ERC Starting Grant for a project "Green tax reform for a just climate transition"

Grand externality problems, such as climate change, call for grand policy solutions that, however, may hurt those struggling to make ends meet. Associate Professor Lassi Ahlvik’s new project has received an ERC Starting Grant, which is among the most esteemed funders of high-quality research in Europe.

The project analyzes the effects of climate policy on various societal groups, investigates people’s notions of fairness and strives to understand how harmful effects can be mitigated through taxation. The study uses mechanism design theory to derive a theoretical framework and Finnish administrative data on individuals and businesses to quantify the effects. Identification of the effects is made possible by the energy price shock caused by the energy crisis of 2022. 

There is growing concern among policy makers in the EU and the United States regarding the implementation of climate policy that costs will put the most strain on the most vulnerable individuals in society. The project supports the devising of a green transition in Finland that is considered socially fair.