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Carbon Pricing in Finland: Balancing policy goals Cover

Carbon Pricing in Finland: Balancing policy goals

By: Eelis Paukku  
Open Access
|Apr 2024

Figures & Tables

Energy tax reforms in Finland

YearGovernment billGoalSignificant changesEffect on total tax revenueEstimated environmental effect
1989HE 122/1989 vpEnvironmental goals, slowing down emission growth.Introducing fuel tax.Significant tax revenue increase.Reducing fuel usage growth by 1%.
1994HE 89/1993 vpEnvironmental goals, slowing down emission growth.Introducing fuel tax based on the carbon content of the fuel.A small increase in tax revenue.Small environmental impact on the short term, possible long-term investment impact.
1995HE 237/1994 vpAdjusting the Finnish tax system to EU membership.Continuing national taxes on some energy products.Significant increase in energy taxes, compensating abolishment of some taxes.Not estimated.
1996HE 65/1995 vpIncreasing tax revenue.Increasing the gasoline tax.Significant revenue increase.Not estimated.
1997HE 225/1996 vpDecreasing the energy costs of industry and increasing competitiveness.Abolishing carbon taxes for electricity production, introducing electricity tax.Significant increase in tax revenue.Increase in carbon emissions. The increase was not estimated to be significant.
1998HE 194/1997 vpSubsidy renewable energy and energy with lower carbon intensity.Tax subsidy for renewable energy production.Significant increase in tax revenue despite new tax subsidies.Increased competitiveness of renewable energy production and natural gas. Possible long-term reduction in carbon emissions.
1998HE 84/1997 vpIncreasing the competitiveness of the fishing industry.Abolishing fuel taxes for fishing boats.Small loss of tax revenue.Only small negative environmental impact.
1998HE 206/1998 vpIncreasing the competitiveness of greenhouse farming.New tax subsidy for greenhouse farming.Small loss of tax revenue.Not estimated.
1999HE 55/1998 vpIncreasing energy taxes in order to finance cutting down revenue taxes.Increase in all tax levels. New tax subsidies for district heating and wind power. New tax subsidies for the energy-intensive industry.Significant increase in tax revenue.Possible long-term reduction in carbon emissions due to their increased competitiveness.
2003HE 130/2002 vpIncrease energy tax subsidies to cover deficits.Increased renewable energy tax subsidies. Significant tax level increases.Significant increase in tax revenue.Possible reduction in energy demand growth and carbon emission growth. Increase in renewable energy production.
2005HE 37/2005 vpKeep peat competitive despite EU ETS.Removing all taxes from peat.Small loss of tax revenue.A small increase in carbon emissions. (Disputed at the time, peat emissions are extremely significant in the 2020s).
2006HE 56/2006 vpSubsidizing agriculture.New energy tax subsidy for agriculture.Small loss of tax revenue.Small negative environmental impact.
2006HE 120/2006 vpIncreasing industry competitiveness despite the EU ETS.Decreasing industry energy taxes, removing tax subsidies from competitive renewable energy sources.Medium-sized loss of tax revenue.No significant environmental impact as the EU ETS had just increased electricity prices. Smaller decrease of carbon emissions than in the base scenario.
2007HE 61/2007 vpTo raise tax levels.Increasing tax levels.Significant increase in tax revenue.Small positive environmental impact as emissions would grow slower.
2009HE 185/2008 vpSubsidize agriculture.Increase in tax subsidies.Small loss of tax revenue.The small negative environmental impact that was compensated in other sectors.
2010HE 147/2010 vpIncreasing energy taxation to be more carbonbased.Abolishing base tax and taxing only energy and carbon contents.Significant increase in tax revenue.Significant greenhouse gas emission reduction in traffic and heating. No change in agriculture.
2010HE 152/2010 vpPromoting renewable energy production.Starting new feed-in tariffs for renewable energy production.Moderate costs to the state.Possibility to achieve 20-20-20 goals.
2011HE 53/2011 vpIncreasing taxes, decreasing carbon emissions, and increasing the use of sustainable biofuels.Taxes were increased, and tax subsidies from carbon components of tax were abolished. New tax subsidy for sustainable biofuels.A moderate increase in tax revenue.Decrease in carbon emissions.
2011HE 129/2011 vpIncreasing the competitiveness of energyintensive industries.Increasing tax subsidies by making more industries eligible for aid.Moderate costs to the state.No estimated increase in carbon emissions as most of the subsidy receivers were already within EU ETS.
2012HE 26/2012 vpMaking biofuel tax subsidies compatible with the EU state aid regulationTaking account life-cycle emissions in carbon taxation.No effect.No effect.
2013HE 91/2012 vpIncreasing the significance of carbon components in energy taxation.Increasing carbon tax component and decreasing energy tax component.Small loss of tax revenue due to tax subsidies.Making carbon more costly and thus decreasing its usage in other than ETS sectors.
2014HE 110/2013 vpIncreasing tax revenue.Increasing taxes on traffic fuels and electricity.A moderate increase in tax revenue.Increasing competitiveness of biofuels and decrease in energy usage.
2013HE 178/2013 vpIncreasing data centre competitiveness.Making more industries eligible for electricity tax subsidies.Small loss of tax revenue.Increasing energy usage and a possible increase in carbon emissions if renewable energy capacity growth would not enough.
2015HE 128/2014 vpIncreasing tax revenue, increasing peat and biomass usage in heating. Subsidize agriculture.Increasing carbon taxes. Decreasing peat energy taxation. Removing mining industries from energy tax subsidies.A small increase in tax revenue.Increasing competitiveness of renewable energies and especially energy usage. Possible decrease in energy usage.
2015HE234/2014 vpIncreasing peat competitiveness.Increasing tax subsidy given to peat.Small loss of tax revenue.Estimated carbon emission reduction (disputed).
2015HE 349/2014 vpPromoting small-scale electricity production.Leaving bigger installations outside the electricity taxation. Making the administrative process easier.Very small loss of tax revenue. Possibly bigger losses in the future as small-scale production become more common.A small increase in small-scale renewable energy production.
2015HE 350/2014 vpRemoving tax subsidies from fossil fuels.Removing tax advantages given to LPG.A small increase in tax revenue.No major environmental impact due to lack of alternatives.
2016HE 359/2014 vpIncreasing peat competitiveness. (even more)Increase tax subsidy given to peat.Small loss of tax revenue.Estimated carbon emission reduction (disputed).
2016HE 34/2015 vpIncreasing tax revenue. Subsidize the mining industry.Increasing carbon component of heating fuels. Giving mining industries eligibility for lower electricity taxes and electricity tax subsidies.A moderate increase in tax revenue.Increase in the competitiveness of biofuels. Increased carbon steering.
2017HE 136/2016 vpCovering deficits and financing tax cuts.Increase in carbon and energy taxation.A large increase in tax revenue.Decrease in carbon emissions. Increase in the competitiveness of renewable energy.
2018HE 138/2017 vpIncreasing tax revenue.Increase in carbon and energy taxation.A moderate increase in tax revenue.Decrease in energy usage and carbon emissions. Increase in the competitiveness of renewable energy.
2019HE 191/2018 vpMaking the whole system more compatible with EU state aid legislation. Increasing carbon steering in heating. Subsidizing agriculture. Increasing electricity storages.Taking life-cycle emissions in carbon taxation into account. Taxing only the carbon contents of combined heating and electricity.A small increase in tax revenue.Minor carbon emission reductions in district heating.
2020HE 66/2019 vpIncreasing tax revenue.Increase in carbon and taxation on traffic fuels.Major increase in tax revenue.About 1,2 to 1,4% reduction in fuel usage from base scenario, meaning 0,7% decrease. Possibly promote electric cars.
2021HE 144/2020 vpRemoving some environmental subsidies not related to GHG emissionsRemoving tax subsidies from paraffin diesel.Major increase in tax revenue.About 0,2 to 0,9 reduction to fuel usage from base scenario, meaning 0,1 to 0,3 reduction in fuel usage.
2021HE 167/2020 vpIncreasing competitiveness, increasing tax revenue and decreasing GHG emissions.Removing tax subsidies from energy-intensive industries, decreasing industry electricity tax to EU minimum and increasing energy taxes on certain heating fuels.A moderate increase in tax revenue.Increase electrification in industry. Increase the competitiveness of renewable energy products. Decrease usage of fossil fuels.
2021HE 144/2021 vpCreating a price floor mechanism for peat due to taxation. Subsidizing peat usage in order to make the transition easier.Price adjustments by taxation for peat if EU ETS price would be too low. Making usage of peat in small installations tax-free.Small loss of tax revenue if ETS price would not lower.A small increase in carbon emissions in the future compared to the base scenario. A small decrease in carbon emissions in the scenario where the EU ETS price drops.

Fuel taxes and their revenue in Finland

FuelEstimated revenue, M€% of all budget revenueCarbon tax % of total taxEstimated carbon tax revenue% of all budget revenue, carbon tax
Petrol12982,2%23%3000,5%
Diesel14622,5%42%6071,0%
EU ETS4500,8%100%4500,8%
Language: English
Page range: 76 - 95
Submitted on: Mar 21, 2022
Accepted on: Jun 13, 2023
Published on: Apr 22, 2024
Published by: DJØF Publishing, Nordic Tax Research Council
In partnership with: Paradigm Publishing Services
Publication frequency: 1 issue per year

© 2024 Eelis Paukku, published by DJØF Publishing, Nordic Tax Research Council
This work is licensed under the Creative Commons Attribution 4.0 License.