Friday, April 15, 2011

EU catching up with Finland 21 years later and proposing carbon tax

The European Commission has issued a proposal to augment the EU Emissions Trading Scheme (ETS) with a system of carbon taxes on fuels and heating oil tied to greenhouse gas emissions. Under the EC proposal, the new tax regime would consist primarily of two components: a flat-rate carbon tax beginning at €20 per ton of carbon dioxide (CO2), rising in concert with EU carbon prices; and a component based on a fuel’s energy density rather than its volume, thereby rewarding efficiency. Under the new regime, ethanol and other energy sources regarded as renewable would be exempt from the carbon tax. It is anticipated the UK may oppose or veto the new carbon tax.

Finland was far ahead of the rest of the world and implemented a carbon tax already back in 1990 and was the first country to do so. Having worked in Finland for a number of years I can't say I heard much, if any, industry opposition to the carbon tax. After more than 20 years of the carbon tax, industry has clearly adapted. Has the carbon tax been a success in Finland? It is hard to say given Finland's decision to invest heavily in nuclear energy. Maybe part of the investment in nuclear was a response to the carbon tax? The carbon tax does seem to clearly have benefited the Finnish biomass and bioenergy industry, which is now a global leader in manufacturing, development and in utilizing biomass for energy. Almost 30% of the total primary energy consumption in Finland is met by bioenergy. That compares with 3% in Canada.

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