Macroeconomic Impact of Climate Change on Public Finances

Valkonen TarmoKuusi TeroPohjola JohannaSillanaukee OtsoKuusela Olli-PekkaLehmus MarkkuLintunen JussiSarkia KatriFronzek Stefan


This project provided an overall picture of the effects of climate change and mitigation on the sustainability and risks of public finances. With the help of literature and macroeconomic general equilibrium models, the project examined global effects as well as direct and spillover effects on Finland. Challenges related to modeling and the best methods of modeling were also evaluated.

The literature shows that there are still rather few studies on the effects of climate change, preparedness, and adaptation on the public economy, and that the information about the subject is uncertain. Research requires a perspicuous view of the effects of climate change as well as mitigation and adaptation policies on the national economy and public finances. The chain of influence is long and uncertain. The best starting point for modeling is the combining of details from different sources at the level of the national economy.

Based on the analysis, the physical consequences of climate change are likely to affect the national economy and public finances of Finland less than in most other countries, especially if the adaptation policy is successful. Country-specific differences emphasize the importance of being prepared for international spillover effects, and on the other hand the fact that Finland’s competitiveness may improve. The spillover effects reduce exports, but increase investments, and their combined effect on production remains small.

Industry-specific and regional differences are also large in Finland. The accelerating growth of negative effects as temperatures rise will increase the already high uncertainty associated with impact calculations.

For the next decade, the green transition will be more important for the Finnish economy than climate change. It is driven not only by Finnish and EU policy measures, but also by global technology and behavioral changes. An active and successful policy promoting the green transition is central to determining the kind of economic effects the public finances will experience during the transition phase.

Publications of the Government’s analysis, assessment and research activities 2023:17.

Information om publikationen

Makroekonomi och den offentliga ekonomin
Climate change, Public finances, Macroeconomics, Modeling
Utgivare / serie
Publications of the Government's analysis, assessment and research activities 2023:17
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