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Report: Finland needs to raise the cost of petrol to fight climate change

Research team advocates annual fuel quotas as the most effective way to halve traffic emissions in Finland.

Nainen tankaamassa autoa.
The state should not dictate to citizens what measures they can take to reduce their emissions, says a recent report from Aalto University. Image: Ismo Pekkarinen / AOP

Finland needs to introduce a cap on carbon emissions from petrol and diesel to help fight climate change, according to a report out on Tuesday.

A team of economists at Helsinki’s Aalto University has recommended the introduction of an annual cap on CO2 emissions from fossil fuels if Finland wants to achieve its ambitious goal of halving traffic emissions by 2030. The quota would gradually decrease every year up to 2030, thereby reducing the emissions in line with the Finnish government's targets.

In practice, the research team’s proposal would see the Finnish state set an annual quota for the consumption of fossil fuels.

Fuel distributors in Finland - such as ABC, Neste and Teboil - would then be required to obtain an emission permit for every litre of petrol or diesel they sell, which must be purchased from the state via an auction.

The motorist would then pay for the new emission permit on top of taxes when refueling, which means that petrol and diesel will cost more if the research team's proposal is brought into force.

A radical goal

Matti Liski, professor of economics at Aalto University, who led the research, told Yle that this method would provide an effective means as well as a clear incentive to reduce emissions in an appropriate manner.

“Our proposal is not radical, but the goal set by the decision makers is radical. We're just telling you how to get there,” Liski said.

Liski's team's research was commissioned by the Ministry of Transport and Communications to examine how the Finnish government can meet the 2030 emissions target. Traffic emissions in Finland have fallen only very slightly over the last 30 years, but the target demands that they be halved in ten years.

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Finland has a legally binding EU target to reduce emissions from the so-called burden-sharing sector. The biggest potential for reducing emissions is in traffic, which accounts for about one fifth of Finland's total emissions. Image: Mikko Airikka / Yle

Liski believes the new quota system could be successfully introduced within a year and a half as Finland's Energy Authority has experience of organising permit auctions, and both Finland and the EU have the necessary experience to build such a system.

The biggest question therefore, according to Liski, is whether the political decision makers stick to the objectives they have set. The target of carbon neutrality by 2035 brought plaudits worldwide, but initial measures in support of the target have been sparse.

The government announced a small increase in fuel taxes in its first budget, but also retained subsidies for the carbon-intensive burning of peat for energy.

Liski says that these measures from Prime Minister Antti Rinne's government have not, so far, not had a huge impact.

"Do the decision-makers understand what was agreed," Liski asked. "We have not yet had any very concrete solutions. This would now be a way for politicians to be proactive in keeping the goals alive."

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