News

Distribution rights system will raise fuel prices - compensation for people with low income will only require a fraction of the revenue from system

Economists developed possible compensation models based on extensive person and vehicle data. The report was published at a Ministry of Transport and Communications webinar on 27 October.
Taloustieteilijät ehdottavat: Näin Suomi puolittaa tieliikenteen päästöt vuoteen 2030 mennessä
Picture: Roope Kiviranta / Aalto University.

Finland is committed to halving the amount of fossil fuel used in road transport by 2030. In autumn 2019, an economics research group proposed that the most effective way to reach the target is to create a distribution rights system for fuel sales in Finland where the distributor buys a state-provided sales permit tied to the carbon content of fuel for each litre of fuel the distributor sells. The system will raise fuel prices and thus encourage, for example, buying a car with lower emissions.

Now, a group led by Aalto University Professor Matti Liski has examined how to compensate for the price increase for different population groups, such as people with low income and those living in sparsely populated areas. The working group looked at the nearly three million privately-used vehicles whose owners pay vehicle tax, analysing the kilometres travelled, emissions, and the owners' incomes in order to determine how the costs of the current CO2 tax are distributed among the population.

The data showed that one-quarter of Finland's private vehicles produce half of all private vehicle emissions. Fuel consumption is strongly focused on high-income population groups, and the differences in emissions are primarily explained by the kilometres travelled. For households with disposable income between EUR 70 000 and EUR 80 000, the average carbon dioxide emissions from driving are almost three times higher than households with annual income between EUR 10 000 and EUR 20 000.

In sparsely populated areas, road traffic emissions are higher per individual than in urban areas, but as a whole, urban areas produce more private vehicle emissions than rural areas due to larger population numbers.

The higher the income, the smaller the proportion of income paid in CO2 tax with fuel purchases. For the majority of Finnish people who drive, the tax is less than one per cent of their income.

‘Our research showed that if the increase in fuel prices caused by the distribution rights system is only compensated for low-income households, such as households earning less than EUR 20 000, compensation will be possible by using a relatively small share of the system's revenue,' says Matti Liski.

In their report, the researchers present useful perspectives for creating different compensation models. Decision-makers can use the different models or some combination of them after deciding what kind of fairness perspective compensation aims for.

The economics working group’s report ‘Towards carbon-free transport – an analysis of the effects on income distribution’ (Kohti hiiletöntä liikennettä – analyysi tulonjakovaikutuksista) was published at a webinar organised by the Ministry of Transport and Communications on 27 October 2020.

 

Link to the report (in Finnish) on the Aalto Economic Institute webpage:

http://www.aaltoei.fi/wp-content/uploads/2020/10/AEI_raportti.pdf 

 

More information:

Professor Matti Liski
Aalto University School of Business, Department of Economics
+358 40 353 8173
[email protected]

Lisää aiheesta

Taloustieteilijät ehdottavat: Näin Suomi puolittaa tieliikenteen päästöt vuoteen 2030 mennessä

Economists suggest: This is how Finland will halve its road transport emissions by 2030

The most efficient way to reach emissions targets is to introduce a permit system for fuel sales that will set quotas for fuel carbon contents

News
  • Published:
  • Updated:
Share
URL copied!

Read more news

Jose Lado, photo: Evelin Kask
Research & Art Published:

Early career award granted to Professor Jose Lado

Professor Jose Lado was awarded early career prize. The award recognizes the talents of exceptional young researchers who are making a significant contribution to their respective field of research. The runner-up prize was awarded to Prof. Lado by Deutsche Physikalische Gesellschaft and Institute of Physics through New Journal of Physics (NJP).
Designs for a Cooler Planet 2022 – Open call
Research & Art Published:

What's Life 1.5 like? – Apply now for Designs for a Cooler Planet 2022 to showcase a sustainable future

The climate crisis and biodiversity loss call for radical new ideas. How does your work contribute to wiser consumption, climate solutions or a more sustainable working life? Designs for a Cooler Planet 2022 will present Aalto's most interesting projects to support sustainability – apply now!
Pro arte utili_kirjan kansi_kirjoittajat_kuva_Annukka Mäkijärvi
Cooperation, Research & Art, University Published:

From the margins to the top: How the School of Arts, Design and Architecture rose to the international forefront

New book Pro Arte Utili tells about leadership and vision guiding the change.
No entry sign over workshop image
Campus, Research & Art, Studies Published:

Special opening hours at Arts infra workshops and Väre Takeout

Special opening hours and exceptions at Arts infra workshops and Väre Takeout.