The Economic Impacts of EU Climate Policy

Olavi Rantala

No 2, ETLA Brief from The Research Institute of the Finnish Economy

Abstract: Abstract The study evaluates the impacts of EU climate policy on the emission allowance price, electricity prices, the competitiveness of industry and macroeconomic developments in the third EU emissions trading period 2013-2020. The economic impacts of climate policy on Finland are compared to the impacts on the entire EU area. It turns out that due to its cold climate and heating energy demand, higher export intensity of the economy and higher energy intensity of the industry Finland pays a higher price for EU climate policy in terms of output and employment losses than the EU on average. The study examines the macroeconomic effects of climate policy also in the more distant future, assuming that EU climate policy is tightened further in the 2020s. Climate policy implemented by emissions trading means that the long-term economic growth in the EU area depends essentially on emission-free electricity production, and no longer on other growth factors, such as labour supply and productivity growth.

Pages: 4 pages
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