Fiscal Policies for Achieving Finland’s Emission Neutrality Target
IMF Working Papers, June 25, 2021
Source details
- Canonical URL
- Fiscal Policies for Achieving Finland’s Emission Neutrality Target
Other formats
Bibliographic details
- Authors: Ian W.H. Parry, Philippe Wingender
- Published: June 25, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513585543.001
Objective and context
- Finland has pledged to cut net greenhouse gas emissions to zero by 2035.
- Sectoral targets include deploying electric vehicles, phasing out coal generation, and phasing out oil-based space heating.
- Fiscal policies at the national and sectoral level could play a critical role in achieving these objectives.
Key findings
- Carbon dioxide emissions are already priced significantly in Finland but prices vary substantially across fuels and sectors.
- A reform is discussed to both scale up, and progressively harmonize, pricing while using revenues to address equity issues.
- The paper discusses the potential use of revenue-neutral feebate schemes to strengthen mitigation incentives across multiple sectors.
Sectoral mitigation instruments analyzed
- Transportation: revenue-neutral feebate schemes to strengthen mitigation incentives.
- Industry: use of feebate schemes and pricing harmonization.
- Building: phased pricing changes and feebate incentives for heat sources (including oil-based space heating).
- Forestry and agriculture: consideration of feebate schemes to reinforce mitigation incentives.
- Energy sector: phasing out coal generation aligned with pricing reforms.
Policy recommendations and design features
- Scale up carbon pricing to better reflect emissions across fuels and sectors.
- Progressively harmonize carbon prices across fuels and sectors to reduce price dispersion.
- Use carbon pricing revenues to address equity concerns arising from price reforms.
- Employ revenue-neutral feebate schemes tailored to sectoral characteristics to strengthen mitigation incentives.
Content in this bundle
- Working Paper