The EU is increasing the administrative burden on businesses, but the benefits of the new regulation cannot be credibly demonstrated. Bureaucratic requirements for forest owners will also increase significantly.

The EU Commission's proposal (21 April) for the so-called taxonomy criteria for sustainable forest management is a failure. The confusing and ambiguous proposal would lead to unnecessary regulation without any noticeable benefits, which is why it should be returned to preparation. However, the process, which has been firmly in the hands of the Commission, has progressed to the point where EU Member States are no longer allowed to propose amendments to the criteria. For this reason, Member States can only intervene by opposing the entry into force of the proposed regulation as a whole. Finland should oppose the regulation and should invite a sufficient number of other Member States to oppose it as well.

The European Commission has drafted the first criteria for sustainable finance taking into account the climate perspective in particular. However, the Commission has not taken into account the climate benefits of current sustainable and active forestry. In the taxonomy, the Commission would like to look at the climate impact of forests on forest holdings of at least 13 hectares over a 30-year period, which is at odds with all current EU regulations. The model used and the farm size limit will mean a significant increase in bureaucracy, while any climate benefits will be highly uncertain. Climate impact monitoring and reporting work well at the country level in accordance with current legislation.

"A review and reporting obligation for forest holding as small as 13 hectares would be completely unreasonable for small forest owners and would impose additional costs on them. Our national forest policy is now under serious threat," says Juha Marttila, President of The Central Union of Agricultural Producers and Forest Owners (MTK).

The forest sector's solution to replace the Commission's proposal was the current LULUCF regulation for the land use sector and the extension of the sustainability criteria for biomass in the Renewable Energy Directive to forestry under the taxonomy. At present, the sustainability criteria only apply to wood biomass used for energy production. The criteria of the Renewable Energy Directive are designed so as to ensure also climate sustainability as well.

In addition, the "do no significant harm" criteria proposed by the Commission are problematic and extremely vague. As the name implies, they should focus on ensuring that no significant harm is caused to other environmental objectives while promoting climate change mitigation.

"The bureaucracy faced by the Finnish forest owner will increase alarmingly. The Commission's proposals create entirely new strict policy objectives and concepts, with no consensus on their content. It should not even be possible to propose them in regulation that is supposed to be technical in nature. The Commission's proposal is disproportionate and does not respect the competences of the Member States in forest policy," says Marttila.

"The Commission's proposal is absurd, as Finland intends to be climate-neutral 15 years before the EU. The forest sector has a significant role to play in achieving this goal," says Timo Jaatinen, Director General of Finnish Forest Industries.

The original goal of EU sustainable finance regulation was to involve financial markets in sustainability efforts and to mobilize sustainable investment. At present, a key tool for sustainable financial regulation, taxonomy, threatens to deviate from this goal. The Commission's proposal is also problematic because of its unequal treatment of low-carbon forms of energy production. In addition, uncertainty about possible taxonomic taxonomy criteria for nuclear power persists.

The EU's proposals could lead to the exclusion of current forestry from the classification, i.e. the taxonomy, of sustainable economic activities. The exclusion of current forestry from the taxonomy would undermine the sector's ability to benefit from sustainable financing and threaten the transition to a sustainable circular bioeconomy. At the same time, the Commission is creating partly overlapping and poorly prepared regulation in a number of different projects.

"The forest sector and Finnish stakeholders have engaged in an active dialogue with the Commission. Yet the Commission ended up proposing inconsistent criteria. The proposal is a negative precedent, which says a lot about the Commission's attitude to sustainable forestry. This further reduces the predictability of the investment environment," says Jaatinen.

Further information:

Juha Marttila, President, MTK, tel. +358 (0)50 341 3167

Timo Jaatinen, Director General, Finnish Forest Industries, tel. +358 (0)9 132 6600

Additional information about the impact on the forest sector:

Juha Hakkarainen, Director of Forestry, MTK, tel. +358 (0)400 870 867

Karoliina Niemi, Director for Forest Affairs, Finnish Forest Industries, tel. +358 (0)50 567 9093