Loimu’s CEO, Akava’s Vice President Mikko Salo: Climate Leadership is a Win-Win Situation for Finland’s Economy 

Mikko Salo commented on a report by the research institute Oxford Economics (OE) on the impact of EU climate policy on Finland’s macroeconomy, published by Akava Works on Tuesday, May 21st. The report examines how policies aimed at achieving the emission targets of the European Union and Finland will affect Finland’s economy in the coming decades.

Read the entire blog here below. 

Climate Leadership is a Win-Win Situation for Finland’s Economy

The climate leadership scenario can open the door to significant economic growth and an increase in real incomes for Finland. Investments and high-level expertise play a crucial role in achieving climate goals. 

kava Works published a report by the research institute Oxford Economics (OE) on Tuesday, May 21st, about the impact of EU climate policy on Finland’s macroeconomy. The report examines how policies aimed at achieving the emission targets of the European Union and Finland will affect Finland’s economy in the coming decades. 

Read the report in English: Assessing the Macroeconomic Impact of EU Climate Policy on Finlands Economy May 2024.  

Read more from the report in Finnish: Akava Works: The Impact of EU Climate Policy on Finland’s Macroeconomy 

OE used scenario analysis methodology, OE`s own Global Economic Model, and in addition to written sources, interviewed five Finnish top experts: Markku Ollikainen, Chairman of the Finnish Climate Panel; Riku Huttunen, Director General of the Energy Department at the Ministry of Economic Affairs and Employment; Janne Peljo, Senior Expert at the Confederation of Finnish Industries; Tuuli Kaskinen, CEO of the Climate Leadership Coalition; and Markku Kulmala, Professor of Aerosol and Environmental Physics at the University of Helsinki. 

Why is this report important? At least because it hopefully can, through research and economic modeling, renew our way of thinking about the economic policy perspectives related to the green transition. We have primarily focused on measuring the economic impacts of the green transition in terms of how much we, as a society and as citizens, have to pay for the decline in material well-being to mitigate climate change and biodiversity loss. 

What do we have to give up, how much will our standard of living decline or our economic growth suffer when we aim for carbon neutrality and species preservation? The report shows that this does not necessarily have to be the case. What if, by investing in achieving carbon neutrality targets, we could solve the problems of our public finances in the coming years and decades? 

Scenarios for implementing the green transition  

As Finland, we have set ourselves an ambitious goal of carbon neutrality by 2035 based on the recommendations of the Finnish Climate Panel. With our support, policymakers have enacted a climate law requiring us to reduce emissions by 60 percent by 2030, 80 percent by 2040, and at least 90 percent by 2050 compared to 1990 levels. OE has created a baseline forecast for implementing the green transition in Finland in the coming years. The report compares this forecast with two alternative scenarios: The Climate Leadership Scenario and the Delayed Progress Scenario. 

In the Baseline Scenario, Finland relaxes its climate policy targets, and our research, development, and innovation investments remain around 3 percent of GDP. Our economic growth would then be weak, and the current challenges of our public finances would remain unresolved for a longer period. 

In the Delayed Progress Scenario, there are setbacks and friction on the path to a clean transition, capacity constraints, and labor market rigidities. We progress, but slowly, fail to attract private investments, and do not achieve our carbon neutrality target by 2035. 

In the Climate Leadership scenario, our clear policies direct investments into clean energy capacity, we accelerate research, development, and innovation funding with supportive policies, and public and private sector actors achieve and maintain a 4 percent R&D investment level of GDP. In the Climate Leadership scenario, we achieve the emission reduction targets set by the climate law and we achieve carbon neutrality by 2035. 

Significant benefits of the Climate Leadership Scenario for the National Economy 

What are the most important results of the Oxford Economics report and scenario analysis for Finland’s economy, and what new insights does this report bring to the discussion? The most essential result is that in the Climate Leadership Scenario, the real GDP grows by an average of 0.94 percent per year from 2024 to 2050 due to the growth of green investments. In the Baseline Scenario, growth would be 0.77 percent, and in the Delayed Progress scenario, 0.80 percent. As a result, in the Climate Leadership Scenario, the GDP is 4.5 percent higher than the baseline in 2050. 

Akava’s Chief Economist Pasi Sorjonen explained the figures by stating that the accelerated economic growth in the early stages of the Climate Leadership Scenario generates almost an additional year’s worth of real GDP from 2024 to 2050 compared to 2023 figures. The cumulative real income increase over the entire period compared to the Baseline Scenario is about 110 percent relative to the 2023 income level. These are not small numbers. 

Goals Achieved with High-Level Expertise  

If realized, the Climate Leadership Scenario calculated by OE would be a spectacular example of a win-win situation for the national economy. By effectively implementing the green transition and investing in it, we can simultaneously as a result achieve economic growth, well-being, and success for Finland and Finns. 

The key results of OE’s report should be music to our ears. For members of Akava’s member unions, these results should also have significance for working life and labor markets. For the success of the Climate Leadership Scenario, a massive win-win situation, it is crucial that we, as a society, invest in high-level expertise and skilled professionals. If we do so, we can achieve our ambitious climate goals and at the same time develop Finland’s economy in a favorable direction. 

Members of Akava’s member unions are in key positions and roles in making and leading this win-win situation for Finland’s national economy. We must provide Finland’s highly educated experts with the best possible conditions for success in this vital task. 

Mikko Salo  

The author is the Executive Director of Loimu, Union of Professionals in Natural, Environmental and Forestry Sciences and Vice President of Akava.