In this report, we evaluate the effects of climate policy on employment from the Finnish perspective. The aim is to analyse how ambitious climate policy can be joined with concurrent ambitious employment objectives. We identify the potential positive connections between climate and employment policies, but also conceivable negative channels and risks. The exceptional scope of the topic requires dividing the work into subthemes: (i) the mechanisms of the employment effects caused by climate policy; (ii) the issues pertaining to the innovation, regulation and international markets of products used to mitigate the climate change; and (iii) the roles of public investment and labour market measures. We use a mixed-method approach that combines quantitative data, general equilibrium macroeconomic modelling and statistical analysis with qualitative interviews and surveys. Moreover, the project included close interactions with societal stakeholder groups.
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. Meanwhile, employment can be supported by shifting the focus of taxation from labour to environmentally harmful production and consumption. 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.