Finnish Environmental Equipment Exports (FINTECH)

          CASE NUMBER:          107   
          CASE MNEMONIC:      FINTECH    
          CASE NAME:          Finnish Equipment Exports   

A.        IDENTIFICATION
1.        The Issue
     The pollution control equipment industry has grown partly as
a consequence of the requirements in environmental legislation
enacted in many of the more developed and industrialized nations.

This legislation has come in a variety of forms and address the
issues of air quality, water quality, and solid waste management.

This case focuses on the international trade implications of the
U.S. Clean Air Act, which has helped to provide a promising
market for Tampella Power, Inc.  Following the passage of similar
stringent legislation in Finland in 1983, a Finnish firm developed and 
patented the LIFAC (Limestone Injection into the Furnace and
Activation of unreached Calcium) process, which is a sulphur
dioxide (SO2) removal system designed to cut such emissions in
half at reasonable cost.  This and other innovative technologies have
been developed in order to fulfill the requirements of laws similar
to the U.S. Clean Air Act.  For example, combustion gas scrubbers
and electrostatic precipitators are two other methods which serve
to effectively remove tons of particulates each day of operation
at a given power generation plant.  The application of this equipment
has led to considerable costs savings on site at many process
industries.  Finally, it will become evident that the developments
in this sector are founded upon and oriented toward the improvement
of environmental quality, and that they are simultaneously
stimulating a new, rather lucrative, and rapidly growing worldwide
industry.  

2.        Description
       Unlike many other cases involving potential trade and the
environment conflicts, the legislation and resulting regulations
pertinent to this case are not necessarily serving as an impediment
to trade and business growth.  To a certain degree, many process
and utility industries may be feeling financially squeezed by these
new operational constraints.  However, many are recognizing that
compliance with the new environmental regulations on air quality
will in the long run lead to an overall cost savings and
improvement in operational efficiency at each plant site.  As a
result, a vibrant worldwide pollution control equipment industry
has taken off in the last two decades and promises to continue at
an impressive growth rate.  
     In this instance, Tampella Power's LIFAC process was
initially introduced into the United States in 1989 with Department of
Energy (DOE) support.  As a part of the DOE's Clean Coal Programme, $21
million was provided for the retrofit of many of the older and
smaller power plants throughout the U.S.  The first LIFAC system
was put into operation with Richmond Power and Light later that
year.  This was considered by the DOE to be a test installation,
with the goal of determining LIFAC's effectiveness with the
burning of various kinds of coal (containing different percentages of
sulphur, ranging between 1.2 and 4 percent).  With LIFAC's
earlier successful tests in both Finland and Canada, Jouko Koskinen --
Manager of Sales and Marketing at Tampella Power's office in
Regina, Saskatchewan -- believes that their LIFAC system is well
positioned in the U.S. flue gas desulphurization business.  The
technology is well suited for companies with older power plants
rated under 500 MW and with little available space for additional
equipment.   These, and other, plants are mandated by the 1990
U.S. Clean Air Act Amendments to meet Phase I requirements, which
includes SO2 reductions of up to 80 percent by 1995 (see CLEAN case).
     In the area of air pollution control alone, which accounts
for merely 15 percent of the global trade in environmental
technologies, a considerable amount of equipment is currently in
demand by many large process and utility industries.  In addition
to the technology discussed in this case study, this equipment
includes fabric filters, electrostatic precipitators, mechanical
collectors, gas scrubbers and many other types.  Overall, it
appears that this will promise to be a strong growth industry
which is uniquely positioned to serve none other than the interests of
the environment.

3.        Related Cases
     Keyword Clusters
     (1): Trade Product            =  MANUFactured products
     (2): Bio-geography            =  TEMPerate
     (3): Environmental Problem    =  Pollution Air [POLA]

4.        Draft Author :     Breton H. Lyhus


B.        LEGAL Cluster

5.        Discourse  and  Status: AGReement and COMPlete
     Dating back to about 1970, most countries around the world
have increasingly come to recognize that economic growth and
environmental quality need to be as compatible as possible. 
International Environmental Agreements (IEAs) have been assembled
and signed by many countries since that year, however their
binding qualities and provisions for enforcement have been questionable. 
Examples include The Montreal Protocol, which  addressed  areas
regarding the control of consumption, and consequently emission
levels of many types, particularly those affecting the
stratospheric ozone (see MONTREAL case). 
     More recently, in 1992, there was the United Nations
Conference on the Environment and Development (UNCED), which
included two legally binding and three nonþlegally binding
documents of principle.  One of the legally binding documents was
particularly pertinent to air quality was called the Framework
Convention on Climate Change.  This document called upon the
developed countries to take the lead with cost effective measures
to try to stabilize the emission of carbon dioxide and other
greenhouse gases to 1990 levels by the year 2000.  The United
States, the European Community (EC), and 153 other states had all
signed this treaty by December of 1992.  The U.S. had also
ratified this treaty, and in October of 1993, President Clinton issued the
U.S. Climate Change Action Plan in order to respond to meeting
the convention targets on greenhouse gas emissions while still
strengthening the economy.
     The U.S. Clean Air Act is, of course, more central to the
focus of this case study, and some of the details of this
legislation will be discussed in the Forum and Scope as well as
Legal Standing categories below.  Therefore, despite some
isolated groups of opposition within the general population and also
industry, there is generally a majority amongst the populations
in virtually all nations who support the principles of the recent
IEAs and those to come in the future.  As for the U.S., the 1990 Clean
Air Act Amendment was enacted by Congress. 

6.        Forum and  Scope: USA and UNILateral
     Although the U.S. Clean Air Act outlines requirements and
action addressing a wide variety of emissions sources, this case 
focus upon those concerning the process and power generation
industries for the purpose of this case study.  According to an
estimation in 1990 by the 24þnation Organization for Economic
Cooperation and Development (OECD), these sectors (which have
considerable impact upon global air quality) constitute about 15%
of the world market for environmental equipment and services. 
The rest of the global market for pollution control equipment is
formed by demand in the sectors of water and effluent treatment, solid
waste management, and other related (but uncategorized) products
and services.

7.        Decision Breadth: 1 (USA)
     The United States is the primary sovereign state involved in
this case.  However, the U.S. legislation is providing trade
opportunities for foreign and domestic exporters of pollution
control technologies, as well as prompting similar legislation
amongst these other developed nations.

8.        Legal Standing: LAW
     For power plants, cogeneration plants, pulp paper 
plants (see PULP case), and other process industries 
which typically generate significant amounts of their own power 
for consumption or sale, the U.S. Clean Air Act Amendment of 1990 
calls for two important phases of emissions reductions at
these types of facilities.  Phase I calls for no more than 2.5 lb
of SO2/MMBtu by January 1, 1995 at 261 units in 110 coalþburning
power plants in 21 Eastern and Midwestern states.  Phase II is to
begin on January 1, 2000, and it imposes tighter emissions limits
on these plants and sets restrictions on other smaller plants
fueled by coal, oil, or gas.  This will affect about 2,500 units
at roughly 1,000 plants throughout the nation.  In addition, the
legislation is calling for a 2 million ton cut in NOX (nitrous
oxide) emissions by 2000.  The NOX requirements are of particular
importance in the alleviation of acid rain problems.  Continuous
emission monitors (CEMs) were to have been in place in all of the
units mentioned above by January 1, 1995.

C.        GEOGRAPHIC Clusters

9.        Geography Locations
     This case study refers particularly to the developed and
industrialized nations of North America -- mainly the United
States, since that is the source of the Clean Air Act.  However,
in terms of trade opportunities, virtually all other OECD nations
are important to this case.  As most of these nations have some type
of clean air legislation, their industries have become rather
competitive in the markets of pollution control equipment.  Even
though the U.S. exports much of this equipment, the U.S. is also
a large importer of clean air technologies from many of these other
developed nations, such as in this case of the Finnish supplier. 

     A.   Continental Domain:      North America [NAMER]
     B.   Geographic Site:         Eastern North America [ENAMER]
     C.   Geographic Impact:       USA

10.       Sub-National Factors: YES
     Since the Tampella Power, Inc. LIFAC process was introduced
into the U.S. initially by way of a DOE program related to the
formulation of the 1990 Clean Air Act Amendment, this is
certainly within the realm of the U.S. national legal system. 

11.       Type of Habitat: TEMPerate


D.        TRADE Clusters

12.       Type of Measure: REGulatory Standard [REGSTD]
     This case of pollution control technology trade is very much
the consequence of the recently enacted domestic regulatory
standard - the 1990 Clean Air Act Amendment.  

13.       Direct vs. Indirect Impact:  INDirect

14.       Relation of Measure to Environmental Impact
     The U.S. Clean Air Act will indirectly encourage import and
export of effective air pollution control equipment between
industrialized nations.  The legislation creates a type of
economic instrument, in the form of market incentives and penalties, such
that the trade in various scrubbers, precipitators, injection
systems will continue to grow in response.

     A.   Directly  Related:            NO 
     b.   Indirectly  Related:          YES EQUIPment  
     c.   Not  Related:                 NO
     d.   Process Related:              YES Pollution Air [POLA] 

15.       Trade Product Identification: AIR POLLUTION CONTROL 
               EQUIPMENT [EQUIP]

16.       Economic  Data
     The following figures include all pollution control
equipment - not merely that for the LIFAC equipment or other air quality
control purposes.  Unfortunately, no data was available on the
value of industrial output for specifically air pollution control
equipment.  Industry output was $80 billion in 1990 and $250
billion anticipated by the year 1997 (see LATTECH case). 

17.       Impact of Measure on Trade Competitiveness:  MEDIUM

18.       Industry  Sector:   UTILity

19.       Exporters and Importers: FINland and USA
     The United States was the largest exporter of this equipment
at $850 million in 1990.


E.        ENVIRONMENT Clusters

20.       Environmental Problem Type: Pollution Air [POLA]
     The problem at hand, which is being resolved by the trade of
this LIFAC technology and other similar systems, is how to
control and reduce the nationwide (and eventually worldwide, as
well) emissions of sulphur dioxide (SO2).  This compound, along
with nitrous oxides (NOX), is considered to be largely
responsible for the cause of acid rain (see ECCO2 and SULFUR cases).
     These pollutants are generated in vast quantities through the 
combustion process of coal fired power plants, and then they are 
carried by winds and weather systems to distant regions in any 
direction where they return to earth by way of normal precipitation.
     Fortunately, coal ash itself contains alkalies which absorb
some of the sulphur during the combustion process.  However,
since up to half of the sulphur is not absorbed in this manner, a
process such as LIFAC is necessary to capture and absorb the
remainder of the sulphur.  In this process, pulverized limestone
is pneumatically injected into the upper part of the boiler.  The
high temperature of the outflowing combustion gas quickly
decomposes the limestone into calcium oxide and CO2.  Part of
this calcium oxide reacts with the SO2 to form calcium sulphate. 
This calcium compound is then carried along with the lighter ash
(flyash), and is then effectively removed from the hot exhaust
gas flow by the electrostatic precipitators.  In this way, this
system essentially eliminates the acid rain problem. 
 
21.       Name, Type, and Diversity of Species
     Not applicable to a specific species; however, the acid rain
problem may negatively affect numerous forms of life.

     Name:          MANY
     Type:          MANY
     Diversity:     19,473 Higher Plants per
                    10,000 sq/km (USA)

22.       Resource Impact and Effect: HIGH and PRODuct
23.       Urgency and Lifetime: LOW and 100s of years
24.       Substitutes: Conservation [CONSV]

     Much of the new air pollution control equipment is designed
to improve the energy efficiency of many plants, in addition to
removing airborne particulates at the end of a process.  This is
known as incorporating technologies that bring about
changesþinþproduction processes (CIPP), as opposed to endþofþline
(EOL) technologies originally installed at industrial sites. 


F.        OTHER FACTORS

25.       Culture: YES
     The issue of culture is applicable in this case only in that
these recent developments in the pollution control industry have
been prompted by the environmental legislation within many
developed nations.  This legislation, in turn, was generally
proposed in response to general public demand for action toward
better regard and maintenance for environmental quality.  The
United States, the European nations, Japan, and other nations
have clearly reached a stage of development, whereby their
societies can generally afford both time and money (to a limited
extent) to devote to the quality of the environment.  People have
seized upon this opportunity, and the endeavor has become a
significant part of the national cultures of these nations.

26.       Trans-Boundary Issues: YES
     Air and air quality easily transcends national borders.  We
are all aware how air pollutants generated in heavily
industrialized centers are eventually dispersed throughout the
surrounding region by way of weather systems and their related
wind currents.  Acid rain and greenhouse gas build-up are the
broader consequences of this activity.  Therefore, the marketing,
trade, and distribution of this type of emissions control
equipment will go a long way toward alleviating this serious
trans-boundary air pollution issue.
     In terms of marketing and trade, a relatively new economic
instrument (in the form of a commodity) is being considered for
implementation in the global market place.  A sub-committee of
the United Nations Commission on Sustainable Development is
evaluating a pilot scheme in which carbon dioxide permits would
be distributed to all nations and then traded on the world market
place.
     This measure would allow the more polluting nations to
purchase such permits, but doing so would impose a price (or
disincentive) upon their dirty practices.  Meanwhile, cleaner
nations and their industries would then be able to sell their
permits at some profit, since their actual output in pollution
may be less than that allowed in the permit.  This system is in
its infancy within the United States, and is mostly just an idea
throughout the rest of the world.  However, since the
trans-boundary implications are so great, these permits (also
known as "pollution allowances") may soon develop into a fine
compliment to the international trade of air pollution control
equipment.  This type of trade and environment issue would be an
interesting topic for another case study.  
  
27.       Rights: NO 

28.       Relevant   Literature
Grubb, Michael, et al.  The Earth Summit Agreements:
     A Guide and Assessment  London:  Earthscan Publications
     Ltd., 1993.
Jonkers, Loretta S.  "Environmental Equipment; Industry 
     Overview,"  U.S.Industrial Outlook, (January,          
     1993), 19.
Lapper, Richard and Laurie Morse. "Market Makers in CO2 Permits,"
     Financial Times, March 1, 1995, 10, 3.
Rittenhouse, R. C.  "Action Builds On 1990 Clean Air
     Act Compliance" Power Engineering, May, 1992, 21.
Salaff, Stephen. "LIFAC Moves West," Modern Power
     Systems 12, September, 1992, 27.