN who was an invited speaker in a wood fuel seminar organized by Regional Energy Agency of Eastern Finland, specifically encouraged regional actors to use the available resource for bioenergy development: “Renewable energy sources and their utilization has been specifically named as one of the goal areas of the period 2000–2006 [of structural funds]. This is an important message to all regional level project leaders” (Koskimäki 2000). The project money from the EU structural funds was an additional support for the transition of local energy systems. Majority of these projects were administered by Regional Forestry Centres. Bioenergy was important for forestry organizations as a source of legitimation for their own existence as they could fulfill their new duties in regional development by starting bioenergy projects (Leskinen 2006). Regional development projects became an intermediary field of action which brought together actors that would not have cooperated otherwise: loggers, forest owners, politicians, local engineers, metal industry and forestry experts. The project work also facilitated the formation of more persisting activities such as the network of fuel wood advisors.

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The professionalization of bioenergy production and the development of expertise in this field were also supported by a traditional rural training organization, the TTS Institute. TTS is a research, development and training institute operating in the fields of agriculture, forestry and home economics. It had background in developing working practices and technologies in agriculture and after the oil crises it tried to improve the energy-related self-sufficiency of farms (TTS 2010). The experience in farm-level energy issues helped TTS to get involved in small-scale heating businesses in the 1990s. The institute has offered expert and training services for small energy businesses, for example by testing technologies, and it has become a direct link between rural and energy policies. Small bioenergy businesses have diversified the basis of rural livelihoods. The birth of hundreds of new businesses has brought new activities in regions with declining population and economic activity. The business sector cannot be regarded as significant when measured by its volume: it is likely that the business does not provide full income but rather it is a source of additional incomes for farms. However, the additional income may be significant for the farms in securing the continuation of primary activities. In this way, bioenergy has become part of the development through which rural areas transform into multifunctional landscapes of production instead of solely agricultural production. This has triggered political visions of countryside as a future locus of “bioeconomy” in which energy production is a key activity (Sitra 2009).

Transition Through Interdependencies Between Sectoral Paradigms The capacities to change energy production systems, here illustrated by the development of small-scale bioenergy production in Finnish municipalities, can be built through the utilization of various types of resources and opportunities provided by multiple production regimes. Bioenergy was attached to and became significant in various fields of action. In national energy policy, it was seen as a means to increase renewable energy sources and tackle climate change while at the local level, the transition to bioenergy was associated with local economic impacts. For forestry actors, in turn, bioenergy was primarily a means to tackle forest management problems: in national forest policy it was connected to improving long-term profitability of forestry, and at the local level it was a means to improve the profitability and incomes of forest farms. In the field of rural policy, bioenergy became a symbol of and vehicle for rural economic development. Bioenergy was enacted in these fields through various practices: governmental subsidies and money flow from the EU, forestry administration, public decision making, new framings, project work, forest management, etc. These practices were both discursive, such as giving new meanings to bioenergy, or material and concrete, such as forest management routines or subsidy systems. Although I have argued here that developments in forestry sector and rural policy seemed to be

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more important for bioenergy development than those taken in the energy sector, this does not mean, however, that decisions made in the energy sector would have been meaningless. Although the late 1970s energy policy was unsuccessful in its effort to increase bioenergy production at that time, the investment policies paved way to the 1990s boost in bioenergy. The policies introduced in the aftermath of oil crises encouraged the building of district heating systems, enabled investments in expensive infrastructures and were thus a strong incentive to change local energy production towards small, publicly maintained energy systems. Public support for investments reduced the initial investment costs of the small heating businesses. Although some heating businesses have adopted a strategy to invest in heating pipelines, this is not usual in the early stages of business activities. It was easier to start heating businesses in localities where heating networks existed. Despite the importance of public subsidies to district heating investments, the energy policy measures were not a sufficient condition for bioenergy development. The trend in small-scale heating businesses was not achieved by making a direct intervention to local energy sector but the mobilization of actors and resources across the fields of action explains the success of small-scale bioenergy business. The transition of local energy systems was related to simultaneous changes in other production regimes and policy sectors. For example, the gradually changing forest structure created a potential new raw material base for bioenergy during the decades following the Second World War. Discursive support was offered by forest policy: young forest stands as a resource base outside of industrial interest were seen as a legitimate and even desirable source to be used in energy production. The existence of this raw material base strengthened the legitimacy of bioenergy in municipal decision making as the availability of resources could be shown by regional forestry statistics and calculations. Thus, the administrative routines of forestry were an importance back up to the proponents of bioenergy in local councils and energy offices (Åkerman et al. 2010; Åkerman and Peltola 2006). The case of small-scale bioenergy development proves that changes in production systems may happen through indirect interventions and interdependencies between sectors. This result is compatible with the debates on environmental governance: policies are not only relevant in the context of predefined institutional policy settings but may extend beyond the boundaries of administrative sectors (Hajer 2003). The case is also compatible with the critique of functionalist views of technology development emphasizing that transition is not reached by coordination of rational choices but the motivations and capacities for alternative actions can be based on ideological choices and visions, conflicts, context-dependent resources, collective action and coalitions between different regimes (Smith et  al. 2005; Seyfang and Smith 2005). Each policy sector – energy policy, forest policy and rural policy – had their own concerns and problem settings and policy tools to tackle the problems. Small-scale bioenergy was not the primary focus of neither forest nor energy policy: the technological push was towards large-scale industrial bioenergy production. Small-scale bioenergy did, however, find its niche somewhere in-between these sectors and in connection to rural policy.

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Conclusions: Evaluating the Significance of Small Changes Bioenergy has become a significant element in the landscape of energy policy in the 2000s. The EU 2020 targets for tackling climate change through bioenergy policies have pointed out a need to put a lot of effort on research and development activities in this field. At the same time, they have not been accepted without debate. The goals have been considered as expensive with all the investments needed. But importantly, also doubt whether bioenergy is ecologically or socially sustainable form of energy at all has been raised (e.g., Antikainen et al. 2009; Framstad 2009; Furman et  al. 2009). In national energy policy, public support for bioenergy has been coupled with the parliamentary decision to give new licenses to nuclear plants, a kind of compensation for nuclear future or “green-washing” of energy policy. The institutional inertia of energy policy thus seems to make bioenergy subordinate to building more centralized energy infrastructures. Small-scale heating businesses also seem to be a humble achievement in the light of the great challenges mankind is facing due to climate change. Obviously, the Finnish case does not offer a model for how to create a completely new path to energy production. My argument is that its lesson is valuable in other ways: it helps to evaluate the potential of local activities in developing new solutions. It draws attention to grassroots innovation activities as sources of change – a perspective often neglected in the debates about technological transition (Seyfang and Smith 2005). The relevance of such local innovations is often evaluated in terms of their capability to grow from the margins into mainstream solutions and to help solve sustainability problems by replacing unsustainable production regimes (Seyfang and Smith 2005; Smith et al. 2005). In the case of small-scale heating businesses, the applicability of the business concept was widened by engaging with the sectoral intersections and by developing a mutually enforcing learning process. Small-scale bioenergy is not, however, very likely to develop into a mainstream energy solution; although at the local level, it has gained room. On the other hand, the volume of monetary or biomass flow should not be used as the only criteria to evaluate the importance of small heating businesses. The case study suggests another possibility for evaluation: qualitative changes that may trigger further changes in the existing production regimes. An example of such a qualitative shift is the creation of alternative markets for small-sized timber harvested by thinning young forest growth. To be able to use this resource, bioenergy businesses have created their own timber procurement practices. These practices are based on utilizing rural social networks and even new ICT technologies (internet market places, logistical systems) (Peltola and Leskinen 2009). They form an alternative economic practice to forest industry–driven timber procurement. The development of social capital, skills, networks, knowledge and technologies is a profound change both in the fields of forestry and energy production. The significance of such a change may become more evident while the forest industry in Northern Europe is experiencing a major restructuration process; timber procurement seems to be one major obstacle in developing new products to compensate declining paper industry (Niskanen et al. 2008).

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The above-mentioned change is related also to the politics of grassroot activities: doing things in a different way changes the social organization of production (Seyfang and Smith 2005). This involves always power relations and may be a source of conflicts. For instance, local actors have been worried that forest industry interprets the development of alternative timber procurement as a threat and makes their life difficult through its dominant position in the timber market (Peltola and Leskinen 2009). From the socio-economic viewpoint, bioenergy is not a singular phenomenon. Consequently, we need to analyze in what ways bioenergy is procured and by whom to understand how these production practices support social sustainability – or ecological sustainability for that matter. Transition of production systems always requires the reworking of rules, dependencies, institutional positions and social relations. Therefore, understanding of how the development towards more sustainable energy production takes place requires knowledge of social processes. In this task, we need detailed understanding of local practices and shifts in these practices.

References Åkerman, M. (2005). The role of discursive strategies and material practices in constituting space for wood energy (Risusavotasta maaseudun teknologiaihmeeseen: puun energiakäyttöä tukevat ‘käännökset’ metsätalouden, energiapolitiikan ja maaseutupolitiikan kentillä.) Alue ja Ympäristö, 34 (1), 30–41. (In Finnish with English summary). Åkerman, M., Kaljonen, M. & Peltola, T. (2005). Integrating environmental policies into local practices – The politics of agri-environmental and energy policies in rural Finland. Local Environment 10 (6), 595–611. Åkerman, M., Kilpiö, A. & Peltola, T. (2010). Institutional change from the margins of natural resource use: The emergence of small-scale bioenergy production within industrial forestry in Finland. Forest Policy and Economics 12 (3), 181–188. Åkerman, M. & Peltola, T. (2006). Constituting the space for decision making – Conflicting calculations in a dispute over fuel choice at a local heating plant. Geoforum, 37 (5), 779–789. Åkerman, M. & Peltola, T. (2002). Temporal scales and environmental knowledge production. Landscape & Urban Planning 61 (2–4), 147–156. Antikainen, R., Tenhunen, J., Ilomäki, M., Mickwitz, P., Punttila, P., Puustinen, M., Seppälä, J. & Kauppi, L. (2009). Bioenergy production in Finland – New challenges and their environmental  aspects (Bioenergian uudet haasteet Suomessa ja niiden ympäristönäkökohdat. Nykyti­ lakatsaus.) Suomen ympäristökeskuksen raportteja. 11/2007. Finnish Environment Institute, Helsinki. (In Finnish with English summary). Bijker, W. (1995). Of bicycles, bakelites, and bulbs. Toward a theory of sociotechnical change. Cambridge: MIT Press. Bijker, W., Hughes, T.P. & Pinch, T. (Eds). (1987). The social construction of technological systems. Cambridge: MIT Press. Ministry of Agriculture and Forestry. (2010). bioenergy.fi webservice: www.bioenergy.fi FINBIO. (2003). Bioenergy 2003. International Nordic Bioenergy Conference from 2nd to 5th September, 2003. Book of Proceedings. Jyväskylä: The Bioenergy Association of Finland. Finnish Forest Industries Federation (2008). Forest industry and energy (Metsäteollisuus ja energia). www.metsateollisuus.fi Furman, E., Peltola, T. & Varjopuro, R. (Eds). (2009). Interdisciplinary research framework for identifying research needs. Case: Bioenergy-biodiversity interlinkages. The Finnish Environment. 17/2009. Helsinki: Finnish Environment Institute.

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Framstad, E. (Ed). (2009). Increased biomass harvesting for bioenergy – effects on biodiversity, landscape amenities and cultural heritage values. TemaNord. 2009:591. Copenhagen: Nordic Council of Ministers. Geels, F. (2004). From sectoral systems of innovation to socio-technical systems. Insights about dynamics and change from sociology and institutional theory. Research Policy, 33 (6–7), 897–920. Geels, F.W. & Schot, J. (2007). Typology of sociotechnical transition pathways. Research Policy, 36 (3), 399–417. Hajer, M. (2003). Policy without polity. Policy Analysis and the institutional void. Policy Sciences, 36 (2), 175–195. Hakkila, P. (2004). Developing technology for large-scale production of forest chips. Wood energy technology programme 1999–2003. Final Report. Technology Programme report 6. Helsinki: National Technology Agency Tekes. Hakkila, P., Nurmi, J. & Kalaja, H. (1998). Left-overs of loggings as a source of energy (Metsänuudistusalojen hakkuutähde energianlähteenä). Metsäntutkimuslaitoksen tiedonantoja. 684. Vantaa: Finnish Forest Research Institute. (In Finnish). Hughes, T.P. (1995). Technological momentum. In Smith, M.R., Marx, L. (Eds.), Does technology drive history? The dilemma of technological determinism. (pp. 101–113). Cambridge: MIT Press. Jokinen, A. (2006). Stand/ardization and entrainment in forest management. In Haila, Y., Dyke, C. (Eds.), How nature speaks: The dynamics of the human ecological condition. (pp. 198–217). Durham: Duke University Press, Durham. Koskimäki, P.-L. (2000). The energy policy of EU (EU:n energiapolitiikka). In: Puuenergia on mahdollisuus pienyrityksille, seminaariraportti 26.6.2000 Mikkeli. Seminar report. Mikkeli: Regional Energy Agency of Eastern Finland. (In Finnish). Leskinen, L. (2006). Adaptation of the regional forestry administration to national forest, climate change and rural development policies in Finland. Small-scale Forestry, 5 (2), 231–247. Leskinen, L.A., Peltola, T. & Åkerman, M. (2006). Puuenergia, metsätalouden toimintakentän muutos ja sosiaalinen kestävyys (Wood Energy and Social Sustainability of Forestry). Metsätieteen aikakauskirja 2/2006, 293–304. Lovio, R., Mickwitz, P. & Heiskanen, E. (2011). Path-dependence, path creation and creative destruction in the evolution of energy systems. In: Wüstenhagen, R & Wuebker, R. (Eds.) Handbook of Energy Entrepreneurship (pp.). Edward Elgar. Mackenzie, D., Wajcman, J. (Eds) (1999). The social shaping of technology. 2nd Edition. Milton Keynes: Open University Press. Ministry of Trade and Industry. (1999). Action plan for renewable energy sources. (Uusiutuvan energian edistämisohjelma). Publications of Ministry of Trade and Industry 4. Helsinki. (In Finnish with English summary). Nikkola, A. & Solmio, H. (2005). Heating businesses in 2004. (Lämpöyrittäjätoiminta vuonna 2004). Reports of TTS Institute No 694. Available at: http://www.tts.fi/tts/julkaisut/lyhennelmat/ tmet694.htm (In Finnish). Niskanen, A., Donner-Amnell, J., Häyrynen, S. & Peltola, T. (2008). The new era of forest. Towards more versatile livelihood structure. (Metsän uusi aika. Kohden monipuolisempaa metsäalan elinkeinorakennetta.) Final report of the project Future Forum on Forests. Silva Carelica 53. Joensuu: University of Joensuu. (In Finnish). Peltola, T. (2007a). Paikallisen energiahuollon ympäristöpoliittinen liikkumavara: vaihtoehtoiset teknologiat, poliittiset käytännöt ja toimijuus. (Environmental Margin of Local Energy Production: Alternative Technologies, Political Practices and Agency) Acta Universitatis Tamperensis. 1203, Tampere: Tampere University Press. Peltola, T. (2007b). Business on the margin: Local practices and the politics of forests in Finland. Ethics, Place and Environment, 10 (1), 29–47. Peltola, T. (2007c). An esker as a political actor: Actor-networks in a local dispute on district heating plant (Harju poliittisena toimijana: toimijaverkot lämpölaitoksen sijoituspaikkakiistassa Kangasalla). Terra, 118 (2), 67–80. (In Finnish, with English summary).

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Peltola, T. (2005). Politics of a fluid technology: Socio-technical trajectories of forest fuel production in Finland. In: Bammé, A., Getzinger, G. & Wieser, B. (Eds.) Yearbook 2005 of the Institute for Advanced Studies on Science, Technology and Society. (pp. 191–217). Munich/Vienna: Profil Verlag. Peltola, T. (2003). Local economic development and wood fuel projects. Megawatthours, jobs, cleaning area or carbon dioxide? (Puuenergiahankkeet ja paikallislähtöinen kehittäminen. Megawattitunteja, työtä, harvennusrästejä vai hiilidioksidia?) In: Riukulehto, S. & Tuovinen, A. (Eds) Aluekehityksen todellisuus. Seinäjoen IV aluekehityspäivät 19.-20.3.2002. (pp. 75–91). Seinäjoki: University of Helsinki, Seinäjoki Institute for Rural Research and Training. (In Finnish). Peltola, T. & Leskinen, L. (2009). Man, machine and forest: nature in the working practices of logging contractors (Mies, kone ja metsä: luonto metsäkoneyrittäjän työkäytännöissä). Alue ja Ympäristö, 38 (2), 25–33. (In Finnish with English summary). Poikola, J. (2003). Practical experiences of large-scale production of forest chips. In: FINBIO (2003). Bioenergy 2003. International Nordic Bioenergy Conference from 2nd to 5th September, 2003. Book of Proceedings. The Bioenergy Association of Finland, Jyväskylä. pp. 233–235. Sairinen, R. (1987). The development of rural energy services (Maaseudun energiahuollon kehitys). In: Massa, I., Sairinen, R., Itkonen, L. (Eds.), Energiahuollon vaihtoehdot ja maaseutu. Kolme näkökulmaa. Working papers 6. Helsinki: University of Helsinki, Department of Social Policy. (In Finnish). Seyfang, G. & Smith, A. (2005). Grassroots innovations for sustainable development: Towards a new research and policy agenda. Environmental politics, 16 (4), 584–603. Sitra. (2009). A Natural Resource Strategy for Finland. Helsinki: Finnish Innovation Found. Available at: www.sitra.fi/en/Innovations/natural_resources_strategy.htm Smith, A., Stirling, A. & Berkhout, F. (2005). The governance of sustainable socio-technical transitions. Research policy, 34 (10), 1491–1510. Statistics Finland. (2008). Energy Statistics 2008. See also: http://www.stat.fi/til/ekul/2007/ ekul_2007_2008-12-12_kuv_001_en.html Tirkkonen, J. (2000). Climate policy and ecological modernization – A discursive study of Finnish climate policy and its connection to the change in the forest sector. (Ilmastopolitiikka ja ekologinen modernisaatio. Diskursiivinen tarkastelu suomalaisesta ilmastopolitiikasta ja sen yhteydestä metsäsektorin muutokseen. Acta Universitatis Tamperensis 781. Tampere: University of Tampere Press. (In Finnish, with English summary). TTS. (2010). Homepage of TTS Institute. www.tts.fi Vehmas, J. (2002). ‘Money for Sweden and CO2 emissions to Denmark’. Reconstitution of the Finnish environment-based energy taxation in 1993–96. (‘Rahat Ruotsiin ja päästöt Tanskaan.’ Suomen ympäristöperusteisen energiaverotuksen rekonstituutio 1993–96). Acta Universitatis Tamperensis 861. Tampere: University of Tampere Press. (In Finnish, with English summary). Wessberg, N. (2002). Local decisions in the Finnish energy production network – A socio-technical perspective. Landscape and Urban Planning, 61 (2–4), 137–146. Ylitalo, E. (2009). Puun energiakäyttö 2008. Forest Statistical Bulletins 15. Helsinki: Finnish Forest Research Institute. 5.5.2009, http://www.metla.fi/tiedotteet/metsatilastotiedotteet/2009/ puupolttoaine2008.htm (In Finnish). Ylitalo, E. (2007). Puun energiakäyttö 2006. Forest Statistical Bulletins 867. Helsinki: Finnish Forest Research Institute. 10.5.2007, http://www.metla.fi/tiedotteet/metsatilastotiedotteet/2007/ puupolttoaine2006.htm (In Finnish).

Chapter 10

Bioenergy Production and Social Sustainability on Finnish Farms Suvi Huttunen

Keywords  Bioenergy • Social sustainability • Local energy production

Introduction Problems related to energy production have become a significant social issue, also regarding rural areas. There is an apparent need to establish a model for sustainable energy production that would encompass economic, environmental and social sustainability (Elliott 2000). One important solution to reducing carbon dioxide emissions, as well as addressing the depletion of fossil fuel resources, lies in the renewable natural resources that exist in rural areas. However, sustainable and reasonable utilization of these resources is not simple and requires specific analysis of different production models (Mol 2007). Simultaneously, one must consider how these rural resources can be utilized and how they can contribute to (sustainable) rural development. There has been much discussion surrounding multifunctional agriculture among rural research and policy making in Europe during the last 10 years (Arovuori et al. 2006; Wilson 2008). Multifunctionality refers to the ability of agriculture to provide beneficial commodities and non-commodities besides traditional food and fibre. These can include rural landscapes and rural viability. Through multifunctionality, agriculture and rurality can be considered as broader concepts by which multifunctional agriculture is actively producing sustainable rural development. By recognizing multifunctionality as an essential component of agriculture, sustainable development gains a

S. Huttunen (*) Department of Social Sciences and Philosophy, University of Jyväskylä, Jyväskylä, Finland e-mail: [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_10, © Springer Science+Business Media, LLC 2011

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central position in analysing rural development the countryside (Marsden and Sonnino 2008; Marsden 2003). Farms producing renewable energy are generally considered to be pluriactive or partaking in more than one business. Thus, energy-producing farms can be considered multifunctional in a way that farms concentrating merely on food production cannot. The various by-products of energy production become an important component of the farm’s multifunctionality (Järvelä et al. 2009). In Finland, bioenergy production on farms has traditionally been in the form of heat production using wood fuels to meet the farm’s own energy demands. Increasingly, the production of wood-based heat for retail purposes has provided an additional source of income for many farms. This is referred to as heat entrepreneurship. Heat entrepreneurship began in Finland in the beginning of the 1990s and the number of heat entrepreneurs has rapidly risen ever since, especially during the 2000s. At the end of 2006, there were approximately 330 heat plants operated by heat entrepreneurs and about 200 heat entrepreneurs as one heat entrepreneur sometimes operated several plants. The majority of heat entrepreneurs in Finland are farmers (Alanen 2007). Bioenergy production on farms can also include biogas and biodiesel production and their utilization as heat, electricity and traffic fuel. In Finland, there were eight farms producing biogas and four farms in the process of building a biogas reactor in 2006. In addition, there is one larger unit managed in cooperation by several farms (Kuittinen et al. 2007). The oldest plants were built in the 1980s but the majority are quite recent and have been constructed during the last 5 years. Currently, there are no statistics available on the farms producing biodiesel but estimates approximate that biodiesel is produced on about 30 farms. The production of biogas or biodiesel can seldom be considered an auxiliary production. Rather, it is an addition to food production that reduces the need to purchase energy and makes the farm more multifunctional. The fourth way1 in which Finnish farms can partake in bioenergy production is through the cultivation of reed canary grass. It has become increasingly popular during the last 5 years, especially due to the involvement of Vapo, a Finnish peat and bioenergy company. Vapo has made cultivation contracts with farms and committed to purchasing the reed canary grass they produce. However, reed canary grass cultivation is not energy production as such, since the farmer is not directly producing electricity, heat or traffic fuel. For this reason, reed canary grass cultivation is excluded from the scope of this study. The purpose of this chapter is twofold: first, the possibilities of bioenergy production on farms are examined from the perspective of the farmers themselves. Next, uncovering what form of social sustainability can be associated with energy production on farms and what potential it has to promote social sustainability more widely in the region is explored. The research is based on the interviews of energyproducing farmers in Finland. There are several studies relating bioenergy and renewable energy production to sustainable development and numerous studies on the social effects and implications of bioenergy production (e.g. Domac et al. 2005; There has also been discussion on other agriculture-related ways of producing bioenergy, for example, willow cultivation. However, these alternatives have not yet been realized in Finland.

1 

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del Río and Burguillo 2008; Bucholz et  al. 2007). This literature was utilized to c­ reate a framework for analysing social sustainability in bioenergy production on Finnish farms. The framework is made exclusively for this study in order to clarify the analysis and is not intended for use in other studies. Sustainable development, especially social sustainability, is always locally bound and therefore, the criteria used for its analysis should also be locally established (e.g. Dryzek 2005:158).

Social Sustainability in Rural Areas and in Bioenergy Production The concept ‘sustainable development’ first entered the global arena via the Our Common Future report by Bruntland’s Commission in 1987. The definition for sustainable development given in the report was as follows: ‘Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (WCED 1987:43). The definition is very broad and general. Basically, it emphasizes human needs and intergenerationality but no clear program for sustainable development can be derived from it. Although ambiguous, the concept of sustainable development has become popular. It has been used for various purposes and also widely criticized (e.g. Meadowcrodt 2000). There have been many attempts to clarify the definition of sustainable development. Finding an exact definition that is suitable to all contexts and for all purposes and establishes a definite set of generally suitable indicators2 seems rather difficult, if not entirely impossible. Nevertheless or perhaps due to its ambiguity, it is very fruitful to use sustainable development in examining questions related to development and well-being locally. Usually, sustainable development is divided into economic, ecological and social dimensions and often an additional cultural dimension is extracted from the social dimension. These dimensions are closely intertwined and it is impossible to separate them entirely. Frequently, the dimensions contradict one another. The primary focus seems to revolve around balancing economic and ecological sustainability, while social sustainability remains more vague. In ‘Our Common Future’, social sustainability is implied by inter-generational and global equity. Social sustainability is developed further in Agenda 21, where the concept of sustainable livelihoods is introduced. Sustainable livelihoods concentrate on poverty reduction and thus have been applied and developed mostly within development studies. The concept of sustainable livelihoods unites all the dimensions of sustainable development but the main focus is on the assessment of people and their capabilities (cf. Sen 1999) and how they respond to boundaries set by external factors. The key question then, becomes: how can people reach and ­maintain sustainable livelihoods? The notion of sustainable livelihood includes Certainly, there have been valuable attempts to find encompassing lists of sustainable development indicators. The problem is that these lists tend to become unpractically long and there is also significant difficulty in putting social sustainability in measurable terms (e.g. Singh et al. 2009).

2 

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various coping strategies and the ability to remain resilient in the face of changing external factors and daily life stresses (Scoones 1998). Thus, the concept is very interesting and relevant in assessing issues not merely linked to poverty reduction but also to social sustainability on a wider scale. One’s assets and the opportunities and restrictions to utilize them define one’s capabilities. Reinforcing capabilities can be regarded as a significant part of social sustainability. In the context of social sustainability, this has been referred to as the ability to control changes (Saastamoinen et al. 2006), control one’s own life (Rannikko 1999) or enlargement of capacity to act (Leskinen et al. 2006). The result of achieving a sustainable livelihood is human well-being and the ability of people to define their own goals for well-being. Well-being is also central to social sustainability (e.g. Elliott 2005). In these cases, well-being is understood as a wide concept which ventures beyond mere material well-being and encompasses such issues as quality of life and control over one’s life. Thus, socially sustainable development aims at providing people opportunities to live good lives in a way they themselves understand good life, keeping in mind cultural diversity, equity and justice. It is simply not enough to have clean environment and material needs like nourishment and housing fulfilled as sustainable development without social sustainability would suggest (Elliott 2005:13; Rannikko 1999; Rantala et al. 2006). Social sustainability has been related to other dimensions of sustainable development in various ways. Perhaps, most generally, the dimensions are perceived as being equal and partly overlapping and real sustainable development is achieved only after sustainability is achieved in all the dimensions. This model is represented as overlapping circles in Fig.  10.1 (Elliott 2005:13; Connelly 2007). Juurola and Karppinen (2003) stress that social sustainability requires environmental sustainability and that economic sustainability can only be reached by practicing ecologically and socially sustainable development. However, it is difficult to comprehend that one dimension of sustainable development requires another dimension, especially when various analyses of sustainable development stress different dimensions (Connelly 2007). These preferences cannot be derived from any one definition of sustainable development alone. They are always related to values and are in such a way part of the plurality and contested nature of sustainable development (Connelly 2007). Rather, sustainable development contains all its dimensions, but the dimensions themselves have to be analysable separately. In the long run, however, it is difficult to consider social sustainability being possible without ecological or economical sustainability, for example. Time, in the context of social sustainability seems to be problematic in a number of ways. The most common problems regarding sustainable development concern the questions: what do we want to sustain? How long should we sustain them? And what if development that appears to be sustainable today is no longer sustainable in the future? To provide an example, one can consider housing politics in Finland after the Second World War. As Finland lost a considerable amount of land in the eastern parts of the country to the Soviet Union, people previously inhabiting these areas were forced to move and find new places to live. The majority of these inhabitants were farmers. The government took an active role in relocating these citizens and issued them new homes or farms. This was accomplished by acquiring portions of existing larger farms or by offering people the opportunity to move to previously

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uninhabited areas. At the time, such a solution certainly seemed reasonable but in the long run it was perhaps unwise to create habitation in remote areas and to divide large farms into many smaller ones. Many of these farms proved to be unviable during the following generation and many of the farmers moved to larger towns and cities (see, e.g. Tykkyläinen 1995). Despite the difficulties associated to it, time is integral to achieving social sustainability. By ignoring the concept of time, the notion of social sustainability is merely reduced to discussions about social impacts (Leskinen et al. 2006; Juurola and Karppinen 2003). It is essential to consider sustainable development and social sustainability, in particular, as processes, where the aim is to develop and reinforce individual capabilities to obtain and increase well-being. Thus, the main objective is not any stable, sustained condition but rather the ability to cope successfully as societal and environmental conditions change within limits where coping is possible. Another difficulty related to sustainable development and social sustainability is scale. What seems to be sustainable locally is not always sustainable globally. In this study, the scope of the locally collected data limits the possibility of global assessment. The focus is on the energy-producing farmers and their views regarding social sustainability in their lives. The potential for increasing their capabilities and the subsequent consequences that might ensue were analysed. Generational assessment is impossible using this data, since the possible effects on future generations can only be speculated. Thus, in this study the assessments are made on individuals residing in Central Finland and thus the scope of the study remains local. What, then, are the characteristics of social sustainability in bioenergy production and what is the framework used in the analysis? When assessing bioenergy production, one must consider the entire production chain with its various phases and impacts. What raw materials are utilized in the energy production, what technology is used in the conversion process and how and in what form is the energy used and distributed (Bucholz et al. 2007)? All the phases are related to social sustainability and thus it is important to discern how the production chain functions. In doing so, all the actors, their roles and any social networks related to the energy production process may be uncovered. Domac et al. (2005) list some benefits related to bioenergy production. These include an increased standard of living, which encompasses employment, environment, health and education, social cohesion and stability that is related to migration from rural areas, local development and pluriactivity within the rural areas. Del Río and Burguillo (2008) also contribute participation and institutional development to this list. In Finland, the production of forest-based energy has customarily been related with positive employment effects, increases in income and improved business opportunities in remote areas (Rikkonen and Tapio 2009; Peltola 2007; Leskinen et al. 2006; Åkerman and Jänis 2005). The positive sum effects of heat entrepreneurship have managed to reinforce the capabilities of the entrepreneurs and thus create social sustainability in the process (Peltola 2007). Employment rapidly becomes the focal point when assessing the social benefits of economic activities, since it is possibly the most easily measurable. In renewable energy production, the most important employment effects arrive via bioenergy production. The demand for workers continues to be significant, even after the build-up

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phase, which includes fuel processing and transport and in the management of the power or heating plant. The employment effects of bioenergy production are often most evident in remote areas, where employment is normally difficult to find and where under-employment is common. Thus, bioenergy production has the potential to equalize employment opportunities between different regions (Del Río and Burguillo 2008). Similarly, the revenue generated through bioenergy production has the potential to level income discrepancies between regions. This can be reflected in migration between regions, for example. Modern bioenergy production has ameliorated the availability of energy in many developing nations, in particular and thus contributed to poverty reduction (e.g. Kemmler and Spreng 2007). On the other hand, renewable energy production has also improved the availability of energy among the underprivileged in industrial countries by reducing fuel prices, as local fuels are often cheaper than imported ones (fuel poverty) (Illsley et al. 2007). Social sustainability in bioenergy production includes acceptance of the technology required in all of the production phases. This can be observed in the way neighbours or community members regard the production activity. An important issue is the existence of customers: Are they easy to find? Appreciation directly relates to acceptability. If the positive effects outweigh the negative ones in the general opinion, the technology becomes acceptable. However, acceptability does not necessarily imply that the activity has no adverse effects (Elghali et al. 2007; Bergmann et al. 2008). On the other hand, acceptability can be influenced by some aspects of social sustainability, such as increasing participation and participatory decision making, as well as through public education (Bergmann et al. 2008). Upon this basis, social sustainability in farm-scale bioenergy production is separated into three main parts that structure the analysis. These parts are: (1) the farmer’s life; (2) the farm and its future; (3) the local area. These are further separated into smaller components, as seen in Table 10.1.

Data and Methods The data is comprised from the interviews of 31 bioenergy producing rural e­ ntrepreneurs. The majority (29 of them) were full- or part-time farmers engaged in dairy, beef or crop production or combinations of these. Although two of the participants were not farmers, they were engaged with forestry in other ways. The part-time farmers had secondary jobs outside the farm or were engaged in other entrepreneurial ventures besides farming or energy production. The interviewees included 15 heat entrepreneurs from the area of Central Finland,3 10 biogas

3  The focus on Central Finland with the choice of interviewed heat entrepreneurs is based on this study being part of a larger project called Sustainable Development and Pioneering Small Scale Rural Entrepreneurs funded by the Academy of Finland (number 115786). The project focuses on new business opportunities of farms in Central Finland in the form of energy entrepreneurship and production of local food. Biogas and biodiesel, on the other hand, are produced in so few farms that concentration on Central Finland was not practical.

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Table 10.1  Framework used for analysing social sustainability in farm-based bioenergy production Income, livelihood 1. Farmer’s life Material wealth Availability of energy Control over one’s life Freedom of choice Participation Ability to adjust to changes – resilience Quality of life Relationships Activities Living conditions 2. Farm and its future Continuity of the farm Possibilities for the next generation to continue production on the farm Aesthetic appeal of the area as a place to live 3. Local area Income, livelihood Employment, equality of employment Other impacts on income, equity in their division Availability of energy Acceptability of technology Community Social contacts Coherence, dependencies Trust Participation Livelihood, structure and aesthetic appeal of the area

­producers and 6 biodiesel producers. Some of the interviewees were engaged in the same energy production cooperatives or consortiums or were cooperating with one another in other ways. All the interviewees were male, since there were no female bioenergy producers. The interviews were conducted between fall 2006 and fall 2007 at the interviewees’ homes or at the energy production plants. The interviews were comprised of questions structured into four themes. The order of the questions varied from one interview to the next and additional questions were also asked, depending on issues that arose during each interview. The themes included: (1) farm and energy production in practice; (2) drivers and barriers for energy production; (3) possibilities for energy production on farms, in general; and (4) relationship to the environment. The interviewees were also asked to draw an operational diagram of their energy ­production activity. This study focuses on the practical arrangements of energy ­production and the drivers and barriers for the production. Issues related to social sustainability were mainly dealt with the second part of the interviews. The analysis maps the energy production activity from the producer’s perspective, in a manner that exposes the main commonalities and differences in the three different forms of bioenergy production, both from a production and social sustainability standpoint.

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Models for Bioenergy Production on Finnish Farms Heat Entrepreneurship A model for farm-based heat entrepreneurship, from a farmer’s perspective is presented in Fig. 10.1. The inner circle represents the farmer’s activities regarding heat production. The next circle includes other actors and functions closely related to heat entrepreneurship. The outer circle demonstrates other actors and functions that support the heat entrepreneurship. Many actors and functions are situated between two or even all of the circles. To illustrate, the two innermost circles in Fig. 10.1 indicate that while some heat entrepreneurs accomplish all of their activity within the heating business, others use external services to complete necessary activities, depending on which ­circles are included. The arrows represent material flows. Dashed arrows represent possible functions that are not included in all heat enterprises, such as the utilization of raw materials other than woodchips in heat production.

Fig. 10.1  Model of heat entrepreneurship from an entrepreneurial perspective

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The role of heat entrepreneurs is strongly affected by the type of business they are engaged in. A heat entrepreneur can work as a single entrepreneur, as a part of a small entrepreneurs consortia or as a part of a cooperative. Single entrepreneurs require partners outside of the heating business, whereas in larger cooperatives, the majority of work can be accomplished by the members themselves. Therefore, the responsibility, workload and earned income are more considerable in a single entrepreneur business than in a shared one. The basic concept of heat entrepreneurship is to sell heat, usually produced from wood chips. Customers make contracts with the heat entrepreneur, in which they commit to purchasing the heat they require for a given price. Most of the heat entrepreneurs interviewed for this study only have one customer. This is most commonly a municipality that purchases the heat for a particular building or sells it to a larger heating network. In some cases, the municipality itself owns the heating plant and the entrepreneur merely manages it. In other cases, the entrepreneur provides heat for a private business or for a state-owned building. The wood used for heating is usually obtained from forests owned by the entrepreneur(s). Also, wood chips are commonly manufactured from purchased materials. Some use external services for chipping and logistics, while others complete such tasks themselves. It is not uncommon for different members of a heat entrepreneurship cooperative or consortia to be responsible for different phases in the wood collecting and heating processes. In fact, it seems typical for cooperatives to form based on the skill set of different members to fulfil various roles, starting from accounting, for instance. Thus, there is vast variation in the services that are performed within the heating business and those that are purchased externally. More distant actors commonly related to heat entrepreneurship are local forestry associations that advise which forests are suitable for attaining raw materials. Additionally, other heat entrepreneurs and heating plant manufacturers may offer assistance whenever problems arise. Therefore, it is possible that the provider of the heat plant manufacturer and even local forestry associations may be members in heat entrepreneurship cooperatives. Additionally, energy advisors employed by regional forestry centres, as well as universities and polytechnics, may provide support for heat entrepreneurs. Analysis through a social sustainability perspective indicates that heat entrepreneurship has changed the entrepreneurs’ lives. For some, it has provided a significant additional income that has enabled the farmer to continue residing on the farm. The additional income is not crucial for all entrepreneurs but it does provide a suitable addition to farming activities and offers a welcome extra source of revenue. As heat entrepreneurship differs from farming, it has broadened livelihood options to other areas and increased possibilities to utilize forests beneficially. Thus, farmer heat entrepreneurs are less dependent on one income source and their economic capital is wider. However, heat entrepreneurship offers no guarantee for an increased income. Some interviewed farmers professed that the addition to their income has been modest and they are searching for additional options or possibilities to expand their heat entrepreneurship businesses. In addition, some farmers have become heat entrepreneurs for reasons other than financial gain, such as the opportunity to heat

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their own farms more economically. In these cases, the financial benefits have remained minor. However, most heat entrepreneurs are content with their business and find it economically feasible. Engagement in the heat entrepreneurship business has resulted in farmers feeling an increased sense of pride in their work. Farmers may experience feelings of inferiority in standard farming due to the subsidies they carry. As a result, many farmers find it satisfying to engage in ‘real’ work, in a business that is profitable without subsidies. In addition, farmers feel that the public image associated with wood energy production is very positive, which further increases the sense of satisfaction they have in their work. During the early phases of heat entrepreneurship, however, the concept of wood energy often caused suspicion among locals and decision makers. Such suspicions often proved troublesome for farmers struggling to establish their businesses. However, after the plants were constructed and were successfully operating, suspicions gradually faded and support for the plants has since become strong. Today, all the interviewed entrepreneurs feel that their business is widely appreciated among the community and beyond. Heat entrepreneurship creates many beneficial relationships. On one hand, being on duty 24 h a day is often trying and may cause stress in family relationships, especially when commencing the operation of a new heating plant and alarms are frequently set off. On the other hand, the formation of strong networks with other members of the heat entrepreneurship cooperative has created new relationships and increased contacts. This, in turn, has created more free time for farmers. A farmer’s work is often viewed as lonely drudgery, thus heat entrepreneurship offers a welcome change because it offers opportunities to work with others and share responsibilities. As an additional benefit, heat entrepreneurship may produce valuable contacts in the business world and with municipal decision makers. Some heat entrepreneurs approach their business merely as an interesting hobby that lends a modest financial benefit for forest management as an additional bonus. Those that have gained a significant income from heat entrepreneurship allege that it has given them an important new challenge. These entrepreneurs claim it has been fascinating to challenge themselves with a new issue or to broaden their understanding of wood heating, which was previously only used on a small scale on farms. Another socially important consequence is the amplified value placed on the farmers’ own forests and on local forests, in general. Also, the landscape appears to have improved. This is largely due to increased management of young forests and to the clearing of roadsides and other thickets. The future is assessed by the stability of current livelihoods and by the possibilities that are available for the next generation. The latter is especially relevant if the heat entrepreneur has children of his own. These farmers predict there will be entrepreneurial opportunities for their children in the future, especially within heat entrepreneurship. Some also believe the financial benefits will be significant enough to earn a living on heat entrepreneurship alone. It is somewhat concerning that wood-based heating and especially the collection of wood fuels is not regarded as a desirable occupation. Unfortunately, it is possible that the future may not hold much employment interest in this sector.

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More generally, heat entrepreneurship is regarded as providing opportunities for entire regions. This is due to the generation of additional employment opportunities, especially for the underemployed, such as local forestry workers. Forestry also benefits by heat entrepreneurs purchasing wood that would otherwise have no market. Thus, it is typical for heat entrepreneurs to regard their business as one that strongly benefits the region. The municipality also benefits, as local fuel is cheaper and consumers are able to purchase heat at a lower price than oil heating can offer. In this way, the availability of and access to energy is also improved. Occasionally, the heat plants and their models of operation have become a local attraction. Those who are interested in establishing a heat entrepreneurship and others that are curious about the operation travel to view the plants, sometimes from abroad. In addition, heat entrepreneurship has supported and even created new local manufacturers, especially when the manufacturer is a co-owner in a heat enterprise.

Biogas Production Biogas production models are very similar to heat entrepreneurship ones. The production model is pictured in Fig. 10.2, using the same principles as those for heat entrepreneurship, in Fig. 10.1. Instead of one large cooperative, however, the energy production activity is independent and based on a single farm. Biogas is produced by anaerobic digestion, primarily using cow or pig manure but occasionally by employing other farm-based or industrial biowaste. Some farms also cultivate ‘energy plants’ to be used in biogas production. If industrial wastes are used, the biogas producer may possibly gain additional income from waste management. The resulting biogas can be used on the farm to produce heat and electricity or it may be stripped further, to be utilized as traffic fuel. Besides biogas, the anaerobic digestion process also produces digestate, which is the solid remnant of the digestion process. The digestate can be applied as fertilizer on the farm, in very much the same manner as manure. The nutrients in the digestate are more readily utilizable and it omits less odour than untreated manure. The energy is mostly used to meet the farm’s energy requirements and as heat. Some of the interviewees also produced electricity and one produced traffic fuel. However, several had plans to begin electricity and traffic fuel production in the near future, especially if the technology becomes more readily available and if selling electricity and traffic fuels becomes more profitable. Electricity and traffic fuels are more marketable than heat. Nevertheless, the majority of the energy would still be used on the farm and many were hopeful that they would not have to purchase external energy. In its simplest form, biogas production offers a solution to the farm’s manure management problems, while simultaneously providing heat. In this study, biogas production has no connections whatsoever outside the scope of farms. Projected future changes and extensions, in the form of electricity production or the utilization of industrial biowaste, for example, present the possibility for more contacts and have the potential to increase economic incentives for biogas production.

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Fig. 10.2  Model of farm-based biogas production from a farmer’s perspective (CPH refers to the combined production of heat and power)

Initial investment costs in biogas production are high, which deter many from establishing a biogas production and also reduce the profitability of the business. The majority of biogas producers, especially those who began their production more than 5 years ago, were given their biogas reactors and other necessary equipment as some kind of pilot projects in cooperation with a university or polytechnic. Thus, they avoided at least a portion of the investment costs. Some of the participants have developed the biogas production system themselves and, by doing so, have successfully earned the opportunity to sell similar equipment to other farmers. If successful, it could create new kinds of rural business opportunities, including consulting. Currently, the financial incentive of biogas production is primarily via the reduction of the farm’s energy bill. Selling electricity is not economically profitable, as current Finnish legislation contains no feed-in tariffs for small-scale producers. However, the interviewees were optimistic about the future profitability of selling electricity, especially if the price of electricity increases and the legislation is amended, as the Finnish Government has promised. Thus, the future of biogas production appears promising, even if initial investment costs are considerable and thus restrictive to other development of the farm.

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As previously mentioned, the motivation for farm-based biogas production lies more in manure management than in financial gain. Digested manure omits less odour and thus is a preferable fertilizer, at least from the perspective of neighbours. Another important incentive for biogas production is the challenge it offers the farmers. Many consider the production to be an interesting hobby but it also has greater potential value. Biogas production in Finnish conditions at a farm scale is still so rare, that the most suitable production concepts are strongly under development. For the farmers to be a part of this development work and be able to manage the biogas production process adds an important asset to the farmer’s skills. To carry this concept a step further, if farming suddenly became unprofitable for the biogas-producing farmer, he would have gained significant skills that could be used in another sector, such as waste management. Thus, the capabilities of the farmer have increased. Compared to heat entrepreneurship, biogas production includes considerably less social networking. Production is largely accomplished on a single farm basis and no external inputs or outputs are required. Many of the biogas producers claimed that they are able to discuss problems and issues of interest with other biogas producers. However, not all producers felt the same way. Some felt rather alienated and expressed that the production was not the experience they had expected it to be, especially in regards to profitability. This seems to be particularly common with producers who have only recently commenced their production. Biogas production in Finland is still uncommon, and the producers have to work hard to establish and promote its production. So, despite all the media attention, even officials are not necessarily aware of all required permits or available grants regarding biogas production. Biogas production can be regarded as pioneering work that requires the producer to be enthusiastic and passionate about technological development work. Biogas production has often been greeted with suspicion from the local community. It has been considered a ‘fool’s errand’ and has repeatedly been met with laughter. A strong belief in one’s work is thus required from the producer. However, there has been a major shift in attitudes during the last few years and producers are no longer laughed at. Today, many biogas producers show their farm and biogas production plant for busses full of interested people and the surrounding community has begun to value the biogas production activity. This has resulted in increased self-esteem and greater work appreciation for the farmers. Biogas producers are strongly optimistic about the future of biogas production. Some even see a future in it for their children, especially if the sale of electricity and traffic fuels becomes feasible. To some extent, the farmers also consider the possibility of stopping conventional farming altogether and becoming energy producers using cultivated crops and waste materials. The benefits of biogas production extend throughout Finland and not just to the near community or region. Biogas production could be a solution to sustaining Finnish energy production. It could replace imported energy and simultaneously treat unutilized waste materials. The income would mostly benefit rural areas, which, from the interviewees’ opinion, need it most crucially.

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Fig. 10.3  Production model of biodiesel production from a producer’s perspective

Biodiesel Production Biodiesel producers were the smallest group among the participants. Biodiesel production was also the category that producers regarded to be simply a hobby or experimental activity. The model for farm-based biodiesel production is presented in Fig. 10.3. Biodiesel is produced primarily from rapeseeds via compression and estherification. Not all biodiesel producers perform the estherification themselves but rather, the vegetable oil is transported to a location outside the farm to be processed into biodiesel. The by-products from biodiesel production provide the farmers with straw, glycerol, protein rich animal feed and in some cases, part of the vegetable oil that is not processed into biodiesel. All the by-products can, hypothetically, be used profitably, thus providing additional income for the farm. If the animal feed is not sold, it is used to feed the animals on the farm. Biodiesel is mostly used on the farm but it can also be sold outside the farm. Biodiesel may be produced on one farm or on cooperatives of several farms. Biodiesel producers are generally well connected and they provide an important support network for one another. Furthermore, equipment manufacturers provide important assistance to biodiesel producers. The producers are also well connected to the surrounding community due to various collaborations relating to the acquirement of raw materials and the utilization of side products. When comparing the networks of farm-based bioenergy producers, biodiesel producers can be placed

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between heat entrepreneurs and biogas producers. Biodiesel producers clearly have a wider production-related network than biogas producers but smaller than heat entrepreneurs. Despite many by-products, biodiesel production is not significantly profitable for the farmers. Although some predict the profitability of biodiesel production to improve in the near future, in many cases, the current production expenses exceed profits while in other cases the costs and profits are on par with one another. Currently, biodiesel production remains more of a hobby and a nice addition to other, more profitable farm activities. Biodiesel production is time consuming but it provides an interesting project that warrants further study and development. Similarly to biogas production, the new skills obtained by the practicing farmers may prove to be useful outside the agricultural sector. Some biodiesel producers have taken part in development projects that have directed them to further interesting projects and contacts. Many biodiesel producers began their production with hopes of attaining fuel self-sufficiency, in both traffic and machinery fuels. Some have additionally considered heat and electricity production. Producers feel a sense of pride when driving cars or machinery powered on fuel they have produced themselves and thus the appreciation they have for their work is strong. The environmental friendliness of the fuel and the belief that they are improving the quality of the environment with their biodiesel production activity further increases the pride the producers take in their work. In general, the producers have high hopes for the future regarding their own biodiesel production activities, as well as for the importance of biodiesel production on a Finnish fuel palette and as a solution to reducing the import of proteinrich animal feed. On the other hand, as the production is currently more of a hobby than a business, producers would not entrust their children’s futures or regional development on biodiesel production alone. More importantly, the by-products and networks that are gained from biodiesel production offer hope for future profitability and additional business opportunities. Like biogas production, biodiesel production has also been met with scepticism and producers have endured much public doubt and cynicism regarding the possibilities of biodiesel. Recently, however, biodiesel production has gained more credibility as more people have become interested in its production and more positive towards its potential. This has strengthened the producers’ faith in their production activity and renewed optimism in the future potential of biodiesel.

Similarities and Differences in Social Sustainability The various models of bioenergy production on Finnish farms represent different types of social sustainability, at least according to the bioenergy-producing farmers. The various characteristics of social sustainability related to each bioenergy production model are presented in Table 10.2. It is clear that heat entrepreneurship produces the greatest number of factors reinforcing social sustainability both regionally, in the future and in the producer’s current life. The way in which these factors are

2. Farm and its future

1. Energy producer’s personal life

Good opportunity for the next generation Benefits the rural area and makes it more of an appealing environment to reside in

Improved self-image as producer of domestic energy participating in ‘real work’, as opposed to farming Increase in knowledge Reinforced relationships in production-related networks Interesting hobby Forests in better condition

Own energy production and ensuing positive economic effects Investment costs economically restricting

Extra income from energy production and forests Better availability of energy, own energy production Resilience in income opportunities

New contacts Time consuming

Time consuming Some new contacts Less odour from manure – improved environment Possible business for the next generation Part of the future of farms, benefits rural areas

Possibly important in the future

Interesting hobby

Possibly more resilience in the future, currently more of an economic burden Increase in know-ledge, self-importance

Expensive investment, utilization may be expensive

Own fuel and ensuing positive economic effects

Biodiesel production

Interesting hobby

Waste management and energy production enable more resilience in the future Being prepared for stricter manure management regulations Financial commitment restricts other options Increase in knowledge, self-importance

Biogas production

Heat entrepreneurship

Table 10.2  Commonalities and differences in bioenergy production on the social sustainability framework

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3. Local area

Dependency on business partners Trust Increased participation by own energy production in the community Local image is enhanced by wood energy Industrial development Tourists

More contact among local people

Income from forests Small-scale local industry emerges Local energy Initial prejudices, now widely supported

Increased employment opportunities

Heat entrepreneurship

New emerging businesses Tourists

Possible financial benefits from buying raw-material and selling biogas Possible employment Waste management Local energy Initially a curiosity, now more accepted and interesting Less odours from manure – better relationships with neighbours A very small amount of cooperation or no cooperation at all

Biogas production

New emerging businesses Tourists

Initially a curiosity, now more accepted and interesting Cooperation related to biodiesel production

Financial benefits from selling and buying by-products and raw materials for biodiesel production Local energy

Biodiesel production

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perceivable in different heat entrepreneurships varies, depending on the form of the enterprise and the role of the particular entrepreneur but, in general, social sustainability is reinforced by heat entrepreneurship in all cases. In regard to heat entrepreneurship, this study reinforces the results presented in previous studies regarding the observation that heat entrepreneurship increases the capabilities of producers and fortifies their abilities to adjust to changes (e.g. Leskinen et al. 2006). Social networks that are formed by the production and their reinforcement are a central cornerstone in this process (Åkerman and Jänis 2005), which partially also ameliorates the aesthetic appeal and social cohesion within the locality. Locally, heat entrepreneurship also improves the economy. Local forests are more efficiently used, new employment is created and in some cases, small-scale local industrial activity emerges. In addition, the availability of energy within the local area increases when compared to oil-based energy use. Furthermore, the energy is usually cheaper for the end user. Biogas and biodiesel production appear quite similar in the framework. Both are relatively new activities for the producer and the community and thus they are associated with some amount of insecurity and financial risk. In the early stages, it appears that biodiesel and biogas production diminish the capabilities of the farmers by demanding heavy investments and commitment. In the long run, however, the investment can prove to be very profitable, as the skills and networks of the farmers improve. At the local level, biogas and biodiesel production are weaker in their ability to create social sustainability when compared to heat entrepreneurship. In biogas production, particularly, the producer is rather alienated and without a local support network. In biodiesel production the situation is improved, due to various by-products. However, it should be emphasized that both lines of production are still young and not all of the necessary networks and patterns of action are fully developed yet, nor are there any replicable models in place, as there are for heat entrepreneurship. In addition, initial suspicions and prejudges might have hastened the farmer’s interest in cooperating with others. Heat entrepreneurship has been actively developed for more than 10 years and has a nationwide network of advisors. It is probable that these measures have influenced the formation of social sustainability. Producers of all three forms of bioenergy production consider production to be an enriching element in their lives. It provides new skills and improves the appreciation they have for their work. These can be regarded as the most important aspects of social sustainability in farm-scale bioenergy production. They clearly illustrate how the different production models can promote social sustainability (cf. Jokinen et al. 2008). This study also demonstrates what forms of multifunctionality farm-scale energy production can promote. As a result, farm-based energy production interestingly becomes part of the discussion on rural development and the various related visions (Jokinen and Järvelä 2008). Will energy production become a central part of sustainable rurality and, more importantly, can it help to promote the process of sustainability in the rural areas? A thorough assessment must include ecological, economic as well as cultural dimensions of sustainable development, which were not included in this study.

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Conclusions There are various new types of bioenergy production that have evolved alongside farm activities in Finland. The effects of these productions are still relatively unstudied. In this research, farm-based bioenergy production was examined in relation to social sustainability, using a framework analysis created specifically for this purpose. The framework proved to be a successful tool in analysing social sustainability. Based on this study, farm-based energy production can significantly promote social sustainability in rural areas, especially by increasing the capabilities of the producers. However, biogas and biodiesel production, particularly, are risky endeavours that are very demanding. Thus, significant development work is still required in order for these productions to become secure and care should be taken while promoting these, in order to avoid false hopes and disappointments. Biogas and biodiesel production are still unstable and many issues related to social sustainability must include the word ‘potentially’.

References Alanen, V.-M. (2007). Lämpöyrittäjätoiminta 2006. TTS Tutkimuksen tiedote, metsäsarja nro 715. Työtehoseura. Arovuori, K., Kola, J., Lankoski, J., Ollikainen, M. (2006). Monivaikutteinen maatalous ja politiikat. Helsingin yliopisto, taloustieteiden laitos. No. 41. Helsinki. Bergmann, A., Colombo, S. Hanley, N. (2008). Rural versus urban preferences for renewable energy developments. Ecological Economics, 65:616–625. Bucholz, T. S., Volk, T. A., Luzadis, V.A. (2007). A participatory systems approach to modeling social, economic, and ecological components of bioenergy. Energy Policy, 35:6084–6094. Connelly, S. (2007). Mapping sustainable development as a contested concept. Local Environment, 12(3):259–278. Domac, J., Richards, K. -Risovic S. (2005). Socio-economic drivers in implementing bioenergy projects. Biomass and Bioenergy. 28: 97–106. Dryzek, J.S. 2005: The politics of the earth. Environmental discourses. Second edition. Oxford: Oxford University Press. Elghali, L., Clift, R., Sinclair, P., Panoutsou, C., Bauen, A. (2007). Developing a sustainability framework for the assessment of bioenergy systems. Energy Policy 35:6075–6083. Elliott, D. (2000). Renewable energy and sustainable futures. Futures, 32:261–274. Elliott, J. A. (2005). An introduction to sustainable development. Third edition. London: Earthscan. Illsley, B., Jackson, T., Lynch, B. (2007). Addressing Scottish rural fuel poverty through a regional industrial symbiosis strategy for the Scottish forest industries sector. Geoforum, 38:21–32. Jokinen, P., Järvelä, M., Puupponen, A, Huttunen, S. (2008). Experiments of sustainable rural livelihood in Finland, International Journal of Agricultural Resources, Governance and Ecology, (IJARGE), 7(3), 211–228. Jokinen, P., Järvelä, M. (2008). Ruuan tuotanto ja maaseudun kehityksen visiot. Futura, 28(3) 71–75. Juurola, M. Karppinen, H. (2003). Sosiaalinen kestävyys ja metsien käyttö. Metsätieteen aikakausikirja 2/2003: 129–142. Järvelä, M. Jokinen, P., Huttunen, S., Puupponen, A. (2009). Local food and renewable energy as emerging new alternatives of rural sustainability in Finland, European Countryside, 1: 2, 113–124.

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Kemmler, A., Spreng, D. (2007). Energy indicators for tracking sustainability in developing countries. Energy Policy, 35(4), 2466–2480. Kuittinen, V., Huttunen, M.J., Leinonen, S. (2007). Suomen biokaasulaitosrekisteri n:o 10. Tiedot vuodelta 2006. Joensuun yliopisto, Ekologian tutkimusinstituutin raportteja no 3. Leskinen, L. A., Peltola, T., Åkerman, M. (2006). Puuenergia, metsätalouden toimintakentän muutos ja sosiaalinen kestävyys. Metsätieteen aikakausikirja 2/2006: 293–304. Marsden, T. (2003). The condition of rural sustainability. Van Gorgum. Marsden, T., Sonnino, R. (2008). Rural development and the regional state: Denying multifunctionals agriculture in the UK. Journal of Rural Studies. 24:422–431. Meadowcrodt, J. (2000). Sustainable development: A New(ish) idea for a new century? Political Studies, 48:370–387. Mol, A. P J. (2007). Boundless biofuels? Between environmental sustainability and vulnerability. Sociologia Ruralis, 47(4), 297–315. Peltola, T. (2007). Business on the margin: local practices and the politics of forests in Finland. Ethics, Place and Environment, 10(1), 29–47. Rannikko, P. (1999). Combining social and ecological sustainability in the Nordic forest periphery. Sociologia Ruralis, 39(3), 394–410. Rantala, T., Hakkarainen, J., Karppinen, H., Korhonen-Salapuro, P., (2006). Metsien käytön sosiaalisen kestävyyden tulevaisuuden haasteet. In Saastamoinen et al. (Eds.) Näkökulmia metsäalan sosiaaliseen kestävyyteen ja sen tulevaisuuteen. Joensuun yliopisto, Metsätieteellinen tiedekunta, Tiedonantoja 168:11–52. Rikkonen, P. and Tapio, P. (2009). Future prospects of alternative agro-based bioenergy use in Finland – Constructing scenarios with quantitative and qualitative Delphi data. Technological Forecasting & Social Change. 76: 978–990. del Río, P., Burguillo, M. (2008). Assessing the impact of renewable energy deployment on local sustainability: Towards a theoretical framework. Renewable and Sustainable Energy Reviews, 12:1325–1344. Saastamoinen, O., Donner-Amnell, J., Rantala, T. (Eds.) (2006). Näkökulmia metsäalan sosiaaliseen kestävyyteen ja sen tulevaisuuteen. Joensuun yliopisto, Metsätieteellinen tiedekunta. Tiedonantoja 168. Sen, A. (1999). Development as freedom. Oxford: Oxford University Press. Scoones, I. (1998). Sustainable rural livelihoods: a framework for analysis. Working paper 72. Brighton: Institute of Development Studies. Singh, R., Kumar, M.H.R., Gupta, S. K., Dikshit, A. K. (2009). An overview of sustainability assessment methodologies. Ecological Indicators, 9(2), 189–212. Tykkyläinen, M. (1995). Asutustoiminnan taloudelliset vaikutukset. In Laitinen, E. (Ed.). Rintamalta raivioille. Sodanjälkeinen asutustoiminta 50 vuotta (pp. 139–158). Helsinki: Atena kustannus. WCED (1987) Our common future. Oxford: Oxford University Press. Wilson, G. (2008). From ‘weak’ to ‘strong’ multifunctionality: Conceptualising farm-level multifunctional transition pathways. Journal of Rural Studies, 24(3), 367–383. Åkerman, M., Jänis, L. (2005). Lähienergiaa puusta – maatalouden ja energiantuotannon synergiaeduista voimaa maaseudun kehitykseen. Maaseudun Uusi Aika, 13(3), 41–48.

Chapter 11

Energy Sustainability: The Role of Small Local Communities Pia Laborgne

Keywords  Energy sustainability • Local communities • Bioenergy • Energy transition

Introduction Energy conservation and its sustainable production are important components of climate protection. The energy sector significantly contributes to Europe’s CO2 emissions. Commonly, the primary focus in literature and the media is on global governance, policies and instruments (Bulkeley and Kern 2004). However, ­emissions are produced locally and the local level is important, especially in the implementation of climate change policies (Aall et al. 2007; Brunnengräber et al. 2008; Bulkeley and Kern 2004, 2006; EEA 2009; Kern 2009). But local communities do more than merely implement strategies designed at other levels of governance; they have a wide range of initiatives and strategies adapted to their particular local ­context and needs. “Frontrunner Cities” like Malmö and Freiburg are acting as ­“pioneers of change” and provide best practice examples (EEA 2009). Climate change, as well as rising costs and scarcity of resources make energy supply and consumption an important challenge at the local level and “energy sustainability” a key subject in their development.

P. Laborgne (*) European Institute for Energy Research/KIT, Karlsruhe, Germany IWAR, Technical University of Darmstadt, Darmstadt, Germany e-mail: [email protected]; [email protected] M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0_11, © Springer Science+Business Media, LLC 2011

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What is energy sustainability? Tester et  al. (2005: xix) define it as “a living harmony between the equitable availability of energy services to all people and the preservation of the earth for future generations.” More specifically, it represents resource efficiency concerning the production and utilization of energy, as well as the reduction of CO2 emissions. For local communities, energy sustainability should also include an energy strategy that contributes not only to local resources and the CO2 balance but to local economical and social development, as well. This article raises two main questions: To what extent can local communities contribute to climate change mitigation by local energy-related activities and how can these activities be integrated into an overall local sustainable development strategy? The focus is on small communities (up to 10,000 inhabitants). By analyzing their action potential and by examining the case studies of three local communities, it will be demonstrated that even small, local communities have a role to play in climate protection and that assuming this role can be part of a strategy to improve local sustainable development in ecological, economical and social terms. Energy efficiency, the reduction of energy consumption (sufficiency) and the sustainable production of energy are regarded as complementary aspects. There is no single solution, and multiple courses of action, requiring a broad integrated approach, must therefore be applied (EEA 2009). First, the spheres and scope of action, as well as the possible roles of local authorities regarding the sustainable production and use of resources at the local level, will be identified and impacts of important societal transformations framing these roles will be observed. The various roles correspond to different modes of local governance1 (Bulkeley and Kern 2006). The case studies demonstrate how local communities in Germany assume these roles to sustainably produce and ­consume energy and how they can be integrated into a wider strategy for sustainable local development. Three approaches to enhancing local energy sustainability are presented, each based on case studies. The Königsfeld approach is quite broad, integrating renewable energies, energy efficiency and incentives aimed toward citizens and other local actors, regarding consumption. The two other examples, Rottweil-Hausen and Jühnde, are primarily focused on the production and use of bioenergy. In Germany, contests, like the “Solar Bundesliga,”2 seem to offer important incentives. The awards allow local achievements to be publically recognized and highlight best practice examples for other cities and towns. Some of these examples and their application in the diffusion of sustainable energy communities are discussed. The question of transferability from one context to another is also addressed.

“Governance” defined after Kooiman (2003) as encompassing “forms of governance associated with the state (hierarchy), coordination and co-operation among social and political actors, as well as self-governing mechanisms” (Bulkeley and Kern 2006). 2  http://www.solarbundesliga.de/ (accessed October 2009) In allusion to the German Bundes Soccer Leage, cities and towns compete on m2 of photovoltaics/solar heat per inhabitant. 1 

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Transformations in the Landscape and Regime of Energy Production and Consumption Energy Infrastructure as a Socio-Technical System Energy infrastructure is a key element for coping with global environmental changes. Its forms and employment are decisive for resource consumption and the mediation of resource distribution (Monstadt 2009). The transition beyond incremental improvements to more sustainable energy production and consumption has significant effects in the ecological, economical and social aspects of sustainability. As a socio-technical system (Hughes 1987) of physical and social elements, energy infrastructure is shaped by technological as well as societal structures. Path dependencies stabilizing it can be found in either sphere. According to Mayntz (2009), the energy sector can be differentiated into production (technology and organization) and regulation. However, the field of consumption should also be integrated in the analysis (Konrad et al. 2004). These elements dictate the path of local energy sustainability. To discern the transformation of energy infrastructure, the concept of a sociotechnical regime can be helpful (Geels 2002). It describes “semi-coherent sets of rules carried out by different social groups” (Geels 2002: 1260) and explains the stability of socio-technical configurations. The regime is part of a multi-level concept (Geels 2002) and is situated between the landscape (external factors) and the niche on which new elements are developed and tested. In cities and towns, visions of changes in the energy regime can be experimented and the results of this can be transferred or can have influence on upper governance levels (Rohracher and Späth 2009). The case study and literature-based hypothesis contend that small, local communities present an appropriate context for such an experimentation of new, local approaches. These local developments can be starting points for transitions in the sector of energy production and consumption.

Recent Transformations Shaping Local Courses of Action Since the 1990s, the energy sector has undergone important transformations (Konrad et al. 2004). On the one hand, they have been induced by policies advocating privatization and liberalization, as well as by ecological and economical challenges. On the other hand, technological changes offer opportunities to meet such challenges (Mayntz 2009). Four important developments directly besiege local energy strategies: 1. Climate change is at the forefront of public discourse and the imminent need for action attributes responsibility not only at international and national levels but also at the local level. 2. Striving for the efficient use of resources is not only motivated by climate protection but by local (economic) interests as well: The increasing cost of energy effects local economies, especially in the context of the financial crises faced by many communities.

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3. Liberalization and privatization led to a transformation of the energy sector (Altvater 2003; Monstadt 2004) that restricts the influence of local communities on the one hand (Bulkeley and Kern 2006; IEA 2002; Kern et al. 2005) but has also opened the markets for new entrants (Walker et  al. 2007) and provided options for alternate energy suppliers, on the other hand (Graichen 2003). 4. Decentralized, renewable energy systems, in particular, have the potential to transform the traditional, centrally organized energy infrastructures dominated by a few prominent power companies. They present new, local opportunities for the production of energy and the use of local resources. New actors become involved and challenge the traditional governance of energy systems. National feed-in tariffs and other, similar schemes in several European countries support this development (Giddens 2009; Mendoza 2007). These transformations have important impacts on the different roles that local communities can have on climate protection.

Efficient Production and Use of Resources: Spheres of Influence and Roles for Local Communities In many international documents, such as Agenda 21 in the Rio Declaration of 1992, local communities are attributed an important role. The local level is defined as the level of implementation (Brunnengräber et al. 2008). Yet communities do not just directly implement: There is a wide range of initiatives and many different paths adapted to their own local context and needs. The spheres of influence and roles focus chiefly on local authorities and what they (can) do in cooperation with various local actors, thus, on local government and the governance of energy sustainability. The term “local authorities” is applied here as a generic term for all local governments and local public offices at the level of a city or a municipality and the term “local community” refers to a wider context, including different actors in a territory.

Spheres for Local Action Concerning Energy The spheres of influence and scope of action for local communities regarding energy are quite extensive, as local governments are immersed in all aspects of energy policy (Council of European Cities and Municipalities CEMR 20093). They can: 1. Influence local energy demand directly through the management of their own energy consumption in public buildings and street lighting 2. Produce energy, promote local energy production and use renewable energy

http://www.ccre.org/ (accessed October 2009).

3 

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3. Influence local demand indirectly by: • Motivating and informing consumers about efficient energy consumption, producing energy and using renewable-based energy • Strategic decisions related to urban development such as the promotion of high urban densities or integrated land use and transportation planning 4. Develop resource efficient mobility concepts4 Energy decisions in favor of more efficient systems and renewable energy can promote local energy production and reduce dependencies on energy resources from other regions. Local energy production and programs for energy efficiency create employment and local creation of value in sectors such as agriculture and artisanry. Local incentives for refurbishment or the use of renewable energies, especially when combined with the creation of local networks and training programs, can generate a demand for local services and even enhance local artisanry in regional markets. Increasing energy efficiency in buildings presents an important approach for reducing CO2 emissions (Wilcken and Janssen 2006). More than 30% of CO2 emissions in Germany are derived from the conversion of energy for domestic heating and hot water. Reasons include the use of fossil energy sources, the high energy consumption in the existing building stock, as well as the use of old, inefficient heating systems (ZSW5 2006). In northern countries, renovations (such as insulating homes) represent the most effective technical measure to increase energy efficiency and should be considered first. The European Climate Alliance states that on average, each municipality spends between 10 euro and 30 euro per inhabitant each year for heat, electricity and water. It has been proven that around two euro can be saved, per inhabitant, each year simply by renovations (Wilcken and Janssen 2006). As early as 1998, the Ministry of Economy of the federal land Baden-Wurttemberg calculated a potential of 30% in savings and a cost effectiveness of an own responsible in the municipal administration for energy for a municipality with at least 10,000 inhabitants (Ministry of Economy of Baden-Württemberg 1998).6 Nevertheless, renewable energy seems to motivate local actors more than measures aimed to reduce energy consumption. It is more visually prevalent7 and the effects (units of energy produced by renewable energy technologies) are easier to measure. Solar energy appears to possess a highly symbolic value and is associated to the concept of “clean energy.” Solar panels clearly and visibly exemplify local commitment to climate protection.8 Additionally, local initiatives for energy sustainability have positive effects on the image of a community (Wilcken and Janssen 2006) and potentially even attract tourism and new inhabitants. The sector of mobility/transport is not the focus here but represents an important sphere of local action for energy as well. It tends to be a neglected field in local energy policy. 5  Zentrum für Solarenergie und Wasserstoffforschung (Centre for Solar Energy and Hydrogen Research Baden-Württemberg). 6  In smaller towns, regional energy agencies are promoted by different programs. 7  In the case of wind energy, the visibility can create acceptance problems as well. 8  In one of the case studies, it was clearly stated that these aspects and local acceptance have played an important role in the choice of this sustainability approach (Roudil et al. 2008). 4 

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Municipal Roles Regarding Energy Local Communities in the German Context In Germany, local governments are not restricted to the duties mandated by upper level administration and have a right to “self-government.” 9 Generally, (Gabriel et al. 1997 cited from Walter 2002) municipal duties fall into one of four categories: Voluntary duties of self-administration, binding duties of self-administration, binding duties on instruction and instructions on demand. Of course, the scope of action is restricted by upper level regulation (federal level, state level and the European level). Moreover, the guaranteed autonomy has been considerably reduced in practice by inadequate financial resources for several years now (Bulkeley and Kern 2004; Sack and Gissendanner 2007). In Germany, climate change policy has been employed on a voluntary basis (Bulkeley and Kern 2004), whereas municipal policies in the UK (Bulkeley and Kern 2004; Kern 2009) and France,10 for example, are mandated. The German state functions more as a facilitator (Kern 2009).

Municipal Roles Energy supply has traditionally been an important domain for local authorities in Germany (Kluge and Scheele 2003). “Stadtwerke,” traditional, local, communityowned municipal utilities, influenced local production. This influence has been restricted in the framework of liberalization and privatization but energy supply nevertheless remains an important field at the local level. In Germany, energy supply is part of the communal self-government under constitutional law. Local authorities are responsible for assuring that citizens have an adequate energy supply. This can be accomplished through community-owned Stadtwerke (municipal utilities) or by signing a concession contract with another utility, for a period of up to 20 years. Municipalities owning Stadtwerke can directly influence corporate policy, while others exert influence primarily through terms and conditions in the concession contracts (based on the energy industry act EnWG). Many concession contracts will need to be renewed in the coming years, which may lead to interesting new energy paths and opportunities. Municipalities may

Basic Law for the Federal Republic of Germany (Grundgesetz, GG), Article 28 (2) Municipalities must be guaranteed the right to regulate all local affairs on their own responsibility, within the limits prescribed by the laws. Within the limits of their functions designated by a law, associations of municipalities shall also have the right of self-government according to the laws. The guarantee of self-government shall extend to the bases of financial autonomy; these bases shall include the right of municipalities to a source of tax revenues based upon economic ability and the right to establish the rates at which these sources shall be taxed. 10  http://www.legrenelle-environnement.fr/IMG/pdf/projet_loi_grenelle2.pdf (accessed May 2010). 9 

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contractually stipulate renewable-based energy production, the creation of an energy counseling center or even a concept for the local promotion of electric mobility (Heinrich Böll Stiftung 2009). An alternative solution is to create a municipal utility and purchase the net from the previous owner. An extraordinary and interesting example occurred in 1997, in the town Schönau (2,400 inhabitants) where the grid was procured by a local citizen’s initiative against nuclear energy. Since 1997, the “Elektrizitätswerke Schönau” (EWS, Schönau Power Station) has taken over local energy distribution and has even expanded to include around 86,000 ­customers across Germany (EWS 8/2009).11 There is a tendency toward recommunalization or the re-acquisition of municipal utilities, mostly in the hope of achieving an active ecological local energy policy (Graichen 2003). Others claim a clear regression is occurring in countries that have previously had a strong involvement, like the Netherlands and Germany (IEA 2002; Kern et  al. 2005). Additionally, municipal utilities are influenced by competitive pressure and financial restrictions – circumstances that constrain technological options (Kern et al. 2005). The abolishment of former regional monopolies by the Energy Industry Act of 1998 allowed consumers to choose their energy provider (EnWG 1998) and significantly diminished the influence of municipalities (Kern et al. 2005). This freedom of choice has failed to initiate a rush for providers offering energy from renewable sources.

Typology of Roles for Local Authorities The Council of European Cities and Municipalities12 has delegated local authorities two major roles in climate protection: As a consumer and a promoter of sustainable practices via planning and public education (CEMR 2009). The Climate Alliance of European Cities identifies four categories: (1) consumer and model, (2) planner and regulator, (3) advisor and promoter, (4) provider and supplier.13 Bulkeley and Kern relate these categories to different modes of local governance: “Self-governing,” “governing by authority,” “governing through enabling” and “governing by provision” (Bulkeley and Kern 2006: 2242). 1. As “consumer and model,” the municipality increases the energy efficiency of public buildings and technical equipment, motivates its employees to save energy and uses renewable energy sources. In municipal premises, the direct influence is quite significant, as the municipality can act directly without having to influence the behavior of other actors. Their role as a model is important in motivating

11  http://www.ews-schoenau.de/fileadmin/content/documents/Footer_Header/EWS_2008_EN.pdf; A case study has been realized by Patrick Graichen (Graichen 2003). 12  http://www.ccre.org/ (accessed October 2009). 13  http://www.localclimateprotection.eu/437.html (accessed October 2009).

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other actors to participate, as well as for the (perceived) legitimacy of complying to demands and the acceptance of local regulations. As stated above, energy conservation in municipal buildings (including schools and other communal properties) saves money, thus making it very enticing. An interesting approach, which has been particularly successful in schools is the “50/50” concept. The municipality, as a maintaining body, makes contracts with schools that motivate them to conserve energy by granting them 50% of the financial savings for their own use.14 Kliche (2003) calculates a theoretical potential of 180 million euro in annual savings from all German schools. Overall, public buildings account for around 2–5% of local energy consumption (Blümling 2000 cited from Kern et al. 2005; Climate Alliance 2009).15 The relative share of energy consumed by public buildings in the overall consumption of local communities is thus relatively low. Therefore, to fulfill their role as a promoter of good practice, it is important that local governments influence the behavior of other actors as well and not restrict their focus to municipal consumption exclusively. 2. As “planners and regulators,” local authorities can specify the standard regarding climate protection in new residential and industrial areas and prescribe the use of renewable energy or connections to a local heat network and determine energy standards for buildings.16 As climate protection is not directly linked to benefits for the local community, it is generally more difficult to act by means of rules and prohibitions. Moreover, resource consumption in the energy sector is difficult to judicially standardize, as it is highly custom related (Monstadt 2004; Kern et al. 2005). 3. As “advisor and promoter,” the local authority is responsible for raising awareness about energy-related issues, by methods such as 50/50 school projects or information campaigns. The goal is to motivate consumers to change their behavior, use more efficient technologies and insulate their homes. Even small municipalities have established local promotional schemes for renewable energies or energy advice centers (often in the framework of a regional cooperation that includes the local economy and organizations). Cooperative approaches to generating energy locally are known as “citizen wind power” or “citizen solar power stations.” Here, the role of the local municipality is mostly to inform interested citizens and/or offer incentives in the form of subsidies or space for installing power stations. 4. Finally, a local authority can use its role as a “provider and supplier,” to influence consumers by customized proposals. In European literature, discussions on local energy production can be traced to the 1970s (Walker et al. 2007), despite the prominence of centralized energy production systems at the time. 14   There are different models with different shares for the partners but the concept has become known under this name, see Kliche 2003. 15   http://www.localclimateprotection.eu/30.html?&L=0%3Fid%3D562 (October 2009). 16  An example is the “Marburger Solarsatzung” that has been contested but served as model for Barcelona, for example. It is criticized as being an “intrusion of proprietary rights” but has been confirmed recently (Longo 2009). Another one is local requirements for building standards in Freiburg (Rohracher and Späth 2009).

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As previously stated, the traditionally influential positions that German communities enjoyed in the field of energy provision have since been restricted substantially. In other fields, like waste disposition, the role of local authorities is still relatively strong (more direct, Kern et al. 2005).17 Forthcoming renewals of concession contracts will open up opportunities and the case studies will reveal that there are still interesting options to explore. An overview of municipal responsibilities in liberalized systems, such as Austria, Sweden, Spain, the United Kingdom, the Netherlands and France, is provided by the IEA MEELS project18 on municipalities and energy efficiency (IEA 2002). The project report states changes in municipal roles, due to influence by external events, such as the opening of the energy markets (Graz Report, IEA 2002). In Germany, Bulkeley and Kern have observed a tendency toward a more facilitative role in local climate governance due to decreasing financial resources and the European liberalization processes (Bulkeley and Kern 2004). Recent developments in Germany regarding local planning regulation may enhance regulatory roles. An analysis of the instrument of “Solarsatzung”19 and other regulatory instruments prescribing the integration of renewable energies in new buildings or during renovations confirms the position of local administrations like Marburg, having installed such local regulations (Longo 2010). But the scope of action for local communities in this field is juridically contested.

Circumstances in Small Local Communities Climate protection is equally relevant for small and medium-sized communities as it is for large cities and towns (ICLEI 2008). Smaller municipalities have some advantages: Local authorities in smaller communities are closer to consumers and to various local actors. Communication is more direct and actors can be coordinated with greater ease. For these reasons, city representatives may even envy small communities (Roudil et al. 2008). Small localities can set more ambitious targets like “100% renewables” (ICLEI 2008), or the vision of “energy autonomy.”20 This can considerably increase the motivation of municipal actors, the local economy and citizens to participate. Such “guiding visions” have an important role for transition processes (Späth and Rohracher 2010; Rohracher and Späth 2009). Small communities, especially rural ones, often have the advantage of more space and additional natural resources.

17  Another differentiation of roles can be made according to steering instruments (WindhoffHéritier 1987 in: Kern et al. 2005). They are: model, order/interdiction, offer, incentive and information/persuasion. 18  MEELS: Municipalities and Energy Efficiency in Liberalized Markets. 19  http://www.marburg.de/sixcms/media.php/20/Entwurf%20Satzung%20Solare%20Baupflicht%20 in%20Marburg%2C%20Stand_%2024.pdf (accessed September 2010). 20 For information and examples on “energy autonomy,” see e.g. www.fesa.de (accessed May 2010). “Energy autonomy” is a vision. It does not mean that the community is detached from the networks but rather that it produces as much energy as it consumes.

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The challenges are considerably greater in the context of large cities. An extensive range of actors in the city administration as well as in local civil society, citizens and local economy must be informed and coordinated. In a group discussion21 and in qualitative interviews (Roudil et al. 2008), local community representatives in Baden-Württemberg emphasized this point. However, they argue that the realization of climate protection measures in small communities largely depends on the motivation of local key actors, especially the mayor. The interviewees also expressed preference for the more institutional and formal process common to cities. Small and medium-sized communities have access to fewer financial and human resources. They are more dependent on external support, cooperation and joint action. This support and cooperation entails more than the mere exchange of ideas (ICLEI 2008). Rather, it involves concrete cooperation, like the joint implementation of services for energy agencies, for example, joint planning and regulations for purchases and technical infrastructure. In Baden-Württemberg, such regional energy agencies have been fostered by the federal land level. They offer an important source of information and advice, especially for smaller communities.22 Especially for rural communities, regional approaches seem promising (Späth and Rohracher 2009). Besides the regional energy agencies mentioned above, there are for example bioenergy regions as implementation of such regional approaches. Twenty-five are officially listed by the contest “bioenergy regions” of the German Ministry of Food, Agriculture and Consumer Protection.23 Two hundred and ten regions have applied in 2009 for this award to their concept to develop such a region, providing financial resources for its realization. In the following section, the approaches for energy sustainability in three small local communities will be discussed.

Case Studies: Local Approaches to Amending Supply and Demand Structures Case Study Selection Three cases, each conducted in small local communities and representing different approaches, are presented. The localities were selected for two reasons: They are cited as “best practice” examples and have been accompanied or analyzed by scien-

A group discussion consisting of seven representatives from local communities. Report in preparation (Laborgne et al. 2010). 22 For information, see: http://www.keabw.de/index.php?id=61 (accessed May 2010), website of the agency for climate protection and energy Baden-Württemberg. 23 http://www.bioenergie-regionen.de/regionen/ (accessed October 2010). 21

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tific case studies in the frame of different research projects. They also demonstrate various approaches and modes of governance. The selected cases are Königsfeld (“solar community,” “climate protection ­community” and “energy saving community”) and two cases with a focus on bioenergy: Jühnde (the first German “bioenergy village”) and a biogas project in RottweilHausen. Jühnde and Hausen were motivated externally, in the frame of scientific projects, while Königsfeld was inspired to act due to its historic and economic background. Since the success of these bioenergy community projects has become known, several other municipalities have followed their example.24 These cases, based on scientific projects, have allowed new approaches to be tested and developed that can be adapted to other contexts.

Methodology The Königsfeld case study was conducted in the framework of a French–German research project on regional and local strategies for energy efficiency and the use of renewable energies in buildings. It was financed by the French program “Prebat” (Ministry of the Environment),25 in 2008. It represents one of three German case studies. Semi-structured interviews with seven local actors in Königsfeld were conducted to outline local process, analyze motivation and strategies, as well as identify barriers and drivers. The other two case studies were obtained from literature. They are both extensively documented projects exploring and demonstrating local opportunities in the production and consumption of bioenergy. The approaches for these two cases will be presented separately, as they are considerably different from each other. But first, the concept of “bioenergy villages” will briefly be introduced.

“Bioenergy Villages” The European Commission Biomass Action Plan (2005) quotes several benefits to increasing the use of biomass: the diversification of Europe’s energy supply and increase of the share of renewable energies; a reduction of greenhouse gas emissions; employment opportunities for rural areas (with the target of 250,000–300,000

A map showing the “bioenergy villages” in Germany can be found at: http://www.wege-zumbioenergiedorf.de/bioenergiedoerfer/karte/ (accessed May 2010). 25  Perebat – Les Politiques Energétiques développées par les Regions dans le cadre du Bati; project led by the CSTB in cooperation with EIFER. 24

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jobs by 2010); and a potential reduction in the price of oil as a result of decreasing demand (Commission of the European Communities 2005). In Germany, around 9.5% of all energy consumption and 7.5% of thermal energy are renewable based. Bioenergy accounts for the greatest share (70% of renewable energy and 94% of renewable thermal energy) (FNR 2009; BMVEL 2008). In the heating sector, substituting renewable energy is the most simple and least cost-intensive solution (BMU 2009; Commission of the European Communities 2005). The use of bioenergy presents interesting economical opportunities for rural communities concerning the creation of local value and employment. Production is mostly decentralized, as transport over long distances is uneconomic for most combustibles (BMU 2009). Local energy production can offer rural communities new perspectives and structural transformations are often important motives for change (IZNE 2007). In Germany, approximately 100,000 work places are attributed to the bioenergy sector (BMVEL 2009). There are different local approaches. Two will be discussed in the following section. One of these examples represents a corporate approach, the second one has been established by the local energy utility, in cooperation with local inhabitants and especially, local farmers. Jühnde Jühnde was the first “bioenergy village,” born out of the scientific initiative of ­several researchers at the University of Göttingen. In 1998, the hope was to convert a complete historical village to renewable energies to demonstrate that such a conversion was possible not only for new residential areas but for historical ones as well (Schmuck et al. 2003). This goal was achieved in 2005, mainly by using biomass and slurry from local agriculture. The electricity generated (about twice the amount that is consumed in the village) is fed into the electrical grid and the heat is distributed by a local heating net. During winter, additional heat is produced by a wood-fired boiler. Extreme, cold weather can be bridged by a central fuel boiler that operates on rapeseed methyl ester (FNR 2008). The conversion of the heat energy infrastructure to bioenergy was scientifically analyzed to assess the impacts on the ecology, agriculture and inhabitants of the village. The results were intended to facilitate the transfer of the “bioenergy village” concept to other municipalities. In 2000, the Ministry for Food, Agriculture and Consumer Protection (BMVEL) consented to finance the project. During the initial phases, criteria for the selection of a municipality were compiled and finally, the inhabitants of 17 communities in the region were approached by means of a brochure and by informative meetings. The local media was integrated as well. All of this led to competition between the communities. Working groups of local actors and inhabitants were formed in several towns and local activities were initiated (Schmuck et al. 2003). Besides the disposition of active community participation (including a financial contribution), the number of agricultural farms able to provide the resources as well as social characteristics

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of the local community (expressed in the form of local associations and collectively realized projects) were important in the selection of the village. On the basis of these criteria, Jühnde was ultimately chosen for the project. The other townships formed a “Round Table of Bioenergy,” supported by the research team. The village of Jühnde26 (ca. 800 inhabitants, with eight full-time farmers) is located in Southern, Lower Saxony. The concept of the project was to integrate all interested persons via village meetings and working groups, with a central planning group legitimated by a village meeting for planning related decision making (FNR 2008). The eight working groups met once a month. The most important local actors were approximately 40, especially active members of these groups (Schmuck et al. 2003). The mediation of conflicts and the creation of an understanding regarding different lifestyles and perspectives were a central part of the process. In May 2002, a GbR (partnership organized under the Civil Code, BGB) was created, which was replaced by a cooperative after construction began, in 2004. All clients are mandated to become part of the cooperative, with a minimum, mandatory 1.200 euro capital contribution. In 2008, the cooperative had 195 members and provided 75% of the local heat demand27 (around 3.2 Mio.kWhth per year, FNR 2008). According to a survey conducted in June 2007, 89.3% of the clients were “very satisfied,” 10.7% “satisfied” and no one was reported to be “unsatisfied” with their heating network service (FNR 2008). The customers benefit from stable prices and local farmers profit from a stable source of income and long-term contracts. Local forestry also benefits from the cost-covering sale of woodchips (IZNE 2007). Electricity is fed in the grid and provides financial gains. In addition to these advantages, the associated social process is expected to have positive effects for community life and local identity (IZNE 2007). Jühnde became widely known on both a national and international level. In 2005, 2,500 visitors traveled to the community and in 2006, that number had risen to 7,200 (FNR 2008). A GbR (BGB) and a tourism association have been built to receive the increasing number of tourists and 14 local inhabitants have been trained as visitor guides (FNR 2008). This aspect of local tourism is important for community motivation as it reaffirms the bioenergy village concept. It is also significant for the diffusion of local experiences and thus, for a wider implementation. Rottweil-Hausen The Rottweil-Hausen case study is part of an interdisciplinary research project conducted by the University of Stuttgart, in cooperation with the local communal energy provider, Energieversorgung Rottweil GmbH & Co. KG (ENRW, Energy Provision Rottweil) (2003–2006). The concept generated for Hausen is specifically suited for

http://www.bioenergiedorf.de/con/cms/front_content.php?idcat=13 (October 2009). Without an existing local obligation to connect.

26  27 

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small local (rural) communities populated by around 100–1,000 inhabitants (ZSW28 2006). Its goal is to establish a district heating system based on renewable energy sources. District heating has several important environmental and economical advantages regarding the local use of combined heat and power (CHP) and renewable energies (ZSW 2006). The choice of Hausen was associated with previous local efforts to establish a heating network since the 1980s. However, technical as well as economical problems arose. A central challenge was persuading local inhabitants to connect to the local heating network. A gas-based network already existed but the connection rate was quite low. This aspect opened the door for a participative concept in the conversion of the network to renewable energies instead of gas (ZSW 2006). Hausen29 is a community in Southwest Germany, of approximately 1,000 inhabitants, that was formally integrated into the city of Rottweil in 1972. Only small, local businesses exist, most inhabitants work in the public service sector or the industry of Rottweil. Ninety-two percent of housing is comprised of one and two family residences (ZSW 2006). The goal of the project was to establish a local heating infrastructure and provide scientific advice for the local decision process. The experience was intended to expose barriers to renewable-based local heating in existing buildings. Furthermore, the project aimed to promote local heating and encourage its use in other communities (ZSW 2006). The social scientific portion30 of the project entailed initiating a communication process. It consisted of three steps: (1) informing the target group; (2) motivating citizens to participate in the decision-making process on the specific energy source and system; and (3) implementation and acceptance regarding the local heat system by users and non-users including the question for the willingness to connect (ZSW 2006). First, a survey was distributed and qualitative interviews with inhabitants and specific local actors were conducted. Next, local documents were analyzed. These methods were administered to acquire knowledge about the locality and its “energy history” and formed the basis for informative meetings and the development of adapted information materials (ZSW 2006). For a period of 2 months, a roundtable of 15 citizens worked on an inhabitant’s opinion (“Bürgergutachten”) and discussed how the existing district heating system could be improved. The participants had expressed a desire to partake in the roundtable and had been subsequently chosen from the questionnaire respondents. There was much sensitivity concerning the candidness of the process. Different possibili-

Zentrum für Solarenergie und Wasserstoffforschung. http://www.rottweil.de/ceasy/modules/cms/main.php5?cPageId=162 (accessed October 2009); Information on Hausen as “bioenergy village”: http://www.wege-zum-bioenergiedorf.de/index. php? id=2117&GID=0&OID=536&KID=24&firma=24 (accessed May 2010). 30  Apart from the social scientific part, an extensive technical portion as well as a resource analysis has been realized (ZSW 2006). 28  29 

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ties were presented and discussed and finally narrowed down to a choice between two realistic technological options (ZSW 2006). The communication process was completed by releasing the intermediate results of the roundtable discussions, visiting pilot plants of alternative energy technologies and by evaluating the results of a second survey. The visits had important impacts on common technological perceptions and on roundtable discussions. A tour of a solar-based local heating system illustrated economical difficulties, while a visit to a wood-based system revealed several technical and ecological disadvantages (ZSW 2006). Visits to existing sites are often a part of the local communication process. Several reservations arose concerning the possible privileges gained by local farmers that were actively involved in the process, as well as the consumption of potential food sources for the production of energy. Local farmers were specifically addressed by the project to actively integrate them as directly interested group. The biomass (renewable resources) is delivered by eight local farmers, organized into a limited liability company. They have a long-term contract, giving them an interesting financial perspective (ZSW 2006). The results of the survey indicated that the majority of participants perceived the roundtable discussions to be “useful” (74%). Furthermore, 85% consented that it was beneficial to allow inhabitants the opportunity to familiarize themselves with the subject of energy supply and that decisions were not only left to the experts and politicians (ZSW 2006). However, these positive results were derived during the process. In the beginning, the “Bürgergutachten” was perceived as useful by only 68% of the respondents, while only 33% were “very interested” or willing to join the roundtable discussions (ZSW 2006). As only 47% of citizens responded to the first survey, the portion of the population willing to partake in the decision-making process concerning local energy systems was relatively small (ZSW 2006). On the other hand, the attendance of approximately 90 inhabitants to the informative meetings seems quite high in relation to the size of the community. Nevertheless, the results of the project suggest that the participative approach was an important step for the realization of a sustainable local energy solution. The inclination of citizens to partake in the local heating grid was significantly higher after the process had been completed.31 Local Bioenergy Use: Conclusions The participative approaches in Jühnde and Hausen demonstrate promising possibilities for small rural communities to achieve a more efficient and ecologically sustainable energy solution and promote local social and economical sustainability (strengthening of the social community by the integrative approach; provision of

31  An evaluation of the instrument employed in the Hausen example can be found in Pfenning and Beninghaus (2008).

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resources by local farmers with long-term contracts and thus, long-term financial perspective). Both cases present two different kinds of participative approaches: A cooperativebased approach in Jühnde involving action research and a public communicationbased approach in Hausen, involving a participatory process. The cooperative-based approach applied in Jühnde has several advantages (IZNE 2007). The financial burden of the investments can be borne conjointly, the energy producer and consumers can make joint decisions on issues such as prices and the social process and identification associated with local energy production can have positive effects on the overall social life of the community. Of course, conflicts can arise, creating a need for discussion processes and eventually, mediation. For such an approach to succeed, local inhabitants must be willing to engage themselves in the process and a pre-existing, well-functioning community life should be present. Perhaps, the Hausen model can be implemented more generally. In any case, both approaches involved the active participation of citizens (or at least connection to the local heating grid), thus, necessitating a communication process. Different actors can initiate the process. Local authorities have different roles that depend on their motivation, status (with or without a municipal utility) and resources. They can act as providers, project promoters or models by establishing a connection to the local grid. The scientific analyses that accompanied these two cases are not generally possible and the two projects can thus not be directly copied. Nevertheless, the examples still reveal technical options and potential approaches, as well as possible barriers. Additionally, these examples can encourage other communities. Several other communities in various parts of Germany have since embarked on the path to becoming “bioenergy villages.”32

Königsfeld Königsfeld, located in the Black Forest, presents a more general approach than the previous examples. The small municipality (approximately 6,000 inhabitants) of Baden-Württemberg has distinguished itself as a “solar community,” “climate protection community” and an “energy-saving community” in various contests. To understand why Königsfeld has chosen the path to energy innovation, its historical background must first be explored. The city was founded by the Moravian Church, over 200 years ago. It houses a renowned health resort and is home to the second largest private school in Germany (1,200 students). Climate protection is linked to “safeguarding the creation” in the city on the one hand and on the other hand, the positive image and publicity that have been bestowed on the community are welcome for the growth of the health resort and general local tourism.

31 A map showing the “bioenergy villages” in Germany can be found at: http://www.wege-zumbioenergiedorf.de/bioenergiedoerfer/karte/ (accessed May 2010).

32 

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All sustainability-related activities were mainly initiated following the liberalization of the energy market in 1999 and after the election of a new mayor. The first goal was to increase the use of renewable energies. This was accomplished by promoting renewable energy sources and offering subsidies for private solar panels, for example. A “consumer and model” approach was also applied by commissioning electricity based on renewable sources for municipal buildings, practicing effective energy management and by increasing energy efficiency in public buildings.33 According to local interview partners, the municipality has achieved savings of 23.8% in communal energy consumption between 1998 and 2003, as well as significant changes in energy consciousness and behavior (Roudil et al. 2008). A primary objective was to set an example (be a “model”) and prompt inhabitants and the local economy to participate. Economically, the savings are beneficial for the municipality and local investments (installation of solar panels and energy efficiency measures) create business for local firms. The aspect of social sustainable development was not the primary focus. The process contained some participative elements but the mode of coordination (local governance) of climate protection was mostly based on few strong actors, especially the mayor. An important question to arise was: How should the municipality proceed in the long run when the initial “success numbers” cannot be repeated, the aspect of doing something new and exciting is ebbing and further increasing savings becomes difficult because it would demand major investments?

Conclusions from the Case Studies The three case studies confirm that small local communities have a large scope of action, despite generally coping with fewer (financial and human) resources than cities. The role of enabler and that of a model are clearly dominant for the largest of the three towns, Königsfeld. It also exemplifies the largest range of activities. The small towns Jühnde and Hausen are more focused on one field. They can be regarded as classical examples of niche development, experimenting with innovative approaches for local energy provision in experimental settings. Aside from some higher-level administrative integration, “governing by authority” seems less relevant in the context of small communities. This could partly be credited to a more personalized and less institutionalized approach of governance that was observed both in the case study and in a group discussion with representatives of (mostly small) local communities (Laborgne et al. 2010; Roudil et al. 2008).

For more information, see Roudil et  al. 2008; http://www.koenigsfeld.de/ceasy/modules/cms/ main.php5?cPageId=363 (October 2009). Other examples for activities are the “Passiv Haus” school and 50/50 projects as well as the cooperation with local craftsmen.

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The Role of Contests and Networks Performance in contests and the comparison of achievements among local communities were important motivators for the city of Königsfeld. Recognition from outside the community is important for the internal identification with the goals and for the motivation to participate in local initiatives. Contests can be used to achieve this recognition. Local communities can be motivated by participation in such contests and labeling processes as the European Energy Award to set goals and standards. They allow comparisons between communities and to gain acclaim or prestige. In addition, contests “call attention to the subject” of saving energy (DStGB and DUH 2007), make measurable local accomplishments (Solar league), give a pulse to the creation of regional networks and support innovative concepts (BMELV 2008). Examples in Germany include the “Solar League,”34 the “Bioenergy-Regions” contest (BMELV 2008), the “Climate Protection Communities”35 contest for small and medium-sized communities and the award as “Energy Saving Community” (DStGB and DUH 2007). They help to identify and promote best practice examples. Across Europe, several “model cities” like Malmö in Sweden are cited as such examples and are important pioneers in the transformation process. Nevertheless, the highlighting of front-runner municipalities can lead to a “situation where islands of ‘best practice’ are surrounded by a sea of ‘business as usual’” (Bulkeley 2000, cited from Aall et  al. 2007). Such “islands” can distract attention from a passive national policy (Aall et al. 2007). Besides contests and awards, city networks like the Climate Alliance36 or Energie Cités37 play a role for exchanging local experiences, or even for cooperations. Almost 1,400 cities and towns have joined at least one of the three European Networks working on Climate Change (Kern and Bulkeley 2009). When municipalities join such networks, they agree to engage in local action. This can be helpful to internal argumentation (Kern et al. 2005). In 2005, a survey distributed among German municipalities assessed the role and perception of city networks (Kern et  al. 2005). The most important advantage of the networks was perceived to be an information platform that extended beyond the representation of local interests on European and international levels. The survey also cited some disappointment among certain municipalities regarding the transferability of approaches to their own specific local contexts (Kern et al. 2005). This is a central

http://www.solarbundesliga.de. http://www.duh.de/uploads/media/Klimaschutzkommune2009_06.pdf (November 2009). 36  http://www.localclimateprotection.eu. 37  http://www.energie-cites.eu/. 34  35 

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concern when applying “best practice” examples and case studies for understanding and diffusing local climate protection and for transforming energy infrastructure. European city networks foster a horizontal Europeanization in which cities directly exchange experiences and jointly develop solutions (Kern 2009; Kern and Bulkeley 2009). But relatively few cities have the capacity for such a privilege (“Networks of Pioneers for Pioneers,” Kern and Bulkeley 2009: 311).

Conclusion Case studies can expose different strategies, methods, as well as potential drivers and barriers. In addition to contests and city networks, they can identify best practice examples and help transfer knowledge, overcome isolated action at the local level and encourage governance and policy strategies at regional, national and European levels. The case studies presented here identify a wide range of measures and approaches to energy sustainability at the local level. They demonstrate that local communities (local authorities as well as the community as a whole) have different roles and are important for climate protection. Such examples can generate ideas and suggestions for strategies but they also illustrate different regional circumstances and the need to create specific local strategies. One approach that may fit a particular context may be entirely inappropriate for another. Regional and national frameworks should be considered, in addition to specific local level actor constellations, local history, social and natural contexts, including local resources and existing infrastructures. The transferability of local strategies and project designs to other local contexts is provided but with clear limits. Energy sustainability clearly presents an important challenge and an opportunity for local social and economic development for large cities as well as for small towns. It merges the economical, social and environmental aspects of local development. While economically, energy is an important cost factor, investments in energy efficiency and the local production of renewable energies can also generate local value creation and employment. Bioenergy can open up new long-term economic perspectives, particularly in isolated, rural communities. Socially, the access to energy can turn out to be an important topic in the context of rising energy prices and the scarcity of resources. Local conflicts regarding the distribution of resources and the impacts of their production and consumption can arise. On the other hand, local energy projects can integrate social processes and strengthen local identity. Environmentally, energy infrastructure is a key interface between society and nature: It significantly determines the exploitation of natural resources and emissions of CO2 (Monstadt 2004). Many local communities are threatened by the impacts of climate change. While energy sufficiency, efficiency and the use of renewable energy at the local level do not directly change the effects, they do contribute to solving the global problem of climate change. The challenge lies in demonstrating how the global and local levels are interconnected (Aall et al. 2007). Concepts are needed for connecting the abstract global level to concrete local measures (Aall 2000, cited in Aall et al. 2007).

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Index

A Adaptation, Sweden development, forest valuation environmental impact and regulation, 141–142 game management, 141 government representation, 141 long-term changes, 142 management and role, 140 minimizing risks, 141 planning, 142 potential measures, 140 risk factors, 140 structure, climate change (see Climate change) B Biodiesel production model, 186 producers and self-sufficiency, 187 profitability, 187 social networking, 186–187 Bioenergy energy policy CO2 emissions reduction, 161 economic profitability, 161 global environmental challenge, 161 household-level firewood use, 162 industry wood procurement, 161–162 political landscape, 161 programs, 1990s, 161 Tekes technology program, 162 forest management improvement path creation process, 164 pulp and paper industry, 163

Bioenergy production and social sustainability, Finnish farms biogas and biodiesel, 174 data and methods, 179–180 heat entrepreneurship, 174 models biodiesel production, 186–187 biogas production, 183–185 heat entrepreneurship, 180–183 multifunctional agriculture, 173–174 reed canary grass cultivation, 174 research and studies, 174–175 rural areas analysis framework, 179 characteristics and framework, 178 energy availability and employment effects, 178 sustainable development, 175–178 technology acceptance, 178–179 similarities and differences biogas and biodiesel, 190 characteristics, 187–190 heat entrepreneurship and multifunctionality farmscale, 190 Bioenergy villages benefits, biomass use, 203 heating sector and local energy production, 204 Jühnde cooperative and advantages, 205 heat production and distribution, 204 selection criteria, 204–205 Rottweil-Hausen communication process steps, 206–207 district heating and challenge, 205–206

M. Järvelä and S. Juhola (eds.), Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Studies in Human Ecology and Adaptation 6, DOI 10.1007/978-1-4614-0350-0, © Springer Science+Business Media, LLC 2011

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216 Bioenergy villages (cont.) project goal, 206 survey results, 207 use participative approaches, 207–208 scientific analyses, 208 Biofuels, Sweden biomass and cellulosic, 143 domestic production, 144 early calculations, 144 economy, 143 ethanol production, 142 first and second-generations benefit, 147 crops and environmental impacts, 145–146 “ecocars” and “ecofuels”, 145 human consumption, 146–147 increasing food prices, 146 objections, transport fuels, 146 Oil Commission’s report, 145 political reactions, 147 recognizing motor fules, 147 “sustainable”and “non-sustainable” fuels, 146 forestry production system, 142 function, 145 GHG emissions, 144 national treasure, 144–145 oil replacement sectors, 143–144 reducing fuel consumption, 145 transport, 143 Biogas production electricity and traffic fuel, 183 farm based model, 183, 184 investment costs and financial incentive, 184 manure management, 185 social networking, 185 C Centralized energy infrastructures, 168 production paradigm bioenergy heating businesses, 158 electricity consumption, 157 Finnish energy sector, 158 forest industry, 157 small-scale heating businesses, 158 CHP. See Combined heat and power Civil society climate change mitigation, 25 climate policy targets, 27

Index “eco-efficiency”, 27 energy consumption, 25–26 energy sector transformations, 27 globalization, 26 lifestyles, 25 sharing values, public life, 26 social emergencies, 26 social reform, 25 socio-political and cultural issue, 27 traditional social values, 26 Climate change adaption structure, Sweden Commission report, 139 damage control measures, 140 investigation, 140 large-scale investments, 139 measures, 139 production, 139 impact, Swedish forests changing wind patterns, 139 fire and damage, 138 growth and earnings, 138 migrations, 138 positive and negative effects, 138 representatives, 138–139 risks, 138 storms, “Gudrun” and “Per”, 137 warm climate, 2006 and 2008, 137 Climate change and energy issues, North economic growth and energy consumption changes in GDP, 19–20 Denmark, 19 emissions trading scheme, 20–21 energy demand and production, 21 environmental impacts, 21 Finland, 19 HDIs, 19 industrial development, 19 industrial society legacy, 20th century, 21 service industry societies, 20 structural transitions, ICT, 21 World Economic Forum, 19 effects economic growth, 14–15 energy production and consumption, 14 global and regional impacts, 14 global level, 14 global warming risk, 14 highly industrialized society, 13 mitigation, 13–14 Nordic countries, 14 power production, 14 regional differences, 13

Index social-economic and cultural transitions, 15 structure, 14–15 technical issues, 15 emerging issue, policy context architecture, 17 economic growth and power production, 16–17 globalization of industries, 17 increasing temperature, 17 limitation, major impacts, 17 politicization and utilization of energy, 18 socio-political strategy, 17 standard of living, 18 technological innovations, 17 uncertainties and economic development, 17 World GDP 2000–2050, 17–18 global emissions (see Greenhouse gas (GHG) emissions) low carbon society, 28 mitigation measures, 27 national level policies, 28 public policy and civil society eco-efficient lifestyle, 25 energy consumption, 25–26 public administration, 26 reducing emissions, 25 restructuring society, 27 sharing values, public life, 26 social reform, 25 socio-political and socio-cultural issue, 27 traditional social values, 26 restructuration, energy sources, 27–28 technology, innovation and investment contribution, 24–25 in Denmark, 23 domestic energy, restrictions, 23 eco-efficiency, power production, 21–22 economic globalization and competitiveness, 24 energy consumption, 2020, 22 energy generation and renewable sources, 22 in Finland, 22–23 infrastructural facilities, 25 measurement, energy production, 21–22 mitigation capacities, 24 modernization and power production, 24

217 nuclear power plants, 22–23 power sources and industrial structures, 23 regional GHG emissions, 22 renewable energy, 25 standard of industrial development and mitigation measures, 24 Climate change mitigation and adaptation, Swedish forests adaption (see Adaptation, Sweden) background and methodology, 135–136 biofuels (see Biofuels, Sweden) conflicting interests, 147–148 ecosystem services and carbon sinks, 134 GHG emissions, 134 goals, 136–137 impact, climate change, 137–139 management, 134 mitigation (see Mitigation) policy recommendations and development, 134 role, 134 twentieth century, 133–134 utilization, forest industry, 133 Clinton Climate Initiative (CCI), 26 Combined heat and power (CHP), 107 Commission communications (COM) documents categorization, 49, 50 description, 48–49 number, 49, 59–61 quotes, 53 security of supply, 54 use, 48 D Demand side management (DSM) benefits, 51 description, 51 goals, 51 Disregarding wind power, feed-in tariffs (FiT) characteristic, energy system, 115–118 conditions, 116 considerations economies of scale, 128–129 GHG emissions and RE, future changes, 129 limitations, 129 policy making, 128 political process, 128 purchase obligation, 128 restructuring forest industries, 129 utilize smaller RE resources, 128

218 Disregarding wind power, feed-in tariffs (FiT) (cont.) economic vs. environment, 118–119 emergence, FiT, 123 energy securing, economic growth, 117–118 failure, implement wind power, 115 Finnish energy sector controlling, 128 drafting bill, FiT system, 126–127 nuclear power plants, 127 payment exemption, 127 reform, 127 regulation, 127 supervision, market-based actors, 128 GHG-emissions political challenge, 119–121 reduction, IPCC, 115 policy communities administration control, 123 core energy policy, 121 energy and climate package, UK, 122 energy policy making, 121 existence, 122 FiT system, 123 interest groups, 121–122 national policy making, 122 structure, 121 support system, 122 renewable energy, Finland energy politics, 116–117 stakeholder experiments, first and second phases, 124 third phase impact, 125 implementation, FiT system, 125 incentive mechanism, 24–25 new incentive mechanism, 126 opposition, 125 produce hydropower, 126 renewable energy policy, 126 utilization, 116 Diversification description, 56 mechanisms, 57 objective, 56 renewable energy, 56–57 DSM. See Demand side management E Employment bioenergy production, 178 heat entrepreneurship, 183, 190

Index Energy efficiency description, 49 DSM, 51 environment, 51–52 legislation, 49–50 mechanisms, 50–51 technical solutions, 52 Energy elite administration control, 123 associations and organizations, 121–122 government, 121 Ministry of Employment and the Economy, 121 Ministry of Finance and Ministry of Environment, 121 national policy making, UK, 122 small number of actors, 121 support system, 122 Energy industry, 68 Energy infrastructure heat, 204 socio-technical system, 195 transformation, 210 Energy policy. See also European Union (EU) energy policy 1995–2007 challenges of national, 10–11 EU, 7, 10 Finland Government, 40–41 goals and instruments, 90 historical developments, 5 instruments, 8 structure, 80–81 world economy, 42 Energy politics, Finland control, 128 environmental concerns, 118 Federation of Finnish Industries, 1983, 118 Kyoto target, 2008–2012, 116 lobbying, state institutions, 129 paper production process, 117 RE production structure, 116–117 wood, energy production, 117 Energy production systems economic vulnerability, 159 interventions, 155 technological transformation, 156 Energy sector European, 67 Finland control, 128 economy vs. environment, 118–119 policy communities, 122 policy measures, 126 price, 129 structure, 115

Index investment, 72 resource, 75 Russian expectation model, 77–78 policy formation process, 68 Tomsk, structure economic and political evolution, 68–69 oil, 70–71 VKN, 69 YUKOS, 69–70 Energy security and economic growth, Finland beck-pressure power, 7–8 2009 climate and energy package, 6 mitigation, 6–7 nuclear enthusiasm, 1950–1960, 6 oil crises, 1970s, 6 policy-making, 7 use domestic energy, 7 wood consumption, 8 Energy supply commercial, 17–18 end users, 20 Europe, 203 municipal roles, 198 Energy sustainability and local communities case studies bioenergy villages, 203–208 Königsfeld, 208–209 methodology, 203 selection, 202–203 small communities vs. cities, 209 climate change mitigation, 194 CO2emissions, 193 contests and networks Königsfeld, 209–210 roles and advantages, 210 defined, 194 Königsfeld approach and Solar Bundesliga, 194 municipal roles advisor and promoter, 200 concession contracts, 198–199 consumer and model, 199–200 Energy Industry Act of 1998, 199 Germany and energy supply, 198 large cities, 202 liberalized systems, 201 planners and regulators, 200 provider and supplier, 200–201 recommunalization/re-acquisition, utilities, 199 regional approaches, 202 small and medium sized communities, 201

219 production and consumption, transformations energy strategies, 195–196 government’s influence, 196–197 infrastructure, 195 local level and authorities, 196 solar energy, 197 roles, authorities, 194 Energy transition, 195 Environmental policy climate change and tasks, 3 low-carbon societies, 5 sectors, 8 Environmental targets decreasing GHG levels, 136 global responsibility, 134 limitations, 136, 140 mitigation and adaption, 135 productivity, 142 EU. See European Union European Union (EU) energy policy decision-makers, 6–7 developments, 10 renewable energy promotion, 8 European Union (EU) energy policy 1995–2007 COM documents, 48–50 description, 45 diversification, 56–57 energy efficiency, 49–52, 62 GHG emissions, 46 liberalization of markets, 54–55 markets liberalization, 46 method and data content analysis, 47 official policies, 48 reliability, 48 policies success, 46–47 political decision-making, 46 security of supply, 52–54 European Wind Energy Association (EWEA), 23 F Farm. See Bioenergy production and social sustainability, Finnish farms Feed in tariffs (FiT). See Disregarding wind power, feed-in tariffs (FiT) G Greenhouse gas (GHG) emissions. See also Climate change burning, fossil fuels, 14

220 Greenhouse gas (GHG) emissions. See also Climate change (cont.) current State in Asia, 16 awareness, political agreement, 15 CO2 concentration, 15 earlier stage, 15 flue gas emissions, 16 global record, 16 reducing energy consumption, 16 Russia, Poland and Romania, 16 development, 14 EU member states, 46 Finland emission trading sector, 12–13 energy and climate package, 120 Finland strategy, 2001, 119–120 future energy production, 119 industrial policy, 120 in 2005, national emission, 120 nuclear energy, 121 rate of level, 120 highly industrialized countries, 13 Kyoto Protocol, 52–53 nuclear power, 58 reducing, 14 H Heat entrepreneurship beneficial relationships, 182, 183 business services and local forestry, 181 engagement and hobby, 182 model, 177, 180 role, entrepreneurs, 181 social sustainability perspective, 181–182 I Innovative democracy approach balance establishment, 102–103 energy policy, 101, 102 neoclassical, 101 political economy paradigms, 104, 105 prototypes, 101 public regulation tools, 103 wind power capacity, 104, 106 CHP, 103 L Liberalization of markets environment and technique, 54–55

Index gas and electricity, 55 policies formulation, 54 Russia’s role, 55 Local communities. See Energy sustainability and local communities Local government energy policy, 196–197 Germany, 198 roles advisor and promoter, 200 consumer and model, 199–200 liberalized systems, 201 planners and regulators, 200 provider and supplier, 200–201 Local heating systems bioenergy businesses factors, 159 governmental subsidy schemes, 159 heating plants, 160 improve energy efficiency, 159 logistical system, 159–160 technical innovations, 160 timber procurement, 159 energy and forest, 157–158 policy goal, 161–162 forest management improvement, 163–164 rural livelihood, 164–166 significance evaluation, 168–169 socio-technological transformations, 156–157 transition, sectoral paradigms climate change, 166 energy policy measures, 167 indirect interventions, 167 Low carbon strategy capacities and challenges, 24 development, energy production, 23 future, Nordic countries, 27 increases, 25 mitigation capacities, 24 target, 26 technological innovation, 22 transformation, 28 M Mitigation contribution, 27 efforts, 22 energy policies and capacities, 24, 26–28 energy production and consumption, 14 intertwining, 14, 15 issues, distancing, 14 measures, 13, 24, 28

Index “next generation”, civil society, 25 public administration, 26 reduction, CFC emissions, 13–14 Swedish Climate and Energy Bill 2009, 137 Climate Committee report, 136 CO2 storage, 136–137 efforts, 137 Forest Bill and management, 137 forest management, 137 forests and forest-based products, CO2, 136 goals, 136 issue documents, 136 low GHG emissions, 137 technological innovations, 17, 25 Multifunctionality agriculture, 173–174 farm scale energy production, 190 N Natural gas production, 71 use, 82 Natural resources oil, 70 socio-economic development, 82 Nordic countries contribution, 22 economic growth and energy consumption “clean” energy, 21 employment, 20 energy demand, 21 energy security and price, 20 GHG emission, 20 Human Development Index, 19 legacy, industrial society, 21 service sector, 21 technology and innovation, 19 World Economic Forum, 2005, 19 World War II, 19 zero energy growth, 21 energy issues and context, 14–15 low-carbon futures, 27 mitigation measures, 13 power production, 22 renewable energy sources, 23, 25 standard of living, 18 traditional social values, 26 transparency of public policy, 26, 27 Northern energy region carbon neutral societies, 5 economic structure, 4

221 energy production and consumption environmental impacts, 9 globalization and political processes, 10 policies and systems, 9 energy supply, 3–4 environmental awareness, 4–5 GHG emissions, 10 local initiatives centralized/distributed systems, 8 global and local energy supply, 7 short-term economic efficiency, 8–9 local sustainable development, 11 national energy policy and environment, 10–11 renewable energy production, 5 similarities and diversity EU energy policy, 7 imported energy resources, 6 production and supply, 6 sustainable energy solutions, 5 Nuclear energy, Finland additional power, 116 cluster, 122 “cost efficiency” and “zero emissions”, 119 domestic policy, 124 economic growth, 117 economy vs. environment, 119 electricity production, 118 enthusiasm, 1950s–1960s, 117 existence, 116 Finnish energy politics, 121 industry, 122 power plants, 127 production, 126 reactor, 119, 120, 129 O Oil. See Tomsk Oblast gas and oil sector P Political elite region’s businesses, 79 resources, 75 Russia’s federal system, 68 socio-economic, 70 Public regulation requirements fossil fuel systems, 109 infrastructure systems, 109 Nordpool market cost structure, 109, 110 wind turbines, 110–111

222 R Renewable energy and conservation (REC) development first phase, 89, 91 second phase, 90 and FFU, 92–93 value-added chain (see Value-added chain) Renewable energy strategies cogeneration development, 107–108 concrete institutional approach, 100 innovative democracy approach, 101–106 neoclassical approach climate policy, 100 Danish parliament, 99 REC technologies, 98 public regulation and economic paradigm, 98 requirements, 109–111 REC transformation, 89–90 technological change, 91–93 value-added chain, 93–98 wind power development, 106–107 Rural area entrepreneurs, 179–180 multifunctional agriculture, 173–174 social sustainability characteristics and framework, 178 development, 175–178 energy availability and benefits, 178 technology acceptance, 178–179 Rural livelihood continuation, primary activities, 166 EU structural funds, 165 heating business, 164 poor rural economy, 164 structural changes, 164 Rural policy rural economic development, 166 small-scale bioenergy, 167 Russia energy sector, 67 federal system, 68 production, 71 resource wealth, 67 S Security of supply COM documents, 53 Kyoto Protocol, 52–53 natural gas, 53–54 Self-sufficiency, Finland and globalization of fossil fuels. See also Disregarding wind power, feed-in tariffs (FiT)

Index bioenergy development, 156 carbon dioxide emissions, 42 carbon tax, 161 coal, 33 development path, renewable to non-renewable energy, 39 energy consumer, 157 exhaustion, indigenous energy resources, 40 foreign trade and energy policy, 41 government, 40–41 international trade, 31 iron production, 32 local energy production, 159–161 nuclear power, 158 oil, 32, 33 rejection, energy self-sufficiency export, 37 oil crises, 38 primary energy supply per capita, 38 rate, supply, 37 solid fossil fuels and nuclear power, 39 ‘the syndrome of the 1950s’, 38 Sonderweg energy crisis, 34 forests, 34 indigenous energy sources, 36 industrialization, 36, 37 nationwide peacetime famine, 36 primary energy use, 34, 35 renewable energy sources, 33 standing stock, 34, 35 timber stock, 34 transition, 39–40 urban areas, 42–43 wood biomass, 158 Social sustainability. See Bioenergy production and social sustainability, Finnish farms Socio-technical system, 195 Socio-technological transformations multi-level developments, 157 science and technology studies, 156 sustainable production, 157 Sustainable development definition, 175 dimensions, 175, 176 housing politics, Finland, 176–177 human wellbeing, 176 livelihoods, 175–176 making, 27 north centralized/distributed systems, 8 global and local energy supply, 7 short-term economic efficiency, 8–9

Index as processes, 177 public policy, 26 Swedish forests. See Climate change mitigation and adaptation, Swedish forests T Technological change fossil fuels and uranium, 91 REC and FFU characteristics, 92–93 Danish wind power industry, 93 discrepancies, 92 Tomsk. See Tomsk Oblast gas and oil sector Tomsk Oblast gas and oil sector commodities, 67–68 finances, 81–82 hydrocarbon industry, 79 information, 82 institutions, 81 labor division and action regional capacities foreign-owned firms, 75 industrial activities, 73 Russian energy sector, 72–73 taxation, 74 legislation 1995–2001, 83–84 2002–2008, 70, 85–86 physical aspects, 81 regional administration, 79–80 economy, 80 resources, 71–72 resulting contingency, 82 Russian and European energy, 67 socio-economic development strategy approaches, 75

223 expectation model, 77–79 indicators, 75, 76 production, 75, 76 region, 76 structuration, 77 structure economic and political evolution, 68–69 oil, 70–71 VNK, 69 YUKOS, 69–70 U UN Rio Conference, 26 V Value-added chain FFU systems, 93–94 REC systems characteristics, 95 electricity, 96–97 vs. FFU, 95, 96 FFU transformation, 97–98 technological change, 96 wind power production, 94 Vostochnaya Neftovaya Kompaniya (VNK), 69 W Wind power. See Disregarding wind power, feed-in tariffs (FiT) Wind power development power companies, 107 production cost, 106 reforms, 106 turbine industry, 106, 107