Exploring the Future of Nordic Economies in the Face of Climate Policies

In a world striving for sustainability, the Nordic countries are at the forefront of implementing ambitious climate policies. The burning question is, who will shoulder the financial burden of these transformative changes?

Spanning across various time zones and academic disciplines, Nordregio recently launched a groundbreaking report titled, "What impact do climate change policies have on Nordic economies, industries, and households?" The report is the first installment of the project "Ensuring Inclusive Growth in the Transition to a Green Economy (EnIGG)," with a primary focus on vulnerable regions and population groups as the Nordic economies face significant transitions and the looming realities of climate change.

The lofty climate goals set by these nations come at a cost, but who will ultimately bear the brunt of these expenses? This question took center stage during the report's launch event. The report is underpinned by a sophisticated model called Nordic-TERM, which evaluates the repercussions of climate policies on GDP, industry outputs, employment, and the cost of living, both at the national and regional levels. This model encompasses nearly the entire Nordic Region, making it a comprehensive tool for analysis.

During the launch event, Professors Peter B Dixon and Maureen Rimmer used this model to demonstrate the effects of three central greenhouse policies:

Increasing the biofuel share in motor fuels
Expanding the share of electric vehicles in the Nordic car fleets
Phasing out all remaining coal-fired electricity

The key finding was both encouraging and informative: Ambitious climate policies related to transportation and energy can be implemented without causing significant disruptions to the Nordic economies. While these policies might not suffice to meet climate targets in most countries, they do contribute substantially to emission reduction without causing significant sectoral or structural changes.

As one of the presenters aptly pointed out, "Dull results like this can be used as an argument against those who oppose climate policies on the basis that they might be unfair. Unless you have results or analysis of this type, that prove the fairness, you’re left quite defenseless against these arguments."

The presentation concluded by emphasizing the value of the report in changing the narrative around climate policies. The discussion shifted to the importance of behavioral change, with a focus on how individuals, not just policies, can drive the transition towards sustainability. Labor unions, for example, are now advocating for a shift towards renewable energy.

Jóhannes Bjarki Urbancic Tómasson from Iceland’s Environment Agency underscored the low costs and multiple benefits of these policies, asserting that they are not just climate policies but good policies overall.

Regarding households, the financial impact of the climate policies was generally minor, with rural households being slightly more affected. The debate revolved around potential support mechanisms, taxation, the "polluter pays" principle, and targeted support for those affected.

In the end, the event delved into the future steps within the context of European climate policy. The Nordic countries play a pivotal role in the European Commission's preparation of climate policy proposals for the 2030s.

As professor emeritus of international economics, Harry Flam from Sweden, aptly put it, "The EU sets yearly targets, and we in the Nordics set long-term targets. That’s not good because it’s too easy to take it easy in the first period of long-term targets. So in this respect, the EU’s goal structure is superior to the Nordic model."

The Nordic Region is ready to make substantial contributions to the global fight against climate change. This event reaffirmed that ambitious climate goals are attainable without causing major shocks to economies and households. It also highlighted the need for continued research and cooperation to achieve these goals.

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