New state budget a disappointment with its contradicting tax solutions

Press releases |
A tax on the energy utilisation of peat will increase the forest industry’s raw material costs and weaken the supply of wood. Recycling costs will also rise. 

“The forest industry has been going through extensive structural changes and has improved its competitiveness through its own actions. Just as the production is starting to recover in Finland, the Government decides to weaken the operating environment and increase the cost burden in next year’s state budget,"says Finnish Forest Industries Federation Director General Timo Jaatinen.
"Higher energy and waste taxes will target different companies in very different ways. Wood processing opportunities should be exploited in a way that maximises the promotion of growth in the national economy.”  

“The Cabinet Committee on Economic Policy forgot about its promise to safeguard the competitiveness of the industry’s energy taxation. The energy taxes paid by the forest industry of Finland will continue to increase in comparison to our rival countries. The original goal was to decrease this competitiveness-eroding difference. Energy taxation must be re-examined within the limits allowed by the EU Directive to promote the competitiveness of the export sector,” Jaatinen says.

Peat tax a threat to the processing of wood

During the budget negotiations, the Government decided that the energy utilisation of peat would be taxed at a rate of €1.9 per megawatt-hour. The decided tax is lighter than the proposal made by the Ministry of Finance (€3.9/MWh), but it will still have extensive direct and indirect effects. The peat tax will lead to an increase in the forest industry’s raw material prices because it will improve the profitability of the energy utilisation of wood.

Feed-in tariffs and subsidies for the energy utilisation of small trees would have been sufficient measures to ensure the attainment of Finland’s renewable energy objectives. The peat tax and emissions trading also represent overlapping forms of regulation and are thus bad energy policies. Forest industry produces already 70 per cent of the renewable energy in Finland.

Recycling will become more expensive and difficult

Heavier waste taxation will increase the cost of waste utilisation and punish for the implementation of environmental protection measures. Taxation will not reduce the amount of landfill waste the forest industry produces because the industry only sends waste, which cannot be utilised in any way, to landfills.

Expanding taxation will lead to increased costs; directly and indirectly, the new taxes will have a total effect of about €46 million. Tax hikes will be transferred onto waste utilisation charges, but the State will only collect a very small amount in taxes. On top of waste taxes, the forest industry would have to pay waste utilisation charges that would amount to almost double the sum of the taxes.

This will not encourage the raw material use of recovered paper because waste taxes will extend to de-inking sludge, which is created as part of the cleaning of recovered paper, as well as to fly ash that is generated during the atmospheric-emission clean-up process.

Further information:
Timo Jaatinen, Director General, Finnish Forest Industries Federation, tel. +358 9 132 66 00

Energy, peat and waste taxation:
Stefan Sundman, Senior Vice President (Energy and Environment, Finnish Forest Industries Federation, tel. +358 9 132 66 11, +358 40 535 0501