Will Fossil-Free Energy Turn Finland’s Economy Toward Growth?

One of the biggest international goals is to phase out fossil energy. That’s why it was interesting to note that 95 percent of Finland’s electricity production was based on fossil-free energy sources in 2024 — including nuclear, wind, hydro, and solar power, as well as renewable fuels.

Last year also marked a milestone: wind power surpassed hydropower to become the second largest source of electricity production. The only larger source is nuclear energy, which accounted for 38 percent of Finland’s electricity supply.

This development is not only excellent for climate action but also because fossil-free energy gives a competitive edge to investments that consume a lot of energy. For this reason, Finland is expected to attract a wide range of international investments in the coming years — from various data centers to fossil-free hydrogen production.

If and when these future promises are fulfilled, Finns will have reason to expect the national economy to finally embark on a path of growth. At the same time, Finland’s public finances could move toward balance — especially since the Finnish government has promised to implement reforms that support economic growth over the next two years.

Previous thoughts on the same topic:
The Green Movement is Withering – And That’s Not a Bad Thing
The difficult times for Finland's economy are coming to an end
Towards green energy despite serious drawbacks

The difficult times for Finland's economy are coming to an end

Finland's economy has struggled since 2008. This is partly due to the fact that the global crisis at that time was preceded by Nokia's success as a mobile phone manufacturer, which led to an expansion of the public sector in hopes of scoring political points.

Then Nokia's glory days came to an end, and Finland was left with an oversized and expensive public sector relative to its income. However, dismantling it proved nearly impossible for the ruling politicians, as almost the entire population benefited from it.

The current Finnish government has started to address this problem, but the recent rise in interest rates has made the situation more difficult by increasing state expenditures just as public sector spending has been reduced. At the same time, the country's labor unions have opposed all changes, and the private sector hasn't recovered as hoped after the COVID-19 pandemic.

However, according to Finland's Ministry of Finance, there now seems to be light at the end of the tunnel. According to its top official, "price increases have clearly slowed down. Interest rates are on the decline, and the ECB is likely to lower rates two more times this year, which the markets have already priced in. The decline in GDP appears to have genuinely stopped, and there are signs of a revival in the housing market."

The official also praises Finland's "excellent" cost competitiveness, meaning the ability to produce goods and services at competitive prices compared to other countries. Additionally, alongside Nokia and the forest products industry, "new beginnings" have emerged in sectors like clean energy, artificial intelligence, and chip technology.

When you add to all this that the country has a right-wing government, which can be expected to refrain from redistribution policies, it seems that Finland is also emerging from its decade-and-a-half-long economic downturn.

Previous thoughts on the same topic:
Finns are backing the government making difficult decisions
Correct minister, ridiculous facts
The program of the new Finland´s Government is ready, and ministers are being selected