The decisions in the budget debate are not yet enough to guarantee that Finland will be carbon neutral in 2035. Only part of the “decision gap” calculated by the Finnish climate panel was now covered.
Government decided in the budget debate to increase the taxation of heating fuels, ie coal, light and heavy fuel oil, natural gas and also peat, by a total of EUR 105 million. This affects people’s housing costs, including the price of district heating.
Read more about budget decisions here.
The tax on peat will almost double as taxation is tightened by 2.7 euros per megawatt hour. There is still considerable tax support for peat.
If peat were taxed in the same way as other fuels, its taxation would have to be ten times higher than at present. Taking into account the subsidy received by other fuels for combined heat and power, the tax on peat should still be six or seven times the current level.
The Finnish Association for Nature Conservation and Greenpeace, among others, consider the peat tax decision to be insufficient, and environmental organizations would have liked stricter measures.
“The decision is stronger than just a minimum increase, but it’s clear that peat burning needs to stop faster,” says Greenpeace climate expert Kaisa Kosonen in the bulletin.
The Finnish Association for Nature Conservation is demanding an end date for the use of peat by law and is still collecting a citizens’ initiative on the matter.
Peat as a heating fuel is desired to get rid of because it is very polluting. The government aims to halve its energy use by 2030.
Proponents of peat believe that emissions trading and the projected rise in the price of allowances would have been enough to ensure that energy producers give up peat in the next few years, as it becomes uncompetitive compared to cheaper fuels.
In the government, the Greens in particular have not considered this to be sufficient, even with the tax increase that has now been made, but the so-called floor price mechanism will be applied to peat in the future.
It simply means that peat taxation will be tightened if the price of allowances remains too low. Minister of the Interior Maria Ohisalon (green), the details of the mechanism will be finally decided in the 2021 framework debate. The preparation is done “on a science basis”.
Peat Getting rid of it is part of the government’s goal to make Finland carbon neutral in 2035. This means that carbon dioxide emissions are produced at most to the extent that they can be sequestered from the atmosphere into carbon sinks, ie forests, for example.
In addition to the increase in the peat tax, the government decided to abandon the emissions trading compensation paid to heavy industry in its current form. Emissions trading compensation for industry has replaced the fact that emissions trading raises the price of their electricity.
This is considered to be an environmentally harmful subsidy as it does not provide an incentive to abandon fossil fuels.
It will be replaced by tailor-made electrification support for energy-intensive companies, valid from 2021 to 2025, which in turn should encourage companies to improve energy efficiency and increase the electrification of their processes.
As well as the climate that an important decision for industrial competitiveness is for the government to reduce the industrial electricity tax to the minimum level allowed by the EU from the beginning of next year.
Otherwise, the Confederation of Finnish Industries, which is reluctant to take decisions, considers the reduction in the electricity tax to be “excellent”, but breathe the same breath into tightening heating fuel taxation and replacing emissions trading compensation with electrification support.
CEO of EK Jyri Häkämies points out in the organisation’s press release that the content of the electrification aid has not been defined. According to him, it can create uncertainty in companies’ investment decisions.
Industry now pays an electricity tax of about 0.7 cents per kilowatt hour, while the EU minimum is 0.05 cents per kilowatt hour. Admittedly, industry does not pay such a high tax in practice, as there is currently an energy tax rebate system in place, which in fact reduces the electricity tax for energy-intensive companies to 0.11 to 0.14 cents per kilowatt hour.
With the electricity tax now going to the EU minimum, about two thirds of the refund system will also be automatically removed when the tax is no longer refunded from the electricity tax.
The remaining fossil fuel-related energy tax rebate will be waived within a four-year period, so that from 2025 companies will no longer be entitled to it.
This in addition, the government intends to move heat pumps and computer rooms that generate heat to the district heating network to a lower electricity tax class. This was supposed to be implemented from the beginning of 2021, but it seems that the decision is more complicated and will last until 2022. The largest computer rooms have already been moved to a lower tax class.
The aim is to make better use of waste and surplus heat and thereby replace fossil fuels in heating.
Government the target of carbon neutrality in 2035 means that emissions must be reduced by around 35 million tonnes of carbon dioxide. In 2035, emissions should not exceed about 21.4 megatons.
In January, the Finnish Climate Panel estimates that there is a significant gap between Finland’s actions and the target: the required emission reductions of 35 megatonnes have only been agreed for about 16 megatonnes, ie there is a gap of about 19 megatonnes between the target and actions.
The government estimates that the peat decision and the reduction of the industrial electricity tax will close that gap by 3 to 4 megatons. There are still difficult crossroads ahead, including how to lower traffic emissions. It will require major changes in traffic taxes and charges.