Minister of Economic Affairs: Government budget session offers solutions to curb rising electricity prices, invest in clean energy and RDI and to increase vitality of Eastern Finland

The measures taken in the administrative branch of the Ministry of Economic Affairs and Employment will support economic growth that is socially, economically and ecologically sustainable. The key objectives include ensuring a predictable investment environment, promoting productivity growth and full use of available labour, supporting clean technology investments and improving energy self-sufficiency.

The appropriation for the administrative branch of the Ministry of Economic Affairs and Employment for 2023 totals EUR 3.7 billion, which is slightly more than this year. In connection with the implementation of the EU’s Recovery and Resilience Plan, a total of EUR 51 million in budget authority will be allocated to the administrative branch of the Ministry of Economic Affairs and Employment. 

Quick solutions for curbing the rise in electricity prices

Russia’s war of aggression in Ukraine has affected Europe’s energy supply and the price of energy. It is unlikely that the prices will fall back to the previous level soon. For these reasons, the Government has agreed in its budget session on a wide range of measures to address the effects of higher energy prices.

The Government decided to temporarily lower the value-added tax on electricity to 10% from the beginning of December until the end of April. The aim is to curb the impact of rising energy costs on the everyday life of Finnish people. In addition, the Government is preparing an EU-level exemption to lower the value-added tax (VAT) on electricity to less than 10%.

In addition to the VAT reduction, the Government will introduce a fixed-term tax credit for electricity in connection with the tax credit for household expenses, which will support those facing unreasonable electricity costs in the coming winter. Under this scheme, taxpayers can apply for a tax card which takes into account the tax credit when calculating the withholding tax. In addition to this tax credit, the Government will introduce a separate financial support for electricity that will be available to households which are unable to make use of the fixed-term tax credit.

The expenditure norm of the heating category for the general housing allowance and the housing allowance for pensioners as well as the expenditure norm of the maintenance category for single-family homes will be raised by 57%. The Government will also submit a proposal to the Commission on lowering the maximum price of bids on the power exchange in the EU.

“In this situation we need quick measures, and reducing the VAT on electricity to 10% is one of them,” says Minister of Economic Affairs Mika Lintilä. 

The tax credit for electricity will help those households whose electricity bill increases unreasonably because of the heating costs for a single-family house, for example. 

On the other hand, the fixed-term financial support for electricity will be of use to those with lowest income.

“This is a fair package that takes care of households and people’s everyday lives in many ways,” Lintilä adds.

Support for the transition to clean energy

The transition from fossil fuels to renewable energy is now more important than ever before. A long-term transformation requires major investments in energy and industrial facilities as well as transmission lines.

Reducing carbon dioxide emissions in energy production and use as well as in industry plays
a key role in achieving carbon neutrality by 2035.

The Government will reserve EUR 315 million for energy aid to support transition to clean energy. The budget authority includes EUR 62 million in funding of the Sustainable Growth Programme for Finland, which focuses on investments in energy infrastructures, new energy technology, low-carbon hydrogen and electrification and decarbonisation of industry. In addition, investments to improve energy self-sufficiency and security of supply will increase the authority by EUR 225 million.

EUR 150 million will be reserved for aid for electrification of energy intensive industry.
This electrification aid compensates the indirect costs caused to the price of electricity from emissions trading in sectors where the risk of carbon leakage is significant. The aid aims to lower the risk of carbon leakage, ensure the cost competitiveness of industry and encourage industrial operators to develop carbon neutral production methods. The operator must use at least 50% of the aid granted for development measures that contribute to making its activities carbon neutral.

Strengthening the vitality of eastern Finland

In June, the Ministry of Economic Affairs and Employment appointed a working group of State Secretaries to examine how Russia’s attack on Ukraine has affected the economy of eastern Finland and what measures are needed to strengthen the region’s vitality.  The problems that the war in Ukraine is estimated to cause to the regional economies are still largely ahead, and their extent is very unclear. It appears that the first direct effects of the war are felt in eastern Finland in particular.

“Russia’s war of aggression is affecting the eastern Finnish region severely. That is why the government budget session decided on a wide range of both short-term and long-term measures to boost the vitality of eastern Finland in this difficult situation,” says Lintilä.

The vitality of eastern Finland will be increased by investing in railway projects, education, tourism and business development. The availability of skilled labour and the accessibility of the region will be improved. Appropriations totalling approximately EUR 56 million are proposed for the 2023 budget proposal to ensure the vitality and competitiveness of eastern Finland and, consequently, Finland as a whole.

Research, development and innovation

Public funding for research, development and innovation encourages companies, research organisations and public service providers to engage in RDI activities that support the renewal of business life and society as well as economic growth. Finland has set a goal of increasing its research and development expenditure to four per cent of GDP by 2030 in line with the Government Programme and the National Roadmap for Research, Development and Innovation.

A budget authority of EUR 470 million is reserved for Business Finland to support research, development and innovation activities. This includes an increase of EUR 10 million to extend the audiovisual production subsidy in 2023. This incentive aims to attract foreign production companies to carry out their productions in Finland and to promote internationally funded projects, in particular.

A budget authority of EUR 10 million is allocated for supporting regional research, development and innovation activities under the item ‘Support for business development projects’. Funding will be allocated to improve cooperation between higher education institutions and research institutes and companies. In addition, funding will be targeted to support innovation activities of small companies, SMEs operating in value networks and research-based start-ups and to speed up utilisation of existing technologies and new solutions.

Inquiries:
Ann-Mari Kemell, State Secretary to the Minister of Economic Affairs, tel. +358 295 504 7332
Matias Ollila, Special Adviser to the Minister of Economic Affairs, tel. +358 295 504 7412
Jukka Nummikoski, Director, Ministry of Economic Affairs and Employment, tel. +358 295 504 7333