What is the green transition?

The green transition means a shift towards economically sustainable growth and an economy that is not based on fossil fuels and overconsumption of natural resources. A sustainable economy relies on low-carbon solutions that promote the circular economy and biodiversity.

For companies, the manufacturing industry and municipalities, the green transition can mean investments in clean energy production, circular economy solutions and hydrogen technology, and the introduction of different kinds of new services and operating models. Low-carbon roadmaps and sustainability strategies drawn up by different sectors are an important part of this package.

Sector-specific low-carbon roadmaps

What the green transition means in our daily lives includes, for example, phasing out fossil oil heating and shifting to electric cars. For the society as a whole it can mean different kinds of incentives and subsidies for these and legislation that supports the green transition. The green transition also means that we must question our individual consumer habits and ways of thinking: could we e.g. use machines and appliances that consume less electricity? Would we be prepared to pay more for products manufactured near us that cause less emissions?

Why is the green transition necessary?

The green transition is necessary because, at the moment, we are overconsuming the natural resources, both fossil and renewable ones. This overconsumption has further aggravated the climate and ecological crisis. For this reason a comprehensive change is needed in the way we use our natural resources.

The key challenge is to limit consumption within the carrying capacity of our planet while at the same time keeping the wheels of the economy turning. Broadly speaking, phasing out fossil fuels will turn the climate and environmental challenge into an opportunity: the green transition becomes a driver of new growth and lays the foundation for business and a sustainable economy. By offering a more comprehensive range of products and services we will also provide better opportunities for the end users to reduce their own burden of emissions.

How does the Ministry of the Environment lead the green transition?

The Ministry of the Environment leads the green transition by supporting it with various kinds of grants, developing legislation and guidance, and assessing and creating criteria for new projects. Together with other ministries and stakeholders, we will ensure that those implementing the measures needed for the transition can expect a stable regulatory environment and financial and informational incentives to carry out reforms and investments. Practices and regulation required for a society that is in line with the green transition are being prepared nationally, within the EU and globally.

Priority treatment in permit procedures to boost the green transition in 2023–2026

Investment projects that are important in terms of the green transition will be prioritised in the permit procedures at the Regional State Administrative Agencies in 2023–2026 and in the administrative courts in 2023–2028. The key target is to promote certain investments in the green transition by speeding up the processing of permit applications concerning these by the Regional State Administrative Agencies and the processing of appeals concerning these by the administrative courts.

In their permit procedures, the Regional State Administrative Agencies will give priority to certain 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.

Do No Significant Harm principle

What is also at the core of the green transition is that, when e.g. reducing emissions, we will not cause harm to other environmental objectives. This is the key content of the principle of Do No Significant Harm (DNSH) principle included in the EU taxonomy for sustainable financing. In Finland the DNSH principle has been applied in the preparation of investments and reforms under the European Union’s Recovery and Resilience Facility (RRF). The Do No Significant Harm principle will also be used for other targeted elements governed by the national legislation to boost the green transition.

In addition, Finland has launched the first DNHS project in Europe through support from the European Commission. The aim of the DNSH in Finland project is to use investment and legislative analyses, guidance and training to boost the green transition in processes where the DNHS principle is already in use or could be helpful.

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, Konserniohjaus ja kansainväliset asiat -osasto, Talous ja rahoitus Telephone:0295250255 [email protected]