Financial instruments
Financial instruments comprise subsidies for silvicultural and environmental works in the form of either government subsidies or loans, as well as tax policies.
Since silviculture is a sustained long-term process, many measures that are vital for the production of wood or the safeguarding of biodiversity have poor profitability from the viewpoint of private forest owners, and are therefore subsidised from government funds. The first Forest Improvement Act was adopted as far back as 1928. The latest change was in early 1997, when the Act on the Financing of Sustainable Forestry (KEMERA) entered into force.
Government subsidies (KEMERA support) are available for safeguarding sustainable wood production, maintenance of forest biodiversity and improvement of the health of forests.
An Act on energy support for low-grade timber was enacted towards the end of 2010. Energy support for low-grade timber is a subsidy that will be granted for harvesting energy wood from young forest management sites or first thinning sites. The purpose of the Act is to bring to market wood from sites where the profitability of harvesting is poor due to circumstances and the size of the trees.
The Forest Biodiversity Programme for Southern Finland (METSO, pilot stage 2003–2007) included many pilot projects to find economic incentives for increasing conservation projects undertaken by forest owners. New funding instruments concerning natural values trading and establishment of cooperation networks were included in the Act on the Financing of Sustainable Forestry. The instruments are used as incentives for private forest owners to safeguard biological diversity in their forests.
In Finland, forest owners are taxed on the basis of real income (revenue from wood sales) and expenses. Taxation is an instrument with which the government can influence the profitability of forestry and the bringing to market of domestic wood. Partial tax exemption of income from the sales of timber was applied in 2008–2009 to secure supply for the forest industry as roundwood imports became complicated.
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