The EU’s emissions trading system (EU ETS) is the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions. Under this system those who pollute must buy climate permits.
The system has never really worked well because the EU and member states have allocated free climate permits to big polluters in the name of maintaining competitive advantage for national champions. This has resulted in low prices that have unfortunately not forced companies to clean up their processes and cut pollution.
Finland has a limit from the EU on climate change emissions.
This limit could be breached if the forest sector continues to invest heavily in building new plants for making wood-based products like pulp, fuel, and other derivatives from wood from our forests.
Finland currently uses a sustainable volume of 60 million cubic meters of wood, but the planned new plants may increase this volume to 80 million cubic meters of wood. However, it is not at all certain that all of the plants will be built.
Finland currently has forestry reserves of some 100 million cubic meters of wood and this grows by some 30 million cubic meters each year.
The EU has stated that 80 million cubic meters would lead to Finland going through its Climate Change limits.
Minister Tiilikainen announced on Finnish TV this week that the Finnish government is willing to pay directly for extra climate permits from the higher tax income that the forestry companies will earn from their increased operations when using 80 million cubic meters of wood in the new plants.
Such a proposal is absurd and explained why here:
- The companies should pay directly for all climate permits – they produce the pollution and they should pay from their own profits before they pay tax.
- If the government pays, Finnish taxpayers will end up paying much more than the situation if the companies paid for climate permits directly.
- Here is an example: If the companies have net earnings of €100 million, and corporation tax is say 25% then the company will pay €25 million in tax. If climate permits cost €10 million and the government buys them, then the government will end up with €15 million. However, if the same companies pay for these same permits directly, then they end up with €90 million on which they pay 25% tax which is equal to €22.5 million or almost €7.5 million more for taxpayers in the end!
- … and guess who gets to keep more €7.5 million in cash for bonuses and dividends if government buys the climate permits? This is another example of corporate subsidies.
Now, the Minister has some explaining to do why his party which is very close to the biggest forestry companies, want to give such a hidden subsidy from taxpayers.