Cutting biofuel distribution obligations back in return – Pump prices could unexpectedly come under additional pressure

The government is trying to curb rising fuel prices by cutting the obligation to distribute biofuels. Confederation of Finnish Industries (EK) says cutting the distribution obligation is a pointless move.

“There is no absolute certainty about the impact that cutting biofuel distribution obligations will have on pump prices. In the long run, the decision may be sub-optimal, ”says EK’s leading climate expert Janne Peljo.

According to him, the fluctuation in the world market price of oil has traditionally been the strongest price driver.

The obligation to distribute biofuels will be cut for a period of two years. Emission reductions avoided at the end of the period will be tightened. This will create rising cost pressures for the future.

“After 2024, the slope of Finland’s biofuel distribution obligation will increase significantly from the current level,” Peljo estimates.

At the same time, he said, there may be a situation where the availability of biofuels is tighter than before. This is evident in a situation where other countries are also raising distribution obligations.

“If the production capacity of biofuels does not increase significantly, Finland will have to procure biocomponents in a tighter market. It may be that the costs will be much higher then than at present, ”says Peljo.

Impact on diesel in particular

The distribution obligation in 2030 is 34% in line with the medium-term climate plan. At the beginning of the year, distributors have distributed renewable fuels in accordance with the 19.5% distribution obligation.

The Ministerial Working Group on Preparedness decided on Thursday that the fuel distribution obligation will be temporarily reduced by 7.5 percentage points in 2022 and by 7.5 percentage points in 2023.

The working group estimates that a 7.5 percentage point reduction based on fuel and renewable fuel prices will affect the pumping price of diesel by about 12 cents per liter.

The impact on the pump price of petrol is clearly smaller, as the distribution obligation is met more with renewable diesel.

The reasons for cutting the obligation are, among other things, cost problems in the transport sector.

EK’s Peljo understands the pressure, but soon the worst may be behind us. Costs in the transport sector have begun to flow into new contracts.

By Editor

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