Integrating climate in macroeconomic modelling: A Nordic Perspective

3. The Nordic perspective: modelling landscape and tradition

All of the Nordic countries have embarked on low-carbon development pathways by setting ambitious mid-term (2025-2035) climate targets and seeking carbon neutrality before or by 2050. Due to their ambitious goals, the Nordic countries are considered frontrunners within the European climate policy landscape. Each Nordic country has developed specific modelling tools which can help to identify cost-efficient economic and financial measures to achieve the climate targets while minimising potential negative socio-economic impacts (Krook-Riekkola et al., 2013).

During a series of webinars hosted by the ICMM project (see Textbox 1) several of the modelling initiatives undertaken in the Nordic countries were discussed, providing insights into the specific strategies implemented in each country for modelling the effectiveness of different policies towards the climate goals as well as their impacts (summary in Table 1 and more detailed information on the models in Appendix 1)

Textbox 1: About the ICMM project and the ICMM Network
The Integrating Climate in Macroeconomic Modelling (ICMM) project started in 2022 with the intention of strengthening Nordic cooperation between experts and practitioners designing, working and using macroeconomic models for policy design. The main objectives of the project were: to advance expert and policy-planning knowledge and networks among the Nordic countries on modelling decision when it comes to integrating and assessing climate and finance policies; to enhance the Nordic countries’ international outreach and engagement by advancing common experiences and results from climate and finance integrated models; to identify future Nordic and international collaborative opportunities at both expert and policy-planning levels. The ICMM project established an international network composed by 30 experts working on the integration of climate and finance policies in each and all of the Nordic countries. The project hosted four Technical workshops (focused on the technical aspects of various Nordic models) and two Policy workshops (debating the models’ policy impacts). Comprehensively, the ICMM events gathered more than 100 single participants. More information: Integrating climate into macroeconomic modelling (ICMM) \| Nordregio

Textbox 1: About the ICMM project and the ICMM Network

The Integrating Climate in Macroeconomic Modelling (ICMM) project started in 2022 with the intention of strengthening Nordic cooperation between experts and practitioners designing, working and using macroeconomic models for policy design.

The main objectives of the project were:

to advance expert and policy-planning knowledge and networks among the Nordic countries on modelling decision when it comes to integrating and assessing climate and finance policies;
to enhance the Nordic countries’ international outreach and engagement by advancing common experiences and results from climate and finance integrated models;
to identify future Nordic and international collaborative opportunities at both expert and policy-planning levels.

The ICMM project established an international network composed by 30 experts working on the integration of climate and finance policies in each and all of the Nordic countries. The project hosted four Technical workshops (focused on the technical aspects of various Nordic models) and two Policy workshops (debating the models’ policy impacts). Comprehensively, the ICMM events gathered more than 100 single participants.

More information: Integrating climate into macroeconomic modelling (ICMM) | Nordregio

The degree of maturity of the Nordic CGE models, the acceptance and anchoring within the political system and the role of the Ministries of Finance in the formulation of climate policies, all constitute opportunities for Nordic leadership in assessing climate and finance policies in an integrated way. The seminar series in the ICMM showed how the different Nordic models have many similarities but also important differences in nature, focus, application, usage, as well as ownership and governance. This emphasises the importance of collaborative networking among experts from the different countries. The significance of exchange of lessons learned, and peer-to-peer discussion were highlighted to ensure that models can continuously improve and address the most relevant and pressing policy questions faced by decision makers in the region.

Name	Country	Hosting Institution	Type of Model	Type of Link	Summary of key features
Green REFORM	Denmark	DREAMgruppen	CGE	Hard link	59 sectors plus 27 types of energy and 14 emissions in physical quantities. It has several fully integrated submodules for specific sectors and features that can be turned on/off as needed and can be used independently of one another.
FINAGE	Finland	Collaboration between the Centre of Policy Studies in Melbourne and Finnish researcher	Dynamic AGE model	Soft Link	100 industries and 150 commodities, especially focusing on energy data. The model has a regional extension (at NUTS 3 level), and it covers households by age, income decile and by socioeconomic group.
SNOW	Norway	Statistics Norway	CGE	Hard link (previous versions tested soft links)	It represents the Norwegian economy, with 46 producing sectors and various household and public consumption sectors.
EMEC	Sweden	National Institute of Economic Research (NIER) Konjunkturinstitutet	CGE	Hard link	It specifies firms in 35 production sectors, together producing around 43 different products (this can vary year to year). In the last version (4) the Model disaggregated the road transport substantially (specification of 6+ vehicles and 5+ fuels). It also specifies 6 household types differentiated by income (low/high) and residential area (rural/small, urban/large) to study income distribution
IntERACT	Denmark	Initiated by The Energy Agreement and embedded in the Danish Energy Agency	Hybrid model	Hard link	The IntERACT model setup integrates a general equilibrium model with a technical energy system model TIMES-DK.
Nordic-TERM	Nordic	Nordic Council of Ministers (Nordregio)	CGE	Soft link	Model developed for a Nordregio project- Ensuring inclusive economic growth in the transition to a green economy (EnIGG) -to study the distributional effects of climate policies in the Nordic countries. Five Nordic countries plus Rest of Europe (RoE), 26 (NUTS2) regions within the Nordic countries, 53 industries, 39 occupations, eight wage-bands, and 30 household types (for Denmark, Finland and Sweden)

Table 2 – Integrated climate-CGE models in the Nordic Region