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Summing it up for the first half of 2024

Welcome to our bumper, final edition of Nordic Green News before summer. An edition that is extra long not just because of last week's holiday (ie no NGN), but also because its jam-packed with big stories.


The stories are important in and of themselves, but they also do a good job of summarising the state of the green transition in the Nordics, which is our raison d'etre. There are highs, such as Denmark's world-first tax on methane emissions from agriculture and Norway's largess towards green shipping. But there are more lows. Sweden and Finland submitted their green plans to the EU Commission, with both acknowledging that they have no plan that meets the level of ambition needed. At least they got their plan in on time, with the 3 Nordic EU-countries plus the Netherlands and Italy being the only 5 out of 27 who did. One might speculate that other countries are also struggling to produce a good plan.


Finland's problem is due to how it manages its forest resources, with early hopes that trees would be a positive carbon sink evaporating, leaving the country with tough choices. Sweden's challenges are broader than that, and somewhat self-inflicted, with the Government betting against wind and for nuclear, and then failing to make progress on the nuclear. The quote (see below) from Anna Borg says it all. Sweden is at risk of investing in electrification that no-one needs because its too late and too expensive.


Northvolt's challenges are mounting. In our previous edition we covered its financial problems. Now the company has to deal with the loss of a major contract to BMW and its Chairman. Plus plenty of bad press. Knives are out. Nonetheless, we believe the problems need to be kept in perspective. Despite its size, the company is still in its infancy, and when trying to build a unicorn, engineering is a tougher challenge than coding (or so we think). With so much being bet on Northvolt getting it right, both by Sweden and the EU, we expect that the ship will be steadied.

Feature stories

Sweden’s Government has submitted an updated National Energy and Climate Plan (NECP) to the European Commission before the deadline. In the updated plans, member states must show what they intend to do to meet the requirements of EU legislation, primarily in the period before 2030.


However, the Swedish Government expects that Sweden will not meet any of the central requirements in EU legislation by 2030. More specifically,:

ESR (Effort Sharing Regulation): Swedish emissions outside the current emissions trading system will be greater than the legislation allows.

LULUCF regulation: Swedish net storage of carbon in the landscape and wood products will be less than the legislation requires.

Renewable Energy Directive: The share of renewable energy in the Swedish energy mix in 2030 will be lower than EU legislation requires.

Energy efficiency directive: The government expects that Swedish energy use in 2030 will be greater than the directive allows.

For more, read here.


The Finnish Government presented its annual climate report to the Parliament, delivering a stark message: Finland is not on track to meet its climate law targets of reducing emissions by 60% by 2030 or achieving carbon neutrality by 2035, and will fail to meet either its EU obligations or national targets. The report highlights significant shortfalls in both emission reductions and carbon sink enhancements, particularly in forestry, the so-called Land Use, Land-Use Change and Forestry (LULUCF). This sector, crucial due to its role in absorbing carbon through forests and soil, has weakened over the past 15 years, making the net carbon sink much smaller than previously estimated. Environment and Climate Minister Kai Mykkänen emphasised the need for additional measures, estimating a required reduction of 19 million tons of CO2. Mykkänen called for societal discussion on sustainable forestry practices, suggesting measures to improve carbon sinks without closing factories, such as adjusting rotation periods and thinning practices, as well as exploring carbon capture technologies.


The main reason for the reduction in carbon sinks from forestry is Russia's invasion of Ukraine, which has meant that Finland does not import wood chips from Russia, and instead produces these domestically. Mykkänen emphasises that the extent of Finland's shortfall and the Commission's interpretation of the issue are still unknown, including the availability and price of emission units. Discussions are ongoing with the European Commission regarding whether it would be acceptable for Finland to compensate for previous forest harvesting in Russia by allowing increased domestic harvesting. Mykkänen highlights the need for a societal debate on finding ways to reduce fossil fuel emissions to achieve carbon neutrality by 2035; “Are we able to fix that sink, for example by taking carbon dioxide from industrial chimneys on a large scale, or how do we act?”. 


Mykkänen also said that it is currently impossible to determine how much Finland will potentially spend on purchasing emission units to meet EU obligations. Mundus back-of-the envelope calculations suggest that the figure could be billions of Euros.


Denmark is set to implement the world's first carbon tax on agriculture, charging cattle farmers almost €100 annually per cow for greenhouse gas emissions. This decision follows lengthy negotiations with trade and environmental groups. The tax will start at DKr300 per tonne rate in 2030, rising to DKr750 by 2035, but farmers will benefit from a 60% deduction for the first two years. According to the Ministry of Economy, the various efforts in the agreement must reduce Danish emissions by 1.8 Mt of CO2e in 2030, which will be sufficient to reduce Denmark’s EU shortfall towards 2030 of 1.5 million tonnes of CO2, thus bringing Denmark on target for its 2030 climate goals.


Other measures covered by the political agreement in Denmark’s parliament, included;

Support to plant forests on 250,000 hectares of agricultural land by 2045.

"Strategic land acquisition" with support provided for the removal of 140,000 hectares of low-lying agricultural land up to 2030.

A total of DKK 40 billion will be set aside for the efforts.


Denmark's move will lead to higher costs for its farmers, potentially reducing their market share against foreign competitors with fewer emission regulations. Farmers' organisations like Bæredygtigt Landbrug have criticised the tax, arguing it hinders technological investment and ignores farmers' efforts to reduce emissions. While consumer taxes were considered, they were deemed less effective and fair compared to production taxes. Innovations like Bovaer, a feed additive that reduces methane emissions by 30%, are promising but require broader support for widespread adoption. 


Denmark’s Government aims for this tax to inspire similar global initiatives. Agriculture contributes significantly to global emissions, with livestock alone accounting for 11% - with cows being the primary culprits. Globally, countries struggle to balance emission reductions from food production with maintaining food security. Methane from ruminants like cows and synthetic nitrogen fertilisers significantly contribute to greenhouse gases. And the European Commission is exploring an EU-wide agricultural emissions trading system, but implementing such measures faces political resistance, as seen in New Zealand's recent abandonment of a similar tax.


With construction of Northvolt's factory in Skellefteå, running two years behind schedule, BMW has withdrawn its order for batteries from Northvolt. Citing production delays and quality issues, BMW has turned to Korean supplier Samsung SDI for its battery needs. Evidently the withdrawal of an order worth approximately SEK 22 billion came as a surprise to Northvolt, as such agreements are difficult to back out of, said a source. When 23 banks provided a "historic" multi-billion loan to Northvolt in January, the fully booked order book served as collateral. In a January press release, Northvolt stated that long-term contracts with automotive giants like BMW, Scania, and Volkswagen were used as security for the loans. But after BMW's shock announcement, the foundations of the loss-ridden battery manufacturer's financing look shaky. "The question is what the lenders will say now that BMW is withdrawing their order," a source said. A Northvolt spokesman downplayed the issues, saying "The affected order corresponds to less than 5% of the current order backlog and can, if necessary, go to other customers or to our battery systems, so the expansion continues as planned". Despite the cancellation, Northvolt and BMW still plan to cooperate on developing next-generation battery cells.


Swedish heat pump manufacturer Aira, founded by Vargas Holding, is opening its first factory in Poland, a €300 million plant, with plans to produce 500,000 units annually. Aira aims to target European markets like Britain and Germany, where heat pump usage is relatively low. The company's CEO, Martin Lewerth, expressed optimism about rising demand due to persistently high gas prices.


Following the 2022 energy crisis triggered by Russia's invasion of Ukraine, the EU aims to deploy at least 30 million heat pumps this decade to reduce reliance on fossil fuels. Although European heat pump sales reached a record 2.77 million in 2022, they fell by 5% in 2023 due to disputes over the green transition's pace and cost. Lewerth expects demand to rebound as installation rates remain strong and subsidies in key markets increase. 


Europe’s largest renewable power producer, Statkraft, is scaling back its plans for wind and solar plant development due to lower electricity prices and higher costs. Statkraft's CEO, Birgitte Vartdal, announced a reduction in their annual onshore wind, solar, and battery storage capacity targets to 2-2.5GW from 2026, down from previous targets of 2.5-3GW annually from 2025 and 4GW annually from 2030, while offshore wind targets are reduced to 6-8GW by 2040 from 10GW. This move follows similar adjustments by other European utilities like Ørsted and EDP amidst challenging market conditions, with EDP blaming “lower electricity prices and a higher interest rate environment for longer”.


Electricity prices in Sweden are experiencing record lows and are likely to remain so for several years. This trend, driven by factors such as falling natural gas prices, improved nuclear power availability in France, increased hydropower, and the rapid expansion of wind and solar energy, benefits consumers but poses significant financial challenges for electricity producers. Despite previous fears of electricity shortages, Sweden now has a growing surplus, exacerbated by weaker-than-expected industrial demand and delays in energy-intensive projects. Analysts warn that sustained low prices could lead to major losses, bankruptcies, and halted investment in new production, potentially harming future energy supply once industrial demand rises.


Energiföretagen, an association of Swedish energy companies, presented actions to enhance electricity supply, at Sweden’s annual political jamboree, Almedalen. The demands were implicitly critical of current Government policy, as several of the proposals go against policies which the Government introduced. 


Amongst the proposals were;

Increasing local incentives to encourage wind power development (see press release)

Reducing connection costs to promote offshore wind power projects 

Creating a market with clear investment signals and incentives for new electricity production (as current spot prices are low and do not imply a return on investments, even if demand is known to exist)

Energiföretagen's CEO, Åsa Pettersson, called for rapid reforms to speed up electricity production and enhance competitiveness, to address the projected increase in industrial electricity demand, which is expected to rise from 45 TWh to 133 TWh by 2035.


Other key recommendations include:

Risk sharing and risk minimization for ongoing projects, particularly offshore wind.

Optimising electricity grid use and allowing proactive grid development based on forecasts.

Implementing the Energy Agency's district and cogeneration strategy immediately.


Energiföretagen’s comments were reiterated by Anna Borg, CEO of Vattenfall, Sweden’s state-owned energy company. Borg commented “If we cannot achieve an expansion in the near term, and meet the increased need from Swedish industry, then the risk is that some of the investments will end up elsewhere. In that case, Sweden would have no need in the future for the system that is now being invested in.”


The Swedish government is launching a strategy to expand electricity and hydrogen infrastructure, particularly in northern Sweden. Key points include:

Green Acceleration Office: Established to expedite business investments and address regulatory obstacles.

Efficient Environmental Permit Processes: Simplifying regulations and speeding up decision-making to open more mines for essential metals and minerals, reducing reliance on authoritarian states.

Secured Energy Supply: Aiming for net-zero greenhouse gas emissions by 2045, with a focus on electrification and expanding the energy system, including co-planning electricity and hydrogen infrastructure.

Reinforced Transport Infrastructure: Enhancing the Malmbanan rail line and developing double tracks on the Luleå–Boden route to improve capacity and meet NATO’s civilian capability requirements.


Nine gas transmission system operators (TSOs) from countries bordering the Baltic Sea have signed a MoU to coordinate and facilitate the buildout of hydrogen infrastructure and also foster market development for the greenhouse gas-neutral fuel in the region. Companies include German TSO Ontras Gastransport; Poland’s Gaz-System; Estonia’s Elering; Energinet in Denmark; Finnish TSO Gasgrid Vetyverkot; Lithuania’s Amber Grid; Nordion Energi in Sweden; and Latvia’s Conexus Baltic Grid. Declaring that conditions in the Baltic Sea area are excellent for fossil-free hydrogen production, the companies will coordinate the development of infrastructure projects for the transfer and storage of hydrogen in the area.

To read more about Mundus Nordic Green News, click here


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