The Ministry of Labor and Economy has recently published a report that evaluates the impact of changes in distribution obligations on gas pump prices. The distribution obligation refers to the percentage of renewable fuel that must be included in the fuel mix, with changes in this percentage having a direct effect on fuel prices.
The report, conducted by AFRY Management Consulting Oy on behalf of the ministry, gives a comprehensive analysis of how these changes, in accordance with the government’s program, affect the demand for renewable fuels, road traffic emissions, and ultimately, consumer prices.
Prime minister Petteri Orpon has stated that the increase in the distribution obligation will be moderated to avoid drastic price hikes. The current legislation will be amended so that the distribution obligation will remain at 13.5 percent in 2024. In the subsequent years (2025–2027), the distribution obligation will be gradually increased in a moderate manner to 16.5 percent in 2025, 19.5 percent in 2026, and 22.5 percent in 2027.
The previous law, based on the government led by Ex Prime Minister Hello Marine, mandated the distribution obligation to rise to 28 percent in the current year and gradually increase to 34 percent by 2030. However, according to the Ministry of Labor and Economy, an increase in the distribution obligation to such levels would have resulted in significant increases in pump prices for both diesel and gasoline.
AFRY Management Consulting’s report indicates that the levels of the distribution obligation proposed in the government’s program would result in a decrease in estimated pump prices for diesel by approximately 7-12 cents per liter and the estimated pump prices for E10 gasoline by approximately 9-17 cents per liter, depending on the year under review. This would reduce the costs of all households by an average of around 58 euros per year during the years 2024–2027.
The distribution obligation aims to promote the use of renewable fuels as a substitute for fossil fuels and to decrease traffic CO2 emissions. However, AFRY Management Consulting’s report suggests that the changes in the distribution obligation levels proposed in Orpo’s government program will lead to an increase in road traffic emissions by 4.83 million tons in the years 2024–2027.
The table below provides a detailed breakdown of how the changes in distribution obligation levels proposed in Orpo’s government program would reduce consumers’ costs across different income levels and for all households. The most significant change would be for the highest income bracket, with a reduction in costs of 114 euros this year, equivalent to about 10 euros on a monthly basis.
The effects of the distribution obligation levels of the government program on consumers (euro/year)
| 2024 | 2025 | 2026 | 2027 | |
| 1. tuloviidennes | –35 | –26 | –26 | –19 |
| 2. tuloviidennes | –58 | –43 | –43 | –31 |
| 3. tuloviidennes | –81 | –61 | –60 | –43 |
| 4. tuloviidennes | –92 | –69 | –68 | –49 |
| 5. tuloviidennes | –114 | –85 | –84 | –61 |
| All households | –76 | –57 | –56 | –41 |
Source: AFRY Management Consulting
In October last year, a bill proposing a reduction of the 2024 renewable fuel distribution obligation to 13.5 percent was sent to the parliament by Orpo’s government. The proposal was approved in December. The Ministry of Labor and Economic Affairs has announced that the other entries of the distribution obligation in the government program will be implemented in the second phase, with the government’s proposal regarding this to be presented to the parliament in the fall of 2024.
