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GTAP Resource #3205

"Distributional effects of Finland’s climate policy package – Calculations with the new income distribution module of the VATTAGE model"
by Kinnunen, Jouko, Juha Honkatukia and Kimmo Marttila

The European Union has committed to cutting its greenhouse gas emissions by an average of 20 per cent by the year 2020. In addition, there is a commitment to increasing the share of renewable energy within EU to 20 per cent of energy consumption, also by the year 2020. Finally, energy saving is also given a 20 per cent target by 2020. The European Council accepted the Energy and Climate package in December 2008, making the targets binding for all member countries.

The effects of the energy package on Finland have been analysed by Honkatukia and Forsström (2008), who use both engineering models of the energy sector and an AGE model of the economy to evaluate the effects of the full climate and energy package. While their results indicate that the macroeconomic effects of the energy package lie roughly between one and two per cent of GDP by 2020, they also show that energy policies accelerate structural change in the Finnish economy, which also has regional implications. Their study does not cover distributional effects, however.

Our results show that the effects of climate policy are broadly of the same order of magnitude for different household types, with the exception of farmer households, which seem to be less affected than others. As we study socioeconomic groups by their income level, it seems in the light of our results that the costs of climate policy would be distributed rather evenly among households. Thus, our results contradict with earlier analyses expecting the costs of the climate policy been born primarily by lower income groups. However, while socioeconomic groups can be ordered by income level, the groups contain considerable variation within them which is not taken into account here.

Resource Details (Export Citation) GTAP Keywords
Category: 2010 Conference Paper
Status: Published
By/In: Presented at the 13th Annual Conference on Global Economic Analysis, Penang, Malaysia
Date: 2009
Created: Kinnunen, J. (3/1/2010)
Updated: Kinnunen, J. (6/24/2010)
Visits: 2,468
- Economic analysis of poverty
- Climate change policy
- Calibration and parameter estimation
- Europe (Northern)

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