News in Brief - November 2009

Energy efficiency and heating systems to be considered as possible factors for graded property taxes

Finland is considering whether to introduce graded property taxation levels according to properties’ energy efficiency and the way they are heated, with buildings that generate fewer emissions being subjected to lower taxation rates.

The aim is to use tax incentives to encourage property owners to improve the energy efficiency of buildings, and choose to install more environmentally friendly heating systems. Consequent trends could help Finland to realise national climate and energy policies.  

The working group responsible for the proposals has stressed that such a graded taxation system would need to be straightforward in terms of definitions of energy efficiency levels and heating system types, so as to ensure that properties are assessed and taxed equitably. The parameters used to classify energy efficiency levels and heating system types should also be compatible with Finland’s increasingly harmonised building regulations and EU regulations.

The working group has also emphasised that further work is needed to develop and assess possible practical graded taxation schemes of this kind, before a decision can be made on whether to adopt such a scheme. The working group intends to circulate its final report widely for comments before deciding on any measures.

Alternative models for graded property taxation 

The members of the working group are convinced that several technically feasible models exist for a graded property taxation system to encourage energy efficiency in buildings.

The grading system could be based on energy efficiency categories, figures calculated as indicators of buildings’ energy efficiency, or specific measures taken to enhance buildings’ energy use. Grading could be imposed at a single level or multiple levels. Preferential taxation could alternatively be realised to favour new energy efficient buildings and buildings restored to make them more energy efficient, by exempting them from property taxation for certain specified periods. A third option could combine these two systems, applying both temporary tax exemptions and more permanent graded property taxation levels for favoured buildings.

Buildings account for about 40% of all the energy used in Finland, and 30% of the country’s greenhouse gas emissions. Without actions in this sector it will not be possible for Finland to meet its commitments on reducing emissions, improving energy efficiency and promoting the use of renewable energy. One major challenge concerns the need to improve the energy efficiency of the exiting building stock. New incentive schemes are needed to speed progress in this vital area.

A preliminary report on this issue suggests that for new buildings the information needed as a basis for tax relief related to energy efficiency or heating system type could be submitted to the authorities’ official building register routinely as part of building permit procedures. Corresponding Information on existing buildings would be registered by property owners.

More information:

Tatu Rauhamäki, Ministry of the Environment
firstname.lastname@ymparisto.fi, tel. 050 521 2907

Kirsi Martinkauppi, Ministry of the Environment
firstname.lastname@ymparisto.fi, tel. 040 350 1181