Finland’s stricter climate policy than the rest of the EU requires new measures and education to support employment

The long-term effects of climate policy are forecasted to be detrimental to overall employment, although mitigating. Finland’s more ambitious climate policy compared to the rest of the EU reinforces the negative impact on employment. The biggest effects are indirect and appear in labor-intensive industries. In the coming decades, structural change can be supported by labor market policy and education. In addition, competitive innovation in green products can lead to new market success and generate supporting positive economic and environmental impacts for Finland.

The study “The Effects of Climate Policy on Employment: A Finnish Perspective” analysed how ambitious climate policy can be joined with concurrent ambitious employment objectives. The study identifies the potential positive connections between climate and employment policies, but also conceivable negative channels and risks.

The study found that Finland’s stricter climate policy than the rest of the EU may exacerbate negative impacts on employment. Therefore, several different measures are required, emphasizes Tero Kuusi, Etla Research director who led the project.

– Utilizing emissions tax revenues to reduce the tax wedge that distorts the labor market would appear to improve employment. Employment can be supported by shifting the focus of taxation from labor to environmentally harmful production and consumption, Kuusi states.

Etla Research director Tero Kuusi

The report shows that labour transitions during the structural change caused by climate policy must be supported through labour market policies and the maintenance and development of the functioning of the labour market. Raising the average level of education supports employment, but skills related to solutions to the climate crisis are also needed. Public investment will also ease employment pressures during the transition phase of the energy transition. Competitive innovation in green products leading to market success can generate supporting positive economic and environmental impacts. However, it requires efficient R&D investments, cooperation and knowledge of emerging markets.


This publication is part of the implementation of the Government Plan for Analysis, Assessment and Research.

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