6. Conclusions

The Nordic countries have been leading global efforts towards a post-carbon society since the discussions that led to adoption of the first international agreements to reduce the emission of gases contributing to global warming. Efforts to reduce greenhouse gases in the Nordic countries can been traced back to the 1990s. Nonetheless, emission cuts have so far been concentrated on large combustion plants in manufacturing and energy industries. Emissions in agriculture, transport, and industrial processing – including, e.g. aluminium smelting, steel, and cement production – have proven much more difficult to abate. That is due to a range of technical, legal, and financial obstacles of varying nature, including vested economic interests. 

A critical obstacle for the deployment of carbon abatement policies is the lack of international consensus establishing shared goals and industrial standards, particularly in sectors with long production chains and complex ancillary infrastructures, like the transport sector. The new EU Climate Policy Framework under the EU Green Deal has created the momentum for more ambitious climate goals at the European level. The establishment of the new EU Climate Policy Framework does not only build on the ambition of its climate goals, but also on the sectors that are now targeted. While the ETS proved to be an efficient tool to initiate the decarbonisation of the energy and manufacturing industries, the new ESR, LULUCF, aviation, and maritime regulations under the ‘Fit for 55’ package focus on sectors that have made limited progress so far, including all forms of transport.

This new generation of EU policies may reinforce the traditional Nordic leadership in green policy-making, which is now entering a new stage. With ‘Our Vision 2030’, the Nordic Region has ambitions ‘to become the most sustainable and integrated region in the world’ and actively advocates carbon neutrality. In line with this shared strategy, each of the Nordic countries has adopted climate goals that, in most cases, go beyond the EU ambition to become carbon-neutral by 2050. 

If successfully implemented, the new generation of climate policies in the Nordic countries will contribute to inducing a system change with far-reaching economic and social implications. As technologies evolve and new competitiveness landscapes emerge, some industries and subnational regions will gain momentum and others will lose pace. Such processes will impact workers and households differently, depending on the sector of employment, the region where they live, their income levels, and expenditure distribution. It is therefore important to understand how climate policies affect specific industries, social groups, and territories by looking into their financial, distributive, and territorial impacts. 

In this study, we have qualified and quantified the effects on the Nordic economies in 2030 of achieving goals for the bio-content of motor fuels and the electrification of car fleets. We have also included the effects of completing the phase-out of coal as a fuel for electricity. As shown in Table 7, these policies alone will not be sufficient to achieve the Nordic greenhouse targets for 2030, except in Sweden. Nevertheless, our results support an optimistic conclusion for two reasons. 

First, the policies we have looked at will cause significant reductions in greenhouse emissions at moderate macroeconomic cost. That is indicated in the first three rows of Table 19. The percentage emission reductions are between six times and 30 times greater than the percentage GDP losses. Norway and Iceland have the worst ratios. Greenhouse policies have a relatively large negative effect on Norway’s GDP (see Table 8) and a relatively small effect on its gross emissions (Table 5). The GDP effect for Norway is exacerbated by reduction in the use of oil resources (Table 9). The muted emissions effect is explained by the relative lack of opportunity to reduce emissions from combustion of coal (no coal-electricity industry) and the relatively small-targeted increase in the biofuel share of motor fuels (Table 3). In Iceland's case, the policies have little effect on greenhouse emissions while causing a GDP-reducing substitution of lightly-taxed electricity for more heavily-taxed motor fuels.

* These are the worst employment results over all 39 occupations in our model, not just the selected occupations shown in Table 12.

The second reason for an optimistic interpretation of the results is illustrated by the lower panel of Table 19. It implies that significant reductions in emissions can be achieved with very little structural disruption. 

In Denmark, the percentage deviation in employment in 2030, in the worst-affected occupation out of the 39 in our model is -1.13 per cent. That is the result for Personal care workers in the bottom panel of Table 12. An adjustment of that size would not necessitate employed workers losing their jobs. It does not mean that 1.13 per cent of Denmark’s personal care workers will be put out of work in 2030. From the top two panels of Table 12, we can see that it means employment of Personal care workers will grow between 2019 and 2030 by 3.8 per cent according to the policy-based scenario as opposed to 4.9 per cent according to the baseline scenario. 

In Norway, the worst affected occupation is Health professional, with negative deviations of 0.69 per cent. This occupation has strong baseline growth in Norway. Adoption of greenhouse policies means that their employment growth will be slightly lower than it otherwise would have been. 

In Finland and Sweden, the worst-affected occupation is Handicraft and Printing, with negative deviations of 1.93 and 2.59 per cent, respectively. In both countries, employment in this occupation falls according to the baseline (top panel of Table 12). Greenhouse policies could therefore exacerbate a potential adjustment problem, particularly in Finland. However, even with the negative greenhouse contribution, it seems likely that the decline in employment opportunities for Printing workers over 11 years would be managed by natural attrition. 

For Iceland, the narrative is similar to that in Finland and Sweden. The occupation worst affected by greenhouse policies is Agriculture, forestry and fishing, with a deviation of -1.31 per cent. This occupation has declining employment under the baseline scenario. Again, it seems likely that even with the negative greenhouse contribution the decline in employment opportunities for Iceland’s Agriculture, forestry, and fishing labourers would be managed by natural attrition. 

Our estimates show that some of the contractions observed in specific sectors seem to affect industrial output (Table 10) more intensively than employment (Table 11). That is illustrated by the results for fuel-based electricity production (industry 31) in Finland and Sweden. These results suggest that, in many energy-intensive sectors, substantial reductions in greenhouse gas emissions can be achieved with minimal impacts on output and an overall increase in employment.

In any case, when analysing these results, it should be considered that the sectoral contractions observed in some industries have been calculated without taking processes of innovation and technological change into consideration. For instance, the modest contraction of the wood products industry expected in Finland, Sweden, and Norway is driven by the diversion of feedstock into motor fuels, which might undermine the competitiveness of these industries. However, this outcome is far from being inevitable if product innovation and diversification strategies are adopted in the affected sectors. In the wood industry this can be achieved, for example, by cascading the use of biomass (European Commission 2018a, b). Looking at the other dimensions of employment (wage band, age, education, and region), we can see in Table 19 that the policy-induced deviations for the worst-affected groups are negligible, amounting to less than one per cent in absolute terms.

Large policy-induced negative employment deviations can be found among our industry results (Table 11). However, in terms of adjustment, we consider the occupational and subnational regional results to be of prime relevance. It is reassuring that the greenhouse policies do not generate any large negative employment deviations in these two respects. It means these policies are unlikely to cause skill-based or regional mismatches in Nordic labour markets. 

The final row of results in Table 19 shows the policy-induced cost-of-living increases relative to the national average for the worst affected group of households in Denmark, Finland, and Sweden. In all cases, the worst affected households are rural households in upper income deciles. These households devote relatively high shares of their consumer spending to motor fuels. Nevertheless, even for these households, the relative cost-of-living effect of greenhouse policies is small.