How much does the budget allocate for promoting sustainable development, and in particular for ensuring a ‘carbon-neutral and resource-wise Finland’? A new section in the budget sets out to answer this.
It seems that climate change has been on everyone’s lips this past year. Not least since the publication of the report by the Intergovernmental Panel on Climate Change (IPCC) on the impacts of global warming of 1.5°C and the efforts needed to limit the rise in temperature. This subject is on our minds for good reason, as without doubt climate change is one of the defining challenges of our time.
Implementation of Agenda 2030 in Finland
The UN’s 2030 Agenda for Sustainable Development was approved in 2015, and in spring 2017, in a separate report, the Finnish Government outlined its implementation plan concerning the 2030 Agenda. The implementation focuses on two priority areas: 1) a carbon-neutral and resource-wise Finland; and 2) a non-discriminating, equal and competent Finland.
At the Ministry of Finance, too, we have seen environmental issues moving more into the limelight in many areas, including the regulation of financial markets. In taxation, environmental aspects have long since been mainstream, of course. And now, sustainable development is being brought into the budget as a completely new element in order to illustrate how taxpayers’ money is used towards implementing the United Nations’ sustainable development goals.
Under each main title of expenditure in the 2019 budget proposal, there is information identifying the connection between the appropriations in question and sustainable development. These justifications cover both of Finland’s priority areas.
The 2019 budget proposal contains a separate new section focusing on the ‘carbon-neutral and resource-wise Finland’ priority area. The analysis examines which appropriations represent specific advances towards the aims of this priority area. The rationale also incorporates a qualitative assessment of those elements of public funding which, on the basis of earlier studies, are detrimental to the environment. In addition, taxes that are significant in terms of the goal of fostering a carbon-neutral and resource-wise Finland are discussed, along with policy changes proposed for these in the 2019 budget proposal. These taxes include energy taxes, motor vehicle tax, car tax, excise duty on certain beverage packaging, and waste tax.
Towards a more sustainable budget
Progress towards the aims of the ‘carbon-neutral and resource-wise Finland’ priority area is to be promoted through expenditure of approximately EUR 1.7 billion in the 2019 budget proposal, out of a total budget expenditure of EUR 55 billion. The largest package of measures is associated with the implementation of the energy and climate strategy and the creation of bioeconomy and cleantech solutions. The amount of environmentally harmful subsidies in the 2019 budget proposal is estimated on the basis of previous studies to be approximately EUR 3.5 billion. This illustrates how allocation decisions, which need to take into account other policy goals too, such as food production, regional economies and employment and growth, can be conflicting and the issues difficult to resolve.
The 2019 budget proposal includes a number of tax changes that can be seen as promoting the aims of the ‘carbon-neutral and resource-wise Finland’ priority area. These mainly concern energy taxes and include an increase in the emissions control of combined electricity and heat production and an increase in the taxation of peat.
What we have included in the sustainable development section of the budget proposal does not itself change policy. But it does show which components of the budget can be used to make progress in achieving the goals of a greener and more sustainable resource allocation and taxation. With the Ministry of Finance’s aim being to foster a solid foundation for the economic prosperity and wellbeing of coming generations, it is not difficult to argue that, given the current climate challenges faced by the world, we need to focus more strongly on sustainable development.
Johanna von Knorring
Johanna von Knorring is a Senior Ministerial Adviser at the Ministry of Finance. Before joining the Ministry in 2003, Ms von Knorring worked as an economist at Standard & Poor’s MMS.