Report: Finland’s carbon neutrality target for 2035 can be achieved while strengthening economic growth

According to a new report, Finland can achieve its carbon neutrality target for 2035 by implementing cost-effective measures to strengthen the LULUCF carbon sink and complement it with technological sinks. While promoting incentives to increase the forest sink, these measures will also boost economic growth and improve the sustainability of forestry in within 10-15 years. The report was prepared by Professor Emeritus Markku Ollikainen and his working group on behalf of Kone Foundation’s Metsän puolella (“For the Woods”) initiative.

Petteri Orpo’s government budget session on 1–2 September, 2025, produced decisions that will have a significant impact on whether Finland will achieve its carbon neutrality target in 2035 in accordance with the Paris Climate Agreement.

“We want to provide the government research-based information on the economically most feasible ways to increase carbon sinks in order to achieve Finland’s carbon neutrality goal. It is important to examine the required pathway at the level of the national economy, as the current debate on carbon sinks is not always grounded in research,” says Mari Pantsar, Change Manager for the Metsän puolella initiative.

According to the report, the most feasible measures are strengthening forest carbon sinks, accelerating the green transition to create technological sinks, and, as an additional measure, compensating for the reduction in forest sinks due to the increased and unpredictable decomposition of peat in peatlands with Internationally Transferred Mitigation Outcomes (ITMOs) defined by Article 6 of the Paris Climate Agreement.

The examined measures related to forest carbon sinks included reforming the Forest Act to make the current recommendations for good forest management practices by the Finnish forest expert agency Tapio mandatory for all forest landowners, creating a forest carbon rent mechanism to compensate forest landowners for carbon sequestration, and moderately restricting harvesting in state-owned forests. Compliance with Tapio’s recommendations would strengthen the sustainability and biological diversity of forests, as well as the carbon sink, and halt the decline in the number of large trees.

The green transition measures included the transition of the energy sector from burning biomass to electric boilers and the promotion of biogenic carbon dioxide capture and storage (BECCS), which would lend support to the adoption of hydrogen economy solutions. These measures would also boost economic growth and should therefore be seen more as investments in strengthening the national economy than as costs of climate policy.
As an additional measure, the unforeseen acceleration of peat decomposition would be offset by purchasing ITMOs).
These measures will create a total of approximately 27 million tons of new carbon sinks, and other programs will create an additional 6 Mt of sinks by 2035. When soil emissions are considered, the net carbon sink will be 14 Mt. This corresponds quite closely to Finland’s projected fossil emissions for 2035 (14–18 Mt). A determined reduction in fossil emissions therefore remains essential to ensure carbon neutrality.

The studied measures to increase forest and technological carbon sink will boost economic growth without significantly reducing the amount of log and pulpwood available to the forest industry. When the impacts of the selected measures are calculated using a computable general equilibrium model, the sink pathway will increase the growth of GDP by approximately EUR 2 billion more by 2040 than in the baseline scenario, where no additional measures for the carbon sink were adopted. The gain in growth is driven by increased productivity and improved material efficiency resulting from investments in the green transition.

“The key conclusions of the report are that a realistic pathway to carbon neutrality can be built in Finland, enabling the 2035 carbon neutrality target to be achieved. Furthermore, achieving carbon neutrality will strengthen both economic growth and the sustainability of forestry,” says Professor Emeritus Markku Ollikainen.

Download the full report in Finnish here (opens in a new tab).

Further information

Markku Ollikainen, Professor Emeritus, tel. +358 29 4158065

Mari Pantsar, Docent, Change Manager for Kone Foundation’s Metsän puolella (“For the Woods”) initiative, tel. +358 50 382 0755

Professor Emeritus Markku Ollikainen presented the results of the report on September 1, 2025. The recording is available on Kone Foundation’s YouTube channel.