What is the green transition?

The green transition towards an ecologically sustainable economy is an absolute necessity. A sustainable economy leans on low-carbon solutions that promote biodiversity and on the sustainable use of natural resources.

The clean energy transition is an integral part of the green transition. Phasing out fossil fuels and replacing them with clean energy solutions is the key objective in the transition.

Why is the green transition necessary?

The green transition is needed because our economic growth is based on the overconsumption of natural resources and is thus built on an unsustainable foundation. Biodiversity loss and climate change cause enormous costs and consequence to the economy. With the green transition, we can reduce emissions faster and mitigate climate change, as well as preserve and improve the state of the environment.

The green transition benefits the Finnish economy. It will improve our competitiveness and build wellbeing within the planetary boundaries. The green transition can be turned into a new driving force of our economy as there is a growing demand for low-carbon solutions that strengthen the natural environment around the world. How well we will succeed in mitigating climate change and adapting to it and halting biodiversity loss will have a crucial impact on the long-term sustainability of the public finances, wellbeing of future generations and state of the environment. The green transition will also strengthen comprehensive security. Phasing out fossil fuels of foreign origin and increasing national production of clean energy will improve our security of supply.

Green transition and the Ministry of the Environment

The Ministry of the Environment creates the conditions for the green transition through legislation and by influencing various processes and targeting funding to support this. Practices and regulation required for a society that is in line with the green transition are being prepared nationally, within the EU and globally.

Finland is streamlining the permitting procedures related to the environment to ensure that green transition projects will proceed smoothly, with due account for environmental considerations. A process led by the Ministry of Finance is under way to reform the regional state administration. In the Finnish Supervisory Agency to be set up the application for the essential permits related to the environment will take place by using a centralised one-stop service. The legislative project of the Ministry of the Environment concerning the one-stop model promotes the use of one-stop services in environmental contexts. Besides the legislative projects, may other processes are also under way to streamline the permit procedures.

One-stop services and streamlined permit procedures

One-stop services and streamlined permit procedures

The Ministry of the Environment has also boosted investment projects that are important in terms of the green transition by prioritising them in the permit procedures at the Regional State Administrative Agencies in 2023–2026 and in the administrative courts in 2023–2028. In their permit procedures, the Regional State Administrative Agencies will give priority to projects concerning renewable energy, low-carbon hydrogen production, electrification of industry, carbon capture and utilisation and battery industry that follow the Do No Significant Harm principle.

The Ministry of the Environment guides and supports well-planned land use and, through this, sustainable location of solar power plants and wind turbines.

Wind power construction
Solar power construction

We are developing a market for nature values and carbon, including voluntary protection of forest biodiversity, carbon sequestration and water protection. The development of these markets is based on voluntary ecological compensation under the Nature Conservation Act that entered into force in 2023. We are also developing methods for companies, various organisations and private individuals to calculate both their carbon footprint and the positive carbon handprint.

The Ministry of the Environment promotes research and innovation activities related to green transition and awards grants to projects. For example, we are steering an EU-funded project on clean energy transition (REPower-CEST), which is coordinated by the Finnish Environment Institute Syke. We are drawing up criteria for projects and funding that promote the green transition and support their application.

Low-carbon Built Environment Programme

We are boosting a circular economy. With the Circular Economy Green Deal the participating organisations commit to reducing their use of natural resources and setting effective goals and to taking measures that promote a low-carbon circular economy.

Strategic programme to promote a circular economy

Buildings consume about 40% of all the energy that we use. This means that energy efficiency has a direct link to carbon dioxide emissions that warm the climate. Through various means, we aim to improve the energy efficiency of buildings, increase the use of renewable energy and reduce energy consumption and carbon dioxide emissions.

To ensure a just and acceptable green transition, a key focus must also be on inclusion, financing, cooperation and utilisation of information. The participation of stakeholders and private individuals in the different stages of decision-making is a high priority.

Do No Significant Harm principle

The EU taxonomy for sustainable financing establishes criteria for what is sustainable in terms of the environment and nature. The taxonomy helps channel financing to sustainable activities, thus promoting the green transition and achievement of the EU’s environmental objectives.

The taxonomy includes the Do No Significant Harm (DNSH) principle. This means that e.g. measures to reduce emissions may not cause harm to other environmental objectives. In Finland the DNSH principle is applied in the preparation of investments and reforms under the European Union’s Recovery and Resilience Facility (RRF). The principle is also included in the regulation on the prioritisation of permit procedures concerning certain green transition projects.

Taxonomy – Frequently asked questions

The Taxonomy is a classification system of the EU for sustainable financing. The Taxonomy establishes criteria for what is sustainable for the environment and nature. The Taxonomy consists of the EU Taxonomy Regulation and Delegated Regulations issued under it which lay down the technical criteria for economic activities that are in alignment with the Taxonomy.

Ministry of the Environment
The Taxonomy helps channel financing to sustainable activities, thus promoting the green transition and achievement of the EU’s environmental objectives. The EU and its Member States cannot achieve the necessary emissions and halt the loss of biodiversity with public funding alone; instead, all capital flows should be reoriented in a more sustainable way to support these objectives.

The purpose of the regulation is to facilitate sustainable investments. The Taxonomy can be used to distinguish the proportion of economic activities that promotes climate and environmental objectives and where the society stands to benefit from the financing.

The Regulation enhances the transparency of business for investors and clarifies which are the activities in different sectors that can, when the criteria are met, create a more sustainable future. At the same time the Regulation incorporates sustainability more effectively into risk management by investors and companies. However, technical criteria have not yet been established for all sectors and activities, and the work to develop these continues.

Ministry of the Environment
The Taxonomy is part of the regulation of the financial market. It does not oblige the operators to change their activities to meet the criteria or, as such, impose restrictions concerning any sector. However, the Taxonomy can be utilised as a strategic tool to identify and verify practices that are environmentally sustainable.

For certain operators the regulation concerning the Taxonomy imposes mandatory reporting obligations. Large companies and financial market actors are already obliged to assess the eligibility of their economic activities in terms of the Taxonomy and report on this. From 2023 the reporting obligation was extended to alignment with the Taxonomy, i.e. whether the activities meet the technical screening criteria.

The Corporate Sustainability Reporting Directive (CSRD) that will be applicable from 2024 will expand the reporting obligation in stages.

The Taxonomy also concerns the EU Member States when the countries are laying down standards for green investment products within their own regulatory frameworks.

Ministry of the Environment
In the Taxonomy environmental sustainability has been divided into six objectives:
1. climate change mitigation (e.g. renewable energy generation, clean transport)
2. climate change adaptation (e.g. preparation for extreme weather events)
3. the sustainable use and protection of water and marine resources (e.g. clean waters)
4. the transition to a circular economy (e.g. more efficient reuse of materials, extending the life-cycle of products)
5. pollution prevention and control (reducing emissions other than greenhouse gases)
6. the protection and restoration of biodiversity and ecosystems (e.g. sustainable agricultural practices)
The Taxonomy also includes the Do No Significant Harm (DNSH) principle, which means that no single environmental objective covered by the Taxonomy can be promoted in such a way that this causes significant to any of the other objectives.

Ministry of the Environment
The Taxonomy Regulation was adopted in June 2020 and it entered into force on 12 July 2020. On the basis of the Regulation, the Commission has prepared the detailed Taxonomy criteria.
The first ones adopted were the climate criteria that entered into force on 1 January 2022. These specify criteria for activities that promote climate change mitigation or adaptation and are also in line with the DNSH principle with respect to the other objectives, i.e. cause no harm to other environmental objectives. A package supplementing the climate taxonomy that entered into force in the beginning of 2023 specifies corresponding criteria for natural gas and nuclear power as transitional measures. Their preparation and entry into force sparked a lot of discussion in Member States across Europe.

The Regulation concerning the four other objectives other than the climate objective is expected to be finalised during 2023. If completed, this could enter into force in the beginning of 2024.

For Finland the key sectors in terms of protecting biodiversity include at least agriculture and forestry. The circular economy involves a large number of criteria concerning e.g. the manufacturing industry, and their specification is being followed very closely and actively commented on.

Ministry of the Environment

More information

Emma Terämä, Chief Specialist
Ministry of the Environment, Ministerial Governance and International Affairs Department, Economic Affairs and Financing Telephone:0295250255 Email Address: [email protected]