HELSINKI — Next to a gray brutalist housing block in the Finnish capital stands a 20-meter hill of coal. The adjacent coal plant’s chimneys pipe fumes into the chilly fall air.

The coal pile lies less than a kilometer from Finland's political heart, where the country's five-party center-left coalition government is pushing one of the world's most ambitious climate policies. While the EU as a whole is aiming for a goal of climate-neutrality by 2050 (something not all member countries agree with) Finland has pledged to achieve carbon-neutrality by 2035. That’s earlier than any other industrialized country.

But that goal is causing political tensions because it means radical changes to two of the country's traditional industries — forestry and peat mining.

“Technically it’s doable, but it requires a great deal of political will as these things won’t happen without regulation and incentives,” said Markku Ollikainen, head of the Finnish Climate Change Panel, an independent think tank that advises the Finnish government.

In order to hit the 2035 target, Finland needs to cut its annual carbon dioxide emissions by 35 million tons so that it won’t emit any more CO2 than its vast forests can absorb. The country is currently heading in the opposite direction — its greenhouse gas emissions rose by 2 percent in 2018 compared with a year earlier, thanks to growing gas and peat use, the government said.

“Peat currently gets a massive tax subsidy. I was disappointed that the government could not remove it” — Markku Ollikainen, head of the Finnish Climate Change Panel

Cutting emissions

The new government has promised to pass the needed 2035 legislation during its term in office, which lasts until 2023.

To become CO2-neutral, Finland would have to end the use of coal and peat in energy production, stop deforestation, halve the emissions caused by vehicles and end the use of oil for heating, said the climate panel.

One of the most politically contentious issues is peat, also known as turf. It's partly decayed organic matter that accumulates in bogs, and can be used as a fuel. But peat isn't very efficient and generates more CO2 emissions than coal, while mining it undermines soil's ability to store the greenhouse gas.

Ollikainen said ending the use of peat for energy would be one of the easiest and most effective ways of advancing Finland’s climate goals. But peat is an important source of heating and employment in rural Finland, the heartland of support for the Center Party, whose alliance with the Social Democrats forms the backbone of the ruling coalition.

The sector employs 2,300 people directly, and contributes €500 million a year to the economy, said Hanna Haavikko, head of the peat industry association.

That's creating coalition friction over peat.

The Greens, who gained five seats to take 20 parliamentary places in this year’s election in the wake of growing concern over climate change, are the third party in the coalition. They want to end the use of peat for energy production by the 2020s, something which the Center Party opposes.

As a result, the government is being careful about peat. Its policy program calls for halving the use of peat by 2030 and ending the use of oil to heat public buildings by 2025.

Currently, Finland generates 28 percent of its energy from oil and gas, 26 percent from wood fuels, 18 percent from nuclear power, 8 percent from coal, 6 percent from hydro and wind and 5 percent from peat, according to government statistics.

“Peat currently gets a massive tax subsidy. I was disappointed that the government could not remove it,” said Ollikainen.

The forest sector is the country's second-largest industrial sector, generating about €20 billion a year in revenues.

The peat industry is fighting back. "If the tax subsidy is removed, it's a death blow to many small and medium-size producers," said Haavikko.

Haavikko warned that cutting peat use would increase foreign fossil fuel imports. She also called for continued subsides for peat, which could be used for building materials, cosmetics and food production.

Green growth

Forests are also politically touchy.

The Center Party and the Greens hold opposing views on logging. Forests cover 70 percent of Finland’s land area and their ability to absorb CO2 is key to the country's climate policy. In the wake of a recent U.N. science report that highlighted the need to stop deforestation, the Greens have called for an end to clear-cutting forests. For the Center Party, forest industries are an important source of livelihood in their core constituencies.

The forest sector's voice is heard loud and clear in Helsinki. It's the country's second-largest industrial sector, generating about €20 billion a year in revenues, according to industry statistics, and accounts for about 15 percent of the country's jobs.

Katri Kulmuni, leader of the Center Party, defended her group's climate policies.

"If you look at our track record, we have been in government when Finland pledged to end the use of coal and oil in 2014 and now we have pledged to hike taxes on peat too," she told POLITICO in a telephone interview. However, she wants a gradual phaseout of fossil fuels and viable alternatives to replace the resulting gap in energy production and employment.

"Center wants to continue logging as it is or even increase it, but we believe that Finland needs to maintain or even increase its forest area" — Green Party MP Satu Hassi

Calling forests the "soul" of Finland, she said that "it's natural that forests are cut and grow back ... I believe we can solve the climate crisis. We don't need to feel anxious."

That conflicts with the Green Party's views.

"Center wants to continue logging as it is or even increase it, but we believe that Finland needs to maintain or even increase its forest area," said senior Green Party MP Satu Hassi. "The government's policy program is not ambitious enough ... when it comes to peat we need legislation that stops its energy use soon. We need to hike peat taxes and we need an ambitious phaseout policy."

Despite friction over peat and forests, there is a broad consensus on the 2035 neutrality goal. The party most critical of that target is the opposition far-right Finns Party (formerly True Finns). Its leader, Jussi Halla-aho, has criticized the focus on climate issues, calling it “climate hysteria.”

The party, with 38 seats in the 200-member parliament, believes that Finland’s policies won’t affect global CO2 emissions. Instead, the party has called for emissions reductions in countries that pollute the most and has expressed support for EU-level carbon duties on products coming from high polluting countries such as China.

The Finnish business community has applauded the government’s ambitious climate goals.

"Both small and large Finnish companies see climate change as a huge opportunity," said Matti Kahra, chief policy adviser at EK, the confederation that represents Finnish industries. "They believe it will benefit them in the long term."

However, EK wants more clarity on the kinds of regulation and policy that the government will pursue to reach its targets.

“Companies need long-term predictability on regulation to plan their investments. The government has dished out a little money here and there and hiked some taxes, but it lacks a comprehensive plan on issues such as R&D funding and electrification,” said Kahra.

As for Helsinki's coal hill — it will still be a decade before it disappears. The Finnish parliament earlier this year approved a ban on using coal for energy by 2029.

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