Background information

Due to the rising energy costs following Russia’s war of aggression against Ukraine, the government of Finland has lowered the distribution obligation for renewable fuels. The aim is to temporary lower the costs of transport fuels. The parliament has passed the proposed amendment to the Act on the Promotion of Renewable Fuels in the Transport Sector [446/2007]. The Act promotes the use of renewable fuels as a substitute for petrol, diesel, and natural gas in the transport sector with the purpose of reducing greenhouse gas emissions of transport.

The temporary amendment entered into force on 8 July 2022 and applies until 31 December 2024.

Content of measure

The amendment reduces the distribution obligation for renewable fuels by 7.5 percentage points, whereby the distribution obligation of renewable fuels is temporarily lowered to 12% in 2022 and 13.5% in 2023.

Calculated based on fuel prices of March 2022, it was estimated that the 7.5 percentage point cut reduces the price of diesel by around 12 cents per litre. The impact on petrol prices will be smaller, as more renewable diesel will be used to meet the distribution obligation. Reducing the obligation for distributors subject to the obligation and making it more flexible will temporarily reduce cost pressures. However, for biofuel producers, the reduction may have a temporary negative impact.

The amendment is expected to indirectly increase the excise tax revenue on transport fuels by approximately €75 million in 2022. The volume of renewable fuels on the market may not fully decrease to the same extent as the reduction of the distribution obligation, and therefore the indirect effect on excise revenues may be lower than estimated. The change in the law is not expected to have a significant impact on VAT revenues, as the reduction in fuel prices is expected to increase other consumption by a corresponding amount.

Use of measure

The measure applies to all citizens and companies utilising transport fuels.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Sector specific set of companies	Does not apply to citizens

Actors and funding

Actors	Funding
National government	No special funding required

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Consulted	Consulted
Form	Direct consultation outside a formal body	Direct consultation outside a formal body

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: Sectoral or branch level

Involvement

The proposal was open for consultation before being voted on in parliament. Employers' organisations in the transport sector received invitations to leave a statement.

Views and reactions

Multiple employers' organisations considered the amendment necessary to safeguard the operating conditions of transport companies. The Service Sector employer’s organisation Palta however commented that the proposal is problematic as it increases greenhouse gas emissions in Finland and thus hinders the achievement of the emission reduction targets in the transport and cargo distribution sector. No statements from trade unions were received.

Sectors and occupations

This case is not occupation-specific.

Sources

• 30 May 2022: Government proposal HE 85/2022 vp [Hallituksen esitys] (www.eduskunta.fi)
• 19 September 2022: Lower distribution obligation for transport fuels to continue in 2023 (tem.fi)