Back 24.06.2009

District heating producers must adapt their strategies to the new EU emissions directive

A new study carried out by Gaia shows that new EU emissions directive will have a significant effect on the profitability of Finnish district heating sector. The study analyzed the free allocation of emission allowances for district heating production. The new rules will be in effect from 2013.

The results of the study show that the use of the so-called benchmarking method will change the amount of free emission allowances to typical Finnish district heating producers. This will affect the competitiveness of district heating and the production strategies of the energy plant owners. The effect of the new EU emissions directive will vary by producer, and, as the results of the study suggest, producers should take the new rules into account early enough and be able to adapt their strategies accordingly.

The focus of the study was on deriving allocation principles for the initial free allocation of emission allowances for district heating production in Finland under the EU Emission Trading Scheme (ETS) for the period 2013–2020.

Suitability of the existing and modified benchmarking principles to district heating as well as high efficiency cogeneration (CHP) in Finland was analyzed. Different methods in division of emissions separately to heat and power production in cogeneration were considered. The effects of benchmarking to CHP plants were studied through real life case studies. The study covered also an analysis of benchmarking utilized in selected countries.

District heating has roughly 50 % share of the Finnish heating market. The main benefit of district heating is the higher production efficiency in large centralized production units, especially if cogeneration of heat and power is used. The EU Emission Trading Scheme regulates emissions from all major industrial and energy production sites. The initial free allocation principles have a sizeable effect on the profitability of energy production and industrial activities.

The study was funded by the Ministry of Employment and the Economy of Finland.

More information:

  • Juha Vanhanen, Managing Director of Gaia Group, gsm+358-50-564 1889,