Browsing by study line "Miljö- och naturresursekonomi"

This study analyses the effects of carbon subsidy schemes on the optimal forest management in forest sites of different productivity. Forest stand level analysis shows the changes in the optimal stand management due to carbon subsidies. Market level analysis evaluates the market level implications of mutual and unilateral carbon subsidy policies and their effects outside the policy area. In the first chapter, we study the effects of carbon subsidies on a forest stand level. The results show that carbon subsidies lengthen the optimal rotation period, increase the annual timber output and increase the amount of CO2 sequestered in the forest stand. A sufficiently high carbon price leads to forest conservation. All the effects are stronger in the forest of poor productivity. The market level analysis presents an age-class structured model with an endogenous timber price and alternative land use. The numerical examples show that, in addition to the effects shown in the stand-level analysis, carbon subsidies encourage afforestation. An increase in the annual timber output may lead to a lower stumpage price. Unilateral policies may lead to an increase in timber output inside the policy, which decreases the timber price and result in deforestation outside the policy. As a sufficiently high carbon price leads to forest conservation, timber price increases and results in afforestation and decrease carbon emissions outside the policy. The results are in contradiction with the common hypothesis that increasing carbon sequestration in forests by unilateral policy would inevitably lead to an increase in carbon emissions outside the policy area.

Boreal forests fulfil a myriad of ecological, social and economic functions in modern society, which is why it is crucial to manage them in the best way possible. The prevailing forest management strategy in Finland has been rotation forestry, but a Finnish citizens’ initiative and the new EU forest strategy for 2030 have for ecological reasons been calling for a reduction in clearcuts and a switch to continuous cover forestry. While a growing number of economic-ecological optimization studies illustrate the economic aspects of optimal management regime choice in Nordic conditions, the understanding remains incomplete. To contribute to this line of research, this thesis studies the economically optimal management regime and species composition of mixed-species boreal forests with a previously unexamined species combination: Scots pine (Pinus sylvestris L.) and silver birch (Betula pendula Roth). The analysis is based on a theoretically sound and generalized stand-level economic-ecological model that maximizes the net present value of forestry income. In this setup, the optimal management regime is determined endogenously and flexibly, by dynamically optimizing both the rotation period and the timing and intensity of thinnings in a tri-level structure. All model details are empirically estimated. Forest stand development is described by size-structured empirical growth models by Pukkala et al. (2011, 2013) and by Pukkala et al. (2021), of which the latter has not been used in this line of analysis before. The results of this thesis show, for the first time empirically, that it can be economically optimal to conduct near-clearcuts without investing in artificial regeneration afterwards. Near-clearcuts create favourable conditions for utilizing the unharvested young trees and natural regeneration of pioneer species in generating a new tree cohort. This management strategy is found to be suitable for birch-dominated pine–birch stands with a 1% interest rate, as well as pure birch stands. With a 3% interest rate, continuous cover forestry becomes optimal for mixed stands. A further outcome of this thesis is that continuous cover management of pure pine stands is found to be more viable than in previous optimization studies. Further, it is shown that it is economically beneficial to let birch regenerate in a pine stand and even dominate it, due to improvements in overall ingrowth. The characteristics of the optimal solutions are, however, dependent on the ecological growth model used. In light of the cases studied in this thesis, neither rotation forestry nor continuous cover forestry is categorically superior in terms of timber income. There are demonstrably many cases where taking advantage of the environmental benefits of continuous cover forestry and higher tree species diversity is optimal also with respect solely to maximizing timber revenues.

Over the past century, several protection schemes have been introduced in Finland, among which more recently the Natura 2000 programme. As of date, no large scale analysis of the economic effects of protection programmes exist in Finland, even though protection schemes can have large distorting effects. This thesis utilised over 1 million property transactions in Finland from the period 1990-2020 in a hedonic pricing model to analyse the net economic effects of environmental protection. Difference-in-Differences analyses were applied to assess the effects on productive and environmental value of property transactions. This thesis has provided quantified estimates of the economic effects on different stakeholder groups. Average productive value was found to decrease by 15.46% inside protected areas, whereas environmental value increased by 6.76% inside and bordering a protected area. Forest land and land acquired for protection were most reduced in value, whereas residential houses and cottages were found to profit from protection. A net realised welfare gain of €1,127,000,000 was estimated over the period 1990-2020 for the Natura 2000 programme. Besides the net societal welfare gain, distributional disparities were found across stakeholder groups and spatial locations. This research calls for the accurate inclusion of all interests to guarantee net gains for all stakeholders in future protection programmes.

Aquaculture production has enabled the considerably increased consumption of fish for the past decades. While fish is a good source of nutrition, its production is causing negative externalities for instance in a form of eutrophicating nutrient releases. These are attempted to diminish by regulation which has in turn enhanced the stagnation of the aquaculture sector in the EU. Most of the production is currently performed in marine net cages but to harness the economic potential of the sector without further deteriorating the waters, new, more environmentally sustainable options are sought. Bringing the production to land-based indoor facilities with recirculating water is one plausible option. The nutrient releases from these Recirculating Aquaculture Systems (RAS) are significantly smaller as most of the nitrogen (N) and phosphorus (P) can be purified. However, despite the efficiency perks the indoor rearing with adjustable conditions is yielding, the operation and especially the investment costs are likely to be much higher than in the prevailing cage-based production decreasing the desirability of the technology. I conducted a social cost-benefit analysis (CBA) to compare these two alternative aquaculture production technologies, net cage and RAS, from the society’s perspective. In addition to private costs, i.e., investment and production costs, the analysis takes into consideration the eutrophication damage of the released nutrients. The eutrophication damage is determined in monetary terms to make them commensurate with the other costs. For the same reason, all the costs and benefits are discounted to present values prior the comparison. The analysis has special focus on the Baltic Sea and Finland. Due to its dominance in the Finnish aquaculture production, rainbow trout was chosen as the main specie to study along whitefish as a higher value specie. To further examine the economic performance of RAS technology, pike perch production is also included. In addition, due to the uncertainties regarding the cost factors and developing technology, I present a comprehensive sensitivity analysis regarding the discount rate, investment costs of RAS, producer price, and eutrophication damage valuation. When it comes to large scale production of rainbow trout, the results show higher net present value (NPV) for the net cage production. However, when the eutrophication damage costs are taken into consideration the difference between net cage and RAS production decreases. RAS technology seems to be highly profitable in whitefish production, implying that is economically sensible to focus on higher value species. Under the strict environmental legislation regarding the Weser ruling of the EU Water Framework Directive (WFD) activities preventing or hindering to reach the good environmental status waters cannot be allowed. As this can also cause denial of permits for RAS production and further decreasing the distinctive nutrient load of the net cage aquaculture is a challenge considering the economic and technological restrictions, one solution could be offsetting the nutrient load. Gypsum amendment of fields has been found to be a cost-effective measure in preventing phosphorus releases; thus, the initial analysis is extended to include onetime nutrient offsets from farmers. According to the results, it is sensible offsetting measure as the environmental benefits from offsetting are higher than the costs of doing so under net cage production and at the same level under RAS production. The current environmental regulation is affecting hardest on the point sources such as aquaculture farms. This is felt unfair by the fish farmers. To shed light on the issue, another social CBA examines the social net benefits of beef and cultured meat production and compares the NPVs with rainbow trout farming under net cage and RAS technologies. The analysis is conducted with respect to produced protein to make the alternative food sources commensurate. In addition to private costs and eutrophication damage costs of nutrients, it also includes the atmospheric damage costs of carbon dioxide emissions. The results show clear superiority of aquaculture as a protein producer. The thesis concludes that due to the efficiency of aquaculture in producing protein and its potential in the blue growth sector, it is definitely reasonable to seek sustainable ways to produce fish. While net cage technology is currently the best option for large scale aquaculture, RAS has potential on the niche market of higher value species. The technological development has tendency to decrease the costs related to the necessary equipment and if the technology is to overcome its other uncertainties, it may have an important role in the future. Nevertheless, the environmental regulation ought to be adjusted to enable the blue growth in an environmentally and financially sustainable manner.

Ilmastonmuutos on globaali ongelma, jonka torjunta vaatii merkittäviä päästövähennyksiä. Energiantuotanto on yksi merkittävä ilmastolle haitallisia päästöjä aiheuttava sektori. Samaan aikaan globaali energiankysyntä kasvaa jatkuvasti väestönkasvun ja teollistumisen seurauksena. Energiantuotannon päästöjä voidaan vähentää energiateknologialla, uusiutuvan energian ja energiatehokkuuden avulla. Tieteelliset teoriat, joista yksi tunnetuimmista on Porterin hypoteesi, näkevät tiukan ympäristöregulaation vaikuttavan positiivisesti teknologiseen kehitykseen. Ympäristösääntelyn ollessa korkealla tasolla sekä Suomessa että EU:ssa, on Suomella Porterin teorian mukaan hyvät edellytykset kehittää energiateknologiaa ulkomaanvientiin asti. Myös Suomen valtio on panostanut viimevuosina energiateknologian kehitykseen ja maan tavoitteena on hyötyä energiateknologian kehityksestä kotimaisten päästövähennysten lisäksi energiateknologiaviennin kasvattamisen avulla. Tutkielmassani selvitän Suomen energiateknologiaviennin kehitystä ja sen piirteitä vuosina 2010–2018. Olen määrittänyt 457 energiateknologian tuotetta, jotka kuvaavat Suomen energiateknologiaviennin kokonaisuutta. Tutkin tarkemmin Suomen vuoden 2018 energiateknologiavientiä sekä tuulivoimateknologiavientiä vuosina 2010–2018. Suomen energiateknologiavienti on pysynyt melko tasaisena tarkastelujakson ajan. Suomen vuotuinen energiateknologiavienti liikkui viiden miljardin euron tuntumassa vuodesta 2010 vuoteen 2018. Sen sijaan Suomen tuulivoimateknologiavienti on aaltoilevaa, mutta siitä oli havaittavissa kehittyvä kasvutrendi vuodesta 2010 vuoteen 2018. Global climate change is a major issue. Limiting the rise in global temperature below a critical point requires big emission reductions. Globally, energy production causes emissions harmful to the climate. Demand for energy is constantly growing because of population growth and industrialization. However, advances in renewable energy technology can help reduce the levels of emissions. Energy technology can also reduce the final consumption levels of energy by improving energy efficiency. In Finland and EU, environmental regulation is on high level and some theories suggest that this advances technological development. A well-known theory supporting this is Porter’s hypothesis. Regarding these theories, Finland has a good opportunity to develop its energy technology. The government of Finland is investing in low-carbon energy technology and it aims is to gain some benefits by exporting these technologies. In this paper, I will study the exportation of energy technology of Finland in 2010–2018 in general, but also focusing on the exportation of wind power technology. I have defined 457 energy technology products that form the export of energy technology of Finland. The energy technology of Finland has been stable in 2010–2018. The value of this trade in euros has remained stable, approximately five billion euros. While the share of energy technology exports from the total value of exports in Finland has slowly reduced in 2010-2018. Wind power technology export of Finland have been fluctuating, but they have increased more clearly than the total energy technology export of Finland.

Given the urgency of the drastic reduction targets for air traffic, it is necessary to assess which different actions will benefit the achievement of the targets in the short-term. Investments in new and lower-emission aircrafts take time, making them long-term solutions. The introduction of alternative jet fuels, in turn, are impaired by inadequate production levels and lack of economic viability. The benefits of climate offsetting will only be seen in the long term, despite short-term actions. This study presents different tax instruments as the only solution to reduce aviation emissions in the short-term, in the absence of abatement technology. In this Master's thesis I examined, how taxation as a policy instrument can curb aviation emissions in the short-term. The policy instruments considered were fuel, ticket and seat tax and VAT, as well as emissions trading. The impact of the taxes were tested on three different one-way routes. The selected routes included a domestic flight and one intra- and inter-EEA flights. The analysis of short-term emission reduction measures assumed a monopolistic market structure, where the focal airlines have market power. The results were derived by optimizing the flight ticket price from the airline’s profit function, which was used to estimate the number of passengers on the given routes, and thereby the weight of the aircraft as well as the final fuel consumption and the emissions. The results showed, that emission reductions for all the given policy instruments remained very low in the short-term. This finding was not only due to insufficient tax levels, but also to the relatively low share of the passengers in the total emissions. Of the selected instruments, the smallest emission reduction was achieved by emissions trading, and the largest reductions by ticket and value-added tax. The seat tax was not found to have any impact on the emissions. Looking at airline profits, it was found that despite the highest emission reduction figures, the impact of the ticket tax on profits was relatively low compared to other instruments. The largest losses and highest tax revenues were generated from VAT on flight tickets. In addition to emissions trading, the fuel tax was the only policy instrument directly linked to emissions. The increase in fuel prices caused by the fuel tax could make alternative jet fuels, such as synthetic fuels, competitive in the markets. Achieving significant emission reductions in the short-term would require cutting entire flights. However, a significant reduction in passenger numbers could be avoided by seeking to increase the passenger load factors. In reality, airlines have multiple ways to adjust to the given policy instruments. The future research could be extended to consider also other forms of policy adaptation and long-term adaptation strategies.

Forests can sequester large amounts of carbon with relatively low costs. Thus, they are an important instrument for climate policies. The forestry sector can be directly included in an emissions trading system (ETS). Another way is to exclude it but award offsets for additional carbon sinks. The awarded offsets can be used to cover a certain percentage of emissions under the ETS. Offset broaden the scope of an ETS and increase the overall emission reductions at lower cost. However, they face some issues. The main issues are non-additionality, non-permanence and carbon leakage, which are defined in the Kyoto Protocol and scientific literature. The approaches to these issues are compared in three ETS, which are the California Cap-and-Trade Program, the Regional Greenhouse Gas Initiative (RGGI) and the New Zealand Emissions Trading Scheme (NZ ETS). Three research questions are answered. First, how are the forestry related issues of non-additionality, non-permanence and carbon leakage considered in the California Cap-and-Trade Program, the RGGI and the NZ ETS? Second, how these approaches differ between the systems? And third, how could the forestry offset programs be improved in parts of the three main issues based on scientific literature? The approaches to all three issues are almost similar between the California's program and the RGGI. Both programs award only additional sinks. To account for the non-permanence issue, both programs require a 100-year monitoring period after credit issuance. They also require annual reporting and monitoring and a third-party verification every six years. They use a buffer account or reversal risk adjustments for unintentional reversals. Intentional reversals are covered by retiring offset credits in both programs, but the California’s program also requires a penalty. The carbon leakage risk for shifting cropland and grazing activities is determined the same way in both programs and is between zero and 50%. The secondary emissions resulting from these activities are based on the leakage risk, annual difference in actual onsite carbon and annual difference in baseline onsite carbon. The NZ ETS credits all sinks and has not implemented an ETS design to account for carbon leakage. However, non-permanence is addressed. Post-1989 forest owners must repay units if the forest is removed from the program, do a carbon sink inventory every five years and pay units if the number of sinks decreases. Pre-1990 forest owners must repay units in case of deforestation. The California’s program and the RGGI could improve the timing of accounting the onsite carbon sinks and leakage releases, which are inconsistent. Also, the reductions based on the estimated leakage risk may not be high enough because the actual leakage can be up to 80%. The long monitoring periods can be a barrier for participation especially for financially motivated forest owner. On the other hand, the additionality requirements can be a barrier for conservation motivated forest owners. The NZ ETS could be improved by crediting only additional sinks because crediting all sinks increases the government's expenditures, i.e. the taxpayer’s costs, without any environmental benefit. Carbon leakage should also be considered to gain environmental benefits.

The European Union classification system for sustainable activities obligates companies with more than 500 employees to report their EU taxonomy alignment from 2022 on. The purpose of the study was to find out what kind of action companies have taken in preparing for the EU taxonomy classification and reporting. In addition, the aim was to map companies' views on the challenges and benefits of EU taxonomy and environmental responsibility in general. The study was conducted as a case study, and the material was collected through an online survey. The target group was corporate finance and environmental managers from companies employing more than 500 people in Finland, Sweden, and Denmark. Forty-two people answered the survey, 28 of whom say the EU taxonomy affects the company they represent. Most of the respondents were representatives of large Finnish companies operating in the industrial sector. The data were examined by comparing the means and correlations of the responses. According to the survey, 97% of respondents said that their represented company was prepared for EU taxonomy. There were negative correlations between internal preparations and external support based on the data. Finding the EU taxonomy challenging, in turn, positively correlates with the acquisition of external support. Only a small proportion of the respondents said that companies they represented had calculated their own EU taxonomic eligibility or were willing to report on them. Most respondents assessed that their company was a pioneer in environmental responsibility. Based on the results, companies can be divided into two groups in preparation for EU taxonomy. Companies either seek to operate with internal resources or outsource the work. The respondents found that the most significant benefit of EU taxonomy was an improvement in the company's reputation. Topics related to EU taxonomy reporting and determining the company's taxonomic eligibility were identified as the most significant challenges. Companies that did not respond to the survey might not consider EU taxonomy a clear or preferred topic. This fact may also explain the high level of environmental responsibility of the companies that responded to the survey and their good preparation for the challenges posed by EU taxonomy. The role of EU taxonomy in promoting sustainability in companies is remarkable.