On the structural development of arable land in Finland – How costly will it be for the climate?

Finland is the most sparsely populated country in the European Union. Finland's northern location presents special challenges for the profitability of agriculture. At the same time Finland has a fragmented property structure which means that each farmer cultivates a number of separate fields that are scattered into small parcels located around the village. The situation came into being because of land reforms whose purpose was to handle socio-political issues and not to improve the feasibility of farms. It is obvious that this inefficient property structure increases the cultivation costs but what is often forgotten is that it also increases the harmful emissions to the climate.The purpose of this article is to present the property structure of arable land and its development in Finland until 2020. The main objective is to estimate the monetary value for those climate impacts that the development causes. The study was set up to analyze land management tools and their capabilities to handle the future challenges. First, the study estimates how much petrol consumption increases because of the increased need for agricultural traffic due to the forecasted development of property structure. Secondly, the study estimates a monetary value for the increased emissions to the climate due to the changes in petrol consumption. To estimate the monetary value of the climate effect a substitute cost method is used.It was estimated that by year 2020 the agricultural working hours will increase by almost three million hours per year from its current level because of the expected changes in property structure. By using the information about petrol consumption and emission rate of petrol, it was calculated that the total increase in CO₂-emissions will be more than 200 000 tkgCO₂ per year. By using the information about the level of increase in CO₂-emission and their shadow prices, it was calculated that the changes in property structure will cost 37 million euros until year 2020 and 544 million euros until year 2050. The sensitivity analysis showed that the results are strongly dependable on shadow prices of CO₂-emissions, property structure's development scenarios and the expected fuel efficiency of agricultural machinery. On the other hand it also showed that the impact will be remarkable especially in the long run if the changes in property structure cannot be prevented.The study showed that there is a massive potential for land management activities. But since the current land management tools that are utilized in Finland are not efficient to handle the future problems the toolbox should be renewed. As the renewing work requires both legislative and organizational changes the progress will take time. This means that the harmful impacts that the development of property structure causes will be realized in the upcoming decades. The study concludes that the increase in CO₂-emissions doesn’t concern only Finland but also other EU countries and that is why the matter should be investigated in other countries as well.