Project confirms key role of fiscal incentives in achieving circular economy

Project confirms key role of fiscal incentives in achieving circular economy

Green Budget Europe (GBE), the Institute for European Environmental Policy (IEEP), the Ex’Tax Project Foundation (Ex’Tax) and the Finnish Innovation Fund (Sitra) organised on Tuesday 27 November a seminar at the European Parliament to present the results of a one-year project which looked at fiscal and other incentives to promote circular economy objectives in Finland.

At the seminar, hosted by MEP Sirpa Pietikäinen (former Finnish Minister of the Environment and long-standing member of the ENVI Committee), the organisers explained the rationale and proposed instruments used in the scenario developed within the project.

The following incentives were proposed to promote carbon-neutral circular economy goals in Finland:

  • the introduction of a carbon price floor to tackle air pollution in the energy sector;
  • the removal of diesel subsidies in the transport sector to gradually phase out the use of fossil fuels;
  • the increase of electricity tax for bulk users and the removal of subsidies for energy-intensive industries;
  • the introduction of air passenger and air freight taxes;
  • the introduction of a waste incineration tax and nuclear waste tax;
  • the introduction of natural resource taxes for water abstraction, and the extraction of metal ores and non-metallic minerals; and
  • the introduction of a pesticides tax in agriculture.

In the scenario, these measures were phased in over the 2018-2025 period, with revenues amounting to €3.5 billion in 2025. Every year, the revenues were used to lower labour taxes (personal income tax, social contributions paid by employers and employees as well as additional income support for the lowest two income quintiles) and towards investments in R&D and renewables.

Based on economic modelling conducted by Cambridge Econometrics, the results indicated an increase in GDP and employment of 1.2% in 2025 compared to business as usual. Similarly, CO2, SOx and NOx emissions were reduced by 6.0%, 8.1% and 6.3% respectively. Exports and imports were virtually unaffected, apart from energy imports, which were reduced by 6.1%.

At the seminar, the project results were commented on by Janez Potocnik (Co-Chair of the UN international panel and former Commissioner for the Environment, Science and Research), MEP Sirpa Pietikäinen, Corina Hebestreit (Executive Director, Euromines) and Patrick ten Brink (EU Policy Director, European Environmental Bureau). In addition, Outi Haanperä (Leading Specialist, Sitra) gave a short introduction to the background and objectives of the project from the perspective of the funding organisation.

Further details on the proposed incentives can be found from the following presentation given at the seminar:

The project report is currently being finalised, and will be made available for download from GBE’s website. An executive summary of the report was distributed at the seminar, and can be downloaded from the following link.

Further information:

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