Research: EU carbon taxes would have a small overall economic impact on Finland

Research: EU carbon taxes would have a small overall economic impact on Finland

The European Commission is proposing that tariffs be levied on certain highly polluting imports, such as aluminum, cement, fertilizers and steel, in order to encourage third countries to adopt greener production processes, prevent so-called carbon leakage and create a more balanced market in the 27-nation bloc.

According to Etla and Syke, customs duties in Finland would reduce imports of such goods from outside the Union by about 25%. Their impact would be particularly significant on imports of iron, steel and fertilizers – all goods procured mainly from Russia.

Finland could also benefit a bit from the so-called the introduction of a carbon limit adjustment mechanism, as it is a relatively large producer of iron and steel.

“According to our analysis, when the EU’s external borders are closed with customs duties, Finland could secure a larger share of the steel market and this would have a positive effect.” Tero SixEtla’s research director, explained To YLE.

The beneficiaries would be the sectors that produce goods covered by the Internal Market Mechanism, as well as those that produce intermediate products from industries. In contrast, industries that need aluminum, cement, iron, steel or fertilizers for their own production would be adversely affected by price increases in Finland and the EU caused by tariffs.

“The largest and most prominent of these industries are the engineering and electronics sectors, where steel products are particularly important,” Kuusi said.

While tariffs could lead to a 10 percent drop in imports for some companies, they would not be enough to destabilize the economy in the bigger picture. Duties are to be levied on such a limited quantity of goods that their effect on total production is not measured as a percentage but in per thousand.

Researchers at Etla and Syke pointed out that targeting tariffs as proposed would not be without problems. The fact that they do not extend to finished products, for example, means that a product using aluminum or steel could be manufactured in and imported from a third country without an emission allowance.

This could provide a competitive advantage for highly polluting imports into the EU, Kuusi said.

“The solution would, of course, be to expand the tariff mechanism at some point. But more complex products also complicate the process quite a bit. It will take a while for this system to get off the ground properly, ”he told the broadcaster.

Another challenge arises from the proposed abolition of free allowances: EU exports may lose competitiveness compared to highly polluting production outside the 27-nation bloc.

“This could divide the market so that emissions-intensive production is largely distributed outside the EU and clean production is concentrated in the EU. And that is clearly a bad scenario in a global sense. “

He added that the problem could be solved by targeting support for the development of green technologies.

Carbon tariffs are due to be introduced in 2026 as part of Fit for 55, the EU’s plan to reduce net greenhouse gas emissions by at least 55% by 2030. The introduction would take place after a transitional period of three years, during which companies have been asked to provide information on the emissions on which the tariffs are based.

Aleksi Teivainen – HT

Source: The Nordic Page

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