Factsheet: Energy Taxes

Energy Taxes

Key Information
Full name of Instrument & Measure (English): 
Act on Excise Tax on Electricity and Certain Fuels (1260/1996), Act on Excise Duty on Liquid Fuels (1472/1994)
Full name of Instrument & Measure (native language): 
Laki sähkön ja eräiden polttoaineiden valmisteverosta (1260/1996), Laki nestemäisten polttoaineiden valmisteverosta (1472/1994)
Description: 
In Finland energy taxes are levied on electricity, coal, natural gas, fuel peat, tall oil (1260/1996. Act on Excise Tax on Electricity and Certain Fuels) and liquid fuels (1472/1994. Act on Excise Tax on Liquid Fuels). Fuels used for electricity production are tax exempt. Electricity tax is paid by the end-users. Electricity tax has been divided into two taxation categories, the lower of which, category II tax, is paid by industry and server rooms and from 1.1.2017 onwards also by mining and quarrying sectors. Other consumers pay the higher category I tax. In heat production, the use of fossil fuels is taxed based on their energy content and specific CO2 emissions. In addition, a small ‘strategic stockpile fee‘, is levied. Biomass is tax exempt. Combined heat and power (CHP) production gets a tax relief compared to heat-only production. As CHP plants typically fall within the EU emission trading system, the CO2 component tax is only 50% of the corresponding heat-only plant’s tax to reduce the overlap between the two steering mechanisms. Furthermore, in CHP production the total heat tax (called excise tax) is paid only from the amount of fuel corresponding to the quantity of produced useful heat times a factor 0.9. The tax treatment of peat differs from other fossil fuels. For peat, taxation is not based on energy content or specific emissions but an ‘energy tax’ with a fixed level is levied. Excise duty on liquid fuels is levied on motor gasoline, small engine gasoline, bioethanol, ethers used as additives in motor gasoline (MTBE, TAME, ETBE and TAEE), biogasoline, ethanol-diesel, diesel oil, paraffinic diesel oil, biodiesel oil, light fuel oil, biofuel oil, heavy fuel oil, LPG, aviation gasoline and kerosene-type jet fuel as well as on methanol. The taxes are based on energy content and specific CO2 emissions but also local emissions, that are hazardous for health, are taken into account. Sustainable biofuels get 50% tax reduction on CO2 tax and if they originate from waste or leftovers, inedible cellulose material or lignocellulose, the reduction is 100%.
Goal/Aim: 
Regulate excise tax on energy products (electricity, heating fuels, transport fuels).
Responsible Authority: 
The Ministry of Finance and Customs of Finland

Status:

Year Instrument & Measure Started: 
1997
Year Last Instrument & Measure was last Amended: 
2016