Ministerial Committee on Economic Policy outlines measures for securing the competitiveness of combined heat and power production
The Ministerial Committee on Economic Policy has prepared guidelines for measures to be introduced in lieu of the entry in the Government Programme for the removal of the tax ceiling that applies to combined heat and power (CHP) production. The removal of the CHP tax ceiling will be replaced by an increase in the energy tax on heating fuels, with an emphasis on the carbon dioxide component. The aim is to improve the position of renewable energy sources in relation to fossil fuels.
One of the Government Programme's tax policies for increasing tax revenues, and also for seeking to ensure that combined heat and power production generates fewer emissions, is to remove the carbon dioxide tax reduction for CHP (the CHP tax ceiling) in stages. The entry for this in the Government Programme states that the Ministry of Finance and the Ministry of Employment and the Economy will prepare a model and timetable. To prepare for the removal of the CHP tax ceiling and to assess the impact of the tax change, the ministries jointly commissioned a report from VTT Technical Research Centre of Finland on the effects of removing the halved rate of carbon dioxide tax applying to combined heat and power production.
The report demonstrated that the current energy tax system functions well as a whole in terms of the central government's energy and climate policy objectives, and that the use of coal, for example, is steadily declining.
"The report shows that removal of the CHP tax ceiling would not further the environmental and energy policy objectives set out for this in the Government Programme. The impact in terms of energy prices, energy efficiency, self-sufficiency and environmental considerations would mainly be either neutral of slightly negative. That's why we have been looking for another way of finding the agreed tax revenues. With these changes we will improve the position of renewable energy sources in relation to fossil fuels," explains Minister of Finance Alexander Stubb.
Report (in Finnish) by VTT Technical Research Centre of Finland
Energy tax is based on the energy content of the fuel (energy content tax) and the specific emissions of carbon dioxide from combustion (carbon dioxide tax). When the energy content tax and carbon dioxide tax were introduced in 2011, following extensive studies, the focus of tax increases was on the carbon dioxide tax, with the price per tonne of carbon dioxide, which acts as the calculation basis for the carbon dioxide tax, rising from EUR 30 to EUR 54 per tonne of carbon dioxide.
To cover the tax revenue shortfall that would occur if the CHP tax ceiling were not removed, the Ministerial Committee on Economic Policy decided to increase the price per tonne of carbon dioxide used as the calculation basis for the carbon dioxide tax on heating fuels at the start of 2017, to EUR 58 per tonne of carbon dioxide, bringing this figure to the same level as that for liquid fuels in transport. In addition, the energy content tax will be increased slightly, by about EUR 0.4 per megawatt hour. About three quarters of the increase applies to the carbon dioxide tax and one quarter to the energy content tax.
No increases are proposed to the tax level for peat. Among fossil fuels, the increase would apply to coal most strongly and would improve the position of renewable energy sources in relation to fossil fuels.