The Effects of Long-Run Emission Targets on the Finnish Economy

12 Pages Posted: 2 Feb 2012

See all articles by Markku Stenborg

Markku Stenborg

Ministry of Finance

Juha Honkatukia

Government of the Republic of Finland - VATT Institute for Economic Research

Date Written: April 3, 2008

Abstract

This study evaluates the long-run effects in Finland of abatement of greenhouse gases with two applied general equilibrium models. Cutting emissions by 20 percent would cause GDP to fall by as much as 3.4 percent in the short run, leading to significant employment effects. In the long run, the labor market may recover, which shifts the burden of adjustment more on the capital markets. It seems likely that energy-intensive industries will contract as a consequence of climate policies. Employment may recover, if the labor markets are flexible enough in the long run. The results highlight the importance of permit prices and CDM prices for the cost of mitigation. Extending participation to flexibility mechanisms would appear very important for the Finnish economy.

Suggested Citation

Stenborg, Markku and Honkatukia, Juha, The Effects of Long-Run Emission Targets on the Finnish Economy (April 3, 2008). Available at SSRN: https://ssrn.com/abstract=1997258 or http://dx.doi.org/10.2139/ssrn.1997258

Markku Stenborg (Contact Author)

Ministry of Finance ( email )

PO Box 28
Government
Helsinki, 00023
Finland

Juha Honkatukia

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

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