A panel set up by the Ministry of Economic Affairs and Employment has proposed a blueprint for phasing out the use of peat as an energy source.
The panel handed over its report to Minister of Economic Affairs Mika Lintilä (Cen) on Wednesday.
According to the government programme, the energy use of peat must be at least halved by 2030 due to its high greenhouse gas emissions. The proposals will next be considered by the cabinet.
The working group called for a one-off waiver package for companies in the sector.
It also recommended partial state compensation paid to peat producers for unsold stock, the purchase of privately owned or leased peat production areas by the state forest agency Metsähallitus and the establishment of a panel to set compensation levels for disposing of peat production equipment, among other measures.
1,700 jobs at stake
Adjustment allowances should also be paid to entrepreneurs who halt peat production, and early retirement options for older entrepreneurs should also be clarified, the committee said.
In December, the Bioenergy Association of Finland estimated that some 1,700 people were directly employed in peat production and transport, primarily in northern Finland.
The working group also proposed support for the transition of peat companies to new businesses, which could be partly funded by the EU's Just Transition Mechanism (JTM).
The JTM, which is part of the European Green Deal, "aims to alleviate the social and economic costs resulting from the transition towards a climate-neutral economy", according to a European Commission statement. It has a budget of 17.5 billion euros.
Dirtier than coal
As part of the government's emissions-cutting programme, the use of peat as energy is to be at least halved by 2030. Burning peat for electricity emits more carbon dioxide than coal.
The centre-left cabinet has pledged that Finland will achieve carbon neutrality by 2035.
It has predicted that the use of peat as an energy source will end in the 2030s due to the higher cost of the emissions allowance, although "it will remain in use to ensure security of supply".
The cabinet has promised to overhaul the taxation of peat as part of a general energy tax reform.
Instead of incinerating peat, the government aims to increase its use in "innovative, high added-value products" in a manner that is "fair at the regional and social levels".
According to Statistics Finland, the use of peat as an energy source fell by nine percent in 2019 to just four percent of total energy consumption.
In the first three quarters of last year, it fell by a further 25 percent to three percent of overall energy consumption. Meanwhile Finland's use of renewable energy rose to the EU’s second-highest level last year, behind Sweden.