“Before we introduce new subsidies that lead to the burning of more wood, the combined effect of all earlier subsidy decisions on the timber and energy markets should be evaluated. Fresh subsidies must not erode the prerequisites for existing bioenergy production. The planned separate subsidies for coal power plants should be scrapped,” Jaatinen says.
The Ministry of Employment and the Economy in Finland has explored the need for coal power plant subsidies, should these facilities begin replacing coal with biomass-based fuels. Also the report notes that subsidies should increase the utilisation of biomass and not just transfer biomass utilisation from one facility to another, which would raise prices and increase average transport distances.
Steering mechanisms can create timber market distortions
In 2010, the Government decided to promote the burning of more wood by introducing four new steering mechanisms: feed-in tariffs for forest chip and wood-fuel power plants, energy subsidies for small-diameter trees and a tax on the energy utilisation of peat.
The danger is that overlapping subsidies will distort competition and raise the price of wood. Overlapping subsidies weaken the competitiveness of the forest industry, are detrimental to the national economy and make it more difficult to achieve renewable energy targets. The forest industry produces about 70% of Finland’s renewable energy.
Need to monitor the timber market acknowledged
The Government and the Parliament have acknowledged that the effects, which existing subsidy decisions have on the timber market, need to be monitored to enable corrective actions should timber market distortions emerge. Additional subsidies for the combustion of wood might cause losses for the national economy, which is why promoting the market entry of timber should be focused on instead.
Coal subsidy detrimental to the national economy
A report drafted by VTT Technical Research Centre of Finland for the Ministry of Employment and the Economy shows that €80 million in investment subsidies and annual production subsidies of €10-12 million would be required to enable seven coal power plants to replace coal with biomass-based fuels. This would increase the production of wood energy by the same amount as is generated by two ordinary pulp and paper mills in conjunction with their manufacturing operations.
The greatest increase to renewable energy production can be achieved by safeguarding and developing the wood-processing industry’s operating prerequisites in Finland. A recent assessment by the Finnish Forest Research Institute also indicated that the realisation of forest chip use targets would require substantial increases in timber harvesting volumes and the production volumes of the sawmill and plywood industries.
Timo Jaatinen, Director General, Finnish Forest Industries Federation, tel. +358 9 132 66 00
Stefan Sundman, Director (Energy and Infrastructure), tel. +358 9 132 6611, +358 40 535 0501