Chemical industry of Finland: "Reducing the distribution obligation would not solve the problem of high fuel prices – there are more effective ways of doing so"
"The crisis in the Strait of Hormuz and Russia’s war of aggression are behind the high fuel prices. High prices are placing a strain on motorists and transport logistics, and there is a case for reducing costs, but lowering the distribution obligation would be an ineffective and slow way of achieving this," states a press release from the Chemical Industry Federation.
"A one-percentage-point change in the distribution obligation affects pump prices by around 1.3 cents. For the average motorist (14,000 km a year, 7 litres per 100 km), the impact on monthly expenditure is around one euro. Furthermore, changes to the supply obligation are reflected in pump prices with a delay of several months, as supply contracts are long-term.
Conversely, reducing the distribution obligation by, say, ten percentage points would increase carbon dioxide emissions from road transport by up to one million tonnes per year, which would make it more difficult for Finland to achieve its climate targets. If Finland were to have to purchase emission reduction units from other countries, the cost could, according to an estimate by the Ministry of Transport and Communications, for example, rise to as much as hundreds of millions of euros in 2030.
– The distribution obligation has driven significant investment into Finland. A predictable regulatory environment is essential to ensure that this investment continues in the future, says Mikko Salo, Managing Director of the Finnish Chemical Industry Federation.
The distribution obligation covers a number of different alternatives to fossil fuels. These include liquid biofuels, biogas, RFNBO hydrogen and the electrification of road transport. Their use reduces dependence on fossil oil products and on countries posing geopolitical risks. Naturally, greenhouse gas emissions will also be reduced.
The distribution obligation has spurred a number of Finnish investments. For example, Fintoil Oy plans to invest over one hundred million in the Hamina biorefinery. In addition, other projects worth several billion are in the pipeline. Reducing the distribution obligation would jeopardise these investments. A predictable regulatory environment is a fundamental prerequisite for all business activity and investment, particularly in industry, where investments that create jobs are made with a view to the coming decades.
The cost burden should be eased by other means
The chemical industry considers it justified to ease the cost burden on motorists and the logistics sector. However, this should be done through more effective measures that do not simultaneously increase emissions or undermine the predictability of investment.
For example, the introduction of commercial diesel should be accelerated, and it could be introduced immediately from the start of 2027 with a higher refund rate than planned. Similarly, excise duties could be reduced for a limited period. This tax change would be reflected more tangibly in prices at the pump, unlike cuts to the distribution obligation.
– Rather than focusing on percentage points in the distribution obligation, Finland should concentrate on measures that bring rapid relief to transport costs. In addition to promoting the use of commercial diesel, consideration should be given to reducing the excise duty on diesel, increasing the tax deduction for commuting expenses, and targeting measures at vulnerable sectors and consumers, says Salo."
