High tax on peat prevents achievement of the objective related to the use of domestic energy
The past heating season showed that with Finland’s existing boiler base, peat is mainly being replaced with imported fossil-based fuels, not wood. In January-March, imports of coal to Finland increased by almost one-third compared to the previous year. At the same time, Vapo’s energy peat deliveries decreased by almost 40% in Finland. During last January-March, Vapo delivered 3.0 TWh of energy peat, while the deliveries of energy peat for the corresponding period the previous year amounted to 4.9 TWh.
According to Vapo Oy’s Managing Director Tomi Yli-Kyyny, the use of forest energy increased by only under 10% during the same period. The reasons for peat being replaced with imported fuels are rather simple. Due to technical reasons, the Finnish boiler base cannot replace missing peat with wood, and an even more significant reason is the price of different forms of energy, consisting of the actual energy cost, price of emission rights and tax treatment.
“At the beginning of 2013, the energy tax on peat increased from EUR 1.90 per MWh to EUR 4.90 per MWh. With the price of emission rights decreasing to approximately EUR 1 per MWh at the same time, the outcome is this. Domestic fuels are being replaced with imported fuels. The aim should be to increase Finland’s energy self-sufficiency, and the only technical and economic way to achieve that is to increase the combined firing of wood and peat,” Yli-Kyyny says.
According to decisions in force, the tax on peat will increase by an additional EUR 1 as of the beginning of 2015. Should this happen, it will further weaken the competitiveness of the domestic peat/wood combination against imported fuels. If Finland wants to stick to its objective of renewable fuels accounting for 38% of energy by 2020, it is absolutely necessary to change the tax treatment of peat so that the use of wood can be increased. Without a tax amendment, increasing use of imported energy will have very significant negative effects on both employment and the trade balance, according to Yli-Kyyny. Peat and energy wood currently provide employment for almost 17,000 people in Finland.
Co-firing of peat and wood is also a very competitive combination with regard to emissions. Yli-Kyyny reminds us that with a firing mix of 50/50, the carbon dioxide emissions of energy production are clearly lower than with coal or fuel oil and at the same level with natural or shale gas, which are deemed clean.
Peat has been classified as a slow-renewing biomass fuel in Finland. It has a significant share of approximately 6% in our energy balance. As a domestic fuel, peat has significant positive effects at the regional level and on employment and certainty of energy supply. The aim of the national energy and climate strategy is to keep peat a competitive alternative in energy production.
Tomi Yli-Kyyny, Managing Director, tel. +358 20 790 5605
Ahti Martikainen, Director, Communications, tel. +358 40 680 4723