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The Finnish government’s plan to raise taxes on electric and plug-in hybrid vehicles increases the chances that Finland will fail to meet European Union emissions requirements, experts say.
The Finnish government’s plan to increase vehicle taxes on fully electric and plug-in hybrid vehicles would go against Finland’s commitments to the European Union as well as the government’s own plans, researchers from the state-owned VATT Economic Research Institute and the Finnish Centre of Excellence for Tax Systems (FIT) said.
Higher car taxes will erode the comparative advantage of electric vehicles (EVs), four researchers have written a report showing that a rapid uptake of EVs is essential for Finland to meet its statutory emissions reduction targets and avoid EU sanctions over the issue.
When the Prime Minister leads the government Petri Orpo The National Congress Party (NCP) came to power in mid-2023 on a promise to “take steps to reduce transport emissions without increasing the daily expenses of citizens”, including developing electric vehicle charging infrastructure and changing car taxation to wean cars off their reliance on fossil fuels.
The platform pledges that transport policies will “promote the use of sustainable transport modes and reduce emissions”.
The Ministry of Finance, led by the Chairman of the Finns Party Rika PraThe plan is to increase car taxes by around 35 million euros in 2026, mainly on electric cars and plug-in hybrids. In the recent election campaign, her party vowed to curb the cost of traditional combustion engine cars and downplayed the need for further climate measures.
Orpo’s cabinet has already changed fuel tax and distribution laws to favor drivers of combustion-engine cars and eliminated purchase subsidies for electric vehicles — all of which researchers say will hinder the electrification of car fleets and the reduction of transportation emissions.
“The planned changes in vehicle taxation and previous decisions directly affect consumers’ purchasing decisions and slow down the electrification of vehicles. These decisions are clearly at odds with Finland’s climate goals and EU commitments,” said VATT research professor. Marita Laukkanenone of the report’s authors.
Share of new electric vehicles declines
After several years of steady growth, the share of electric vehicles in new car registrations and imported used cars has fallen this year. As of the end of June, 8.8% of passenger cars were pure electric or plug-in hybrid, far lower than in neighboring Sweden and Norway.
“The replacement rate of the car fleet in Finland is slow, so the share of electric vehicles is also growing slowly. Strong incentives are needed to electrify the fleet quickly. Without sufficient incentives, we will not be able to achieve our climate goals on time,” said the research professor. Thomas Kosonen VATT warned in a press release.
The Ministry of Finance published its proposal to increase vehicle taxes on electric and plug-in hybrid vehicles and closed a round of comments on Thursday.
The right-wing government plans to submit its proposal to parliament in late September. With the four ruling parties holding 108 seats in the 200-seat legislature, the bill is likely to pass.
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