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Forecasting Economic Impact of Climate Policy

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  • Rantala, Olavi

Abstract

This paper describes the main features of a model developed for forecasting economic developments, energy demand and greenhouse gas emissions in the EU area and Finland as well as for simulating the economic impacts of EU climate policy. Climate policy analysis necessitates a model of the whole EU area, because CO2 emissions of the EU area emission trading sector determine the demand and price of emission allowances. The main conclusion from model simulations is that output and employment losses induced by EU climate policy in 2008-2012 will be more severe in a small open energy intensive economy like Finland than in the rest of the EU area. The negative impacts of EU climate policy on export competitiveness, exports and output volume in Finland will be strongest in the energy intensive industrial sec-tors which belong to the EU emission trading sector.

Suggested Citation

  • Rantala, Olavi, 2008. "Forecasting Economic Impact of Climate Policy," Discussion Papers 1169, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:dpaper:1169
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    Keywords

    greenhouse gas emissions; economic impacts of emission reduction;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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