Finnish government plans nuclear fuel tax

Monday, 7 February 2011

The Finnish government is planning to introduce a tax on uranium used in nuclear power reactor fuel, the country's Ministry of Employment and the Economy has announced. The tax could generate up to €100 million ($135 million) annually.

 

Taxing times ahead for Loviisa? (Image: Fortum)

The ministry's announcement comes after a government-commissioned report on the introduction of a uranium tax was submitted to the minister of economic affairs, Mauri Pekkarinen, on 4 February. The report was written by Pasi Holm, CEO of economic research institute Pellervon Taloustutkimus (PTT) and Markku Ollikainen, professor of environmental and resource economics at the University of Helsinki.

 

In their report, Holm and Ollikainen present two models for the tax, both taking into account the profits earned by the nuclear plant operators from selling carbon-dioxide (CO₂) emission allowances. The ministry said that these so-called ‘windfall’ profits would be taxed at 43% to 45%, depending on the model adopted.

 

In the 'minimum tax model', the uranium tax would be 44.5% of the market price of CO₂ emission rights. The reference price used is the 2010 average price of €15 ($20) per tonne of CO₂, but the tax would be at least €2 ($2.7) per megawatt-hour (MWh). The tax would generate at least €67 million ($90 million) per year. If the emission allowance price increased to €30 ($40) per tonne, the tax would rise to €6.7 ($9.1) per MWh, generating some €223 million ($302.4 million).

 

In the 'flexible tax model', the uranium tax would be €1.7 ($2.3) per MWh, plus 30% of the windfall profit. An emission allowance price of €15 ($20) per tonne of CO₂ would generate some €57 million ($77.3 million). A price of €30 ($40) per tonne would generate €207 million ($280.3 million). Under this model, if the emissions trading price fell to less than €9.3 ($12.6) per tonne of CO₂, there would be a 'negative' tax which could be credited against subsequent years of 'positive' uranium taxes.

 

The report said that a 'moderate uranium tax' would not be appropriate under current circumstance as it would endanger the profitability of new investment in nuclear power projects.

 

However, the ministry stressed that the introduction of a uranium tax must not jeopardise the international competitiveness of Finnish industrial companies. It said that the resulting rise in energy costs could be offset by lowering the tax on the electricity industry.

 

The Finnish Energy Industries Association (Energia) said that the introduction of such a tax is 'short-sighted' and 'would be contrary to Finland's energy and climate policy objectives.' It added that the planned uranium tax is not in line with the European Union's energy tax directive, which suggests that power generation should be taxed at consumption, not at production.

 

In March 2009, the Finnish government announced that nuclear and hydro power plants would be taxed to reduce company profits that result from competitive operation in a market with carbon trading.

 

This will touch on the profitability of all four nuclear power units now operating in the country. Finland's nuclear power currently comes from two sites: Loviisa, which is owned by Fortum and features two reactors, and Olkiluoto, owned by Teollisuuden Voima Oyj (TVO) with another two units.

 

A nuclear fuel tax has been proposed in Germany. The German Ministry of Finance envisages an additional €2.3 billion ($3.1 billion) per year 'windfall tax' on nuclear operators as part of the 2011 Federal Budget and its financial plan up to 2014. The government has justified the additional tax on the basis of the extra profits earned by the nuclear operators, following increased electricity prices as a result of the additional costs of carbon emissions in the sector borne by fossil fuel users.

 

Researched and written

by World Nuclear News