Hard estimate: The government’s proposal could cost Finland tens of millions of euros per year

In order to lower the rising fuel prices, the government has proposed easing the distribution obligation.

“However, this is neither a functional nor an effective way to reduce the costs of motorists and professional traffic”, this is how the Chemical Industry Association assesses in its press release.

The non-profit organization calculates that if the government reduced the distribution obligation by five percentage points, the pump price could be reduced by an estimated 6.5 cents per liter after a delay of several months.

For someone who drives 14,000 kilometers a year in a car that consumes seven liters per hundred, this would mean a monthly saving of around five euros.

Similarly, reducing the distribution obligation by five percentage points would increase carbon dioxide emissions caused by road traffic by approximately 0.5 million tons per year, which would make it difficult to achieve Finland’s climate goals.

If, as a result, Finland were to acquire emission reduction units from other countries, the costs could rise to tens of millions of euros per year.

“The calculation of the distribution obligation could cost Finland tens of millions of euros per year through the purchase of emission units, and this decrease would come against us Finns in the future in the form of increasing taxes or other expenses,” says the CEO of Kemianintuðir Mikko Salo.

According to him, even a temporary easing of the distribution obligation would probably cause a significant disturbance in the market, because the purchase and delivery contracts are mainly concluded for the whole year.

In addition, changing the obligation would have negative effects on the attractiveness of Finland as an investment destination. Business operations and investment decisions require stable and predictable regulation, which is especially emphasized in industry, where the time span of investments is long, often several decades.

“Repeated changes to the distribution obligation in recent years have increased uncertainty and made long-term planning difficult. These have been blunt signals to chemical industry companies promoting a clean transition and circular economy,” says Salo.

“Cutting the distribution obligation would be a completely wrong policy. The very unstable 2020s have shown that Finland and Europe need actions that promote a reduction in the use of fossil fuels and raw materials and thus national self-sufficiency,” he continues.

Salo reminds that, relative to purchasing power, the price of gasoline is only slightly above the average of the 21st century as a result of the Iran war.

He says that, for example, temporary tax reliefs or refunds are more neutral ways to influence the costs caused by fuels than the distribution obligation. These include, for example, an increase in the commuting deduction, a reduction in the excise duty on diesel, or a tax refund for professional transport, i.e. so-called professional diesel.