Aug 30, 2010. /Lesprom Network/. The Government's budget negotiations ,which were concluded recently, have resulted in taxation decisions that will weaken the preconditions for wood processing in Finland and provide more and more incentive for burning wood, the Finnish Forest Industries Federation said in a statement received by Lesprom Network. A tax on the energy utilisation of peat will increase the forest industry's raw material costs and weaken the supply of wood. Recycling costs will also rise. “The forest industry has been going through extensive structural changes and has improved its competitiveness through its own actions. Just as the production is starting to recover in Finland, the Government decides to weaken the operating environment and increase the cost burden in next year's state budget,"says Finnish Forest Industries Federation Director General Timo Jaatinen. "Higher energy and waste taxes will target different companies in very different ways. Wood processing opportunities should be exploited in a way that maximises the promotion of growth in the national economy.” “The Cabinet Committee on Economic Policy forgot about its promise to safeguard the competitiveness of the industry's energy taxation. The energy taxes paid by the forest industry of Finland will continue to increase in comparison to our rival countries. The original goal was to decrease this competitiveness-eroding difference. Energy taxation must be re-examined within the limits allowed by the EU Directive to promote the competitiveness of the export sector,” Jaatinen says. During the budget negotiations, the Government decided that the energy utilisation of peat would be taxed at a rate of Euro 1.9 per megawatt-hour. The decided tax is lighter than the proposal made by the Ministry of Finance (Euro 3.9/MWh), but it will still have extensive direct and indirect effects. The peat tax will lead to an increase in the forest industry's raw material prices because it will improve the profitability of the energy utilisation of wood. Feed-in tariffs and subsidies for the energy utilisation of small trees would have been sufficient measures to ensure the attainment of Finland's renewable energy objectives. The peat tax and emissions trading also represent overlapping forms of regulation and are thus bad energy policies. Forest industry produces already 70% of the renewable energy in Finland.