Energy utilities and environmental advocacy groups alike have expressed their disappointment with the 10-million euro increase in the tax on peat to be introduced in Finland in 2019.
The Finnish government announced after last week’s budget session that the energy tax on fuels for machinery and heating, including peat, will be raised by a total of 22 million euros – representing a reversal of its position on what supporters argue is a biofuel and opponents argue is a fossil fuel.
The tax on peat has decreased from 4.9 to 1.9 euros per megawatt hour since the start of the current electoral term. The tax cuts have been justified with estimates indicating that a more lenient tax treatment of peat would result in an up-tick in the use of coal and, as a result, undermine the security of energy supply in Finland.
Finnish Energy (ET) responded to the announcement by stating that it would be logical to reduce the overlap between energy taxation and emissions trading, reminding that the companies buying emissions allowances are also the ones paying taxes to the central administration on fuels for heating.
“You should refrain from introducing tax increases in order not to drive down the competitiveness of efficient and low-emission combined heat and electricity production,” said Jukka Leskelä, the managing director of ET.
ET warned that the costs arising from energy taxes and emissions allowances will eventually fall on the shoulders of the citizens and businesses using electricity and district heating.
“It is desirable that the government examines the impact of its tax decisions on the purchasing power and housing costs of citizens. The proposed revisions are ineffective when it comes to climate goals,” said Leskelä.
Harri Laurikka, the managing director of the Bioenergy Association of Finland, similarly reminded that most of the energy user of peat takes place at utilities that fall under the emissions trading scheme, thus forcing such utilities to buy more emissions allowances than those using natural gas, for example.
“At the EU level, the emissions cap will stay unchanged, even if a particular fuel is used more than another in Finland,” he told Uusi Suomi. “We think you should let the emissions trading scheme have its impact instead of taking action to reduce the competitiveness of a domestic fuel.”
The price of emissions allowances, he highlighted, has already more than tripled from the previous year to roughly 21 euros per tonne of carbon dioxide, thus significantly reducing the competitiveness of peat.
“Analysts specialising in emissions trading are now predicting that it’ll rise to as high as 40 euros over the next ten years,” added Laurikka.
The Finnish Association for Nature Conservation (SLL), on the other hand, has voiced its concern about the fact that the energy use of peat surged by 47 per cent year-on-year in the first quarter of the year. It consequently believes the tax increase announced by the government was only a small step in the right direction.
“The detrimental tax subsidies for peat still amount to over 160 million euros in the 2019 budget. Emissions from the energy use of peat exceed those from the use of coal, and it is not justified to continue the special tax treatment of peat going forward,” it highlighted.
Otto Bruun, an environmental policy officer at SLL, told Uusi Suomi that the tax on the energy use of peat is expected to be approximately 2.9 euros per megawatt hour.
“If peat was subjected to the same tax as other fuels for heating, the tax would be almost ten times as high. The current tax rate is markedly too low when taking into account the adverse effects of peat,” he stated.
Laurikka, in turn, reminded that while the increase in the energy use of peat was substantial at the start of the year, the long-term trend is pointing down.
Aleksi Teivainen – HT
Source: Uusi Suomi