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Green deal scenarios envisage a new circular economy for Finland

Ministry of the Environment
Publication date 8.5.2023 16.30
News item
A woman and a boy are shopping clothes in the Reuse Centre.
Sustainable consumption and the sharing economy are essential part of circular economy.

Finland is currently constructing a green deal for the circular economy that brings together the most critical sectors and leading experts from Finland. The heart and soul of the green deal are scientific scenarios that are unique in terms of scope and coverage.

The green deal for the circular economy aims to identify key measures that will help reduce the use of non-renewable natural resources and promote a low-carbon circular economy. To this end, players in the field are expected to voluntarily commit to goals and actions that will allow us to have a low-carbon circular economy by 2035.

Alongside green deals, scenarios will be used to help us prepare for local and global changes. For the first time, the scenarios explore the opportunities provided by the circular economy in Finland from two perspectives: production and consumption. 

‘We want to examine the impact of actions promoting the circular economy on the consumption of natural resources in Finland from a wide range of perspectives,’ says Hannu Savolainen, senior research scientist at the Finnish Environment Institute. He leads a scenario modelling with participants from several Finnish research institutes.

‘Scenario work is truly the heart and soul of this process. Without it, there is no green deal,’ says Taina Nikula, Senior Ministerial Adviser at the Ministry of the Environment.

Future-proofing requires an understanding of how individual actions contribute to overall sustainability 

Scenario work on green deals involves using three different scenarios to produce indicators for Finland’s material flows and for their economic and environmental impacts.

The first one, Business as usual (BAU), or baseline scenario, offers an estimate of resource consumption in 2035 if economic development follows a trend based on existing decisions. The second one, a circular economy target scenario, analyses the actions required to achieve the objectives of the circular economy programme and the potential impacts they may have. The third one, a sustainability scenario, provides an analysis of the actions required to achieve both the objectives of the circular economy programme and Finland’s carbon neutrality target for 2035. 

‘The scenario analysis provides us with a snapshot of Finland in 2035. This gives us a better understanding of our ability to prepare for and respond to a financial crisis or other unforeseen events, and of the potential repercussions,’ Savolainen notes.

Scenario work produces system-level information in which both direct and indirect impacts are factored in. This is important, as material flows in the circular economy tend to move from one company to another and across industries. 

‘Our future-focused circular economy modelling covers a wide range of actors and circular economy actions in various sectors of the economy. This is what makes our scenario work unique. An analysis of impacts on the national economy is crucial since that allows us to identify feedback loops, indirect impacts and net impacts that are easy to miss if we limit our analysis to a single sector,’ says Savolainen.

Overall sustainability is therefore a key phrase in the circular economy. Individual actions that promote the circular economy in one sector may have unexpected effects in another.  

‘Forest industry byproducts are a case in point. Certain byproducts are currently recovered for energy but their reuse as materials could be significantly increased. But then you have to find another alternative energy source and consider the impact of this change on overall sustainability. By looking at things from a wider perspective, we can avoid a situation where an improvement in one area makes things worse in another,’ says Taru Päiväläinen, Manager, Environmental Production Support at UPM.

Strength comes from networks and new partnerships

For the circular economy to become the foundation of a new economy, the green deal for a circular economy must be put in place, especially in critical sectors. For this to happen, powerful organisations in their respective fields must lead the way. 

‘In the construction sector, an organisation such as the Green Building Council could facilitate the implementation of objectives and actions,’ says Taina Nikula from the Ministry of the Environment. 

‘The retail sector plays a gatekeeper role as a provider of sustainable consumption choices for Finnish people and in advancing the green transition. In circular economy value networks are built alongside value chains, and they form new types of partnerships. We are keen to find out how much our industry is consuming natural resources and to find opportunities for effective cooperation in this value network. Could this green deal support our industry in forming these value networks? We hope so. This means we have high expectations for the finished green deal,’ says Marja Ola, Chief Policy Adviser at the Finnish Commerce Federation. 

To instigate change, we need those who lead the way, and we need powerful networks. The competence network for the circular economy in Finland, Circular Economy Finland (KiSu), for one, could offer their expertise, assistance and encouragement. Cross-sectoral cooperation was the biggest incentive for UPM to become involved in the green deal work, says UPM’s Taru Päiväläinen. 

‘Silo mentality is not an option; the circular economy is all about cross-sectoral cooperation and dialogue.’   

Ola agrees with Päiväläinen. 

‘No industry sector or player can make this happen on their own. We hope that the green deal for the circular economy is an excellent networking tool, and it may offer partnership models that we can’t foresee at the moment. The retail sector, for example, generates almost one terawatt hour of residual heat per year, which is a huge amount. We need to find partners from the energy industry to use this residual heat in a bidirectional district heating system,’ says Ola.

Changes required to legislation and data collection

Legislation plays a major role in the transition to a circular economy. The Ministry of the Environment has set up a working group to explore legislative changes that could help facilitate the development of commercial uses for recycled materials.

‘The importance of having more permissive legislation cannot be emphasised enough,’ says UPM's Taru Päiväläinen. 

‘The business environment in the trade sector is also very complex and heavily regulated in areas such as product liability. Introducing new business models is far from simple and straightforward. Our industry will need help and support to make this transition,’ says Marja Ola from the Finnish Commerce Federation. 
It is up to the central government to determine what the change means in terms of legislation and economic steering, and whether steering instruments require modifications.

‘Our analysis covers issues such as the need for incentives, or possibly disincentives in the form of legislation and taxes. It is also our responsibility to identify financial instruments that can help us put the green deal for the circular economy into practice. An EU project for specific areas in need of change might be a possibility, or we can identify initiatives and proposals that might be eligible for funding from Business Finland,’ Taina Nikula explains.

The scenario work proved that the availability of data remains a big problem. Data on the use of industrial byproducts and waste is not being systematically collected, and companies struggle with various limitations that forbid disclosing confidential information into the public domain. 

‘The existing data collection and statistical systems are based on current legislation and were developed to meet the needs of today’s economy. It takes time to modify the data system to serve the needs of the circular economy. The circular economy is like an octopus with its arms stretching everywhere; it affects all walks of life, including the economy,’ says Hannu Savolainen.

Circular economy scenarios will be published at the year-end

Work on the green deal for the circular economy and on the scenarios began last autumn. A large number of people are working intensely to advance these, including research institutes, responsible ministries, municipalities, cities, counties, key industries and businesses. Work is currently under way to establish whether any essential information is still missing for the scenarios, and to prepare for modelling. The scenarios will be published in late 2023. 

In the key segments of the circular economy, six areas in need of change have been identified: Resource-wise buildings, Recycled earth and minerals, Resource-wise production and material flow, Sustainable consumption and the sharing economy, Resource-wise energy production and Renewable food chain. These areas will form the green deal. The first area drafts are currently being prepared and the work continues until the autumn.