4.5.3. EconomicsThe structure of ec

4.5.3. Economics
The structure of economic incentives in Finland does not
promote material efficiency or waste prevention. The share of
environmental taxes of the gross national production has been
between 3 and 3.5% during 1996–2004, which represent EU mid
level (Eurostat, 2006). The income tax and social security fees have
been the fourth highest among EU countries. Also value added tax
(VAT) has been fourth highest among EU countries. However, there
are practically no taxes on using natural resources. The VAT levels
for services aimed at prolonging product life or making more efficient
use of products (like repair,maintenance and renting services)
has not been reduced until 2006. Thus the structure of taxation
and also parts of subsidies policy rather favours using materials,
producing waste, and discourages using work and material saving
services.
The pulp and paper industry does not have to pay value added
taxes on any raw material, products, machinery or contracts they
purchase. There is neither tax on the use of harmful substances nor
on waste taken to industry’s private dumping places or to incineration.
The tax on disposable drinking packaging does not apply
to drinks packaging made of cardboard. There are no direct taxes,
except for energy tax, for the use of natural resources in forest industry.
Consequently the market price is the deciding factor in using
materials and services. The large subsidies for forestry have obviously
partly lowered the market price of wood. In the year 2000
the Finnish forestry got 223.4 million euros in subsidies (Harstela
et al., 2001). The governmental subsidies for energy analyses and
energy conservation investments support saving materials needed
for energy production. Investments in energy audits and energy
analyses in the Finnish industry were 2 million euros in 2004 and
the investment subsidies granted by the Ministry of Trade and
Industry for energy conservation agreements were 3 million euros
(Motiva, 2005).
Virtually all the pulp and paper products are exported, and the
value of the annual export is approximately 9000 million euros. The
whole forest industry paid energy related taxes 90 million euros,
when the subsidies for producing renewable energy are considered.
Most of this tax is paid by the pulp and paper industry (Ministry of
Trade and Industry, 2004). This is 1% of the value of production in
the pulp and paper industry. The findings of Mickwitz et al. (2008)
showthat the Finnish energy tax has had feweffects on innovations
and their diffusion in the pulp and paper sector.
In the paper industry the share of material purchasing costs is
a quarter of the total costs, while energy costs are one tenth of the
total costs. Energy saving is promoted strongly with governmental
economic support for energy auditing (50% of costs) and energy
saving investments (up to 40% of costs).