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A flexible CO2 targeting regime

Author

Listed:
  • Peter Karpestam

    (Lund University)

  • Fredrik NG Andersson

    (Lund University)

Abstract

According to EU regulations, CO2 emissions capped by the EU emission trading system must decline by 1.74 percent per year from 2013 and onwards. This paper argues that it is necessary to allow short term fluctuations in emissions in order to avoid unnecessary volatility in the real economy. An analysis of emissions data from the European Union and the United States reveals systematic fluctuations of some +/- 5 percent a year around the long run trend. Hence, the Emission Trading System (ETS) should be modified to better accommodate temporary variations in emissions.

Suggested Citation

  • Peter Karpestam & Fredrik NG Andersson, 2011. "A flexible CO2 targeting regime," Economics Bulletin, AccessEcon, vol. 31(1), pages 297-308.
    • Handle: RePEc:ebl:ecbull:eb-10-00328
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P29.pdf
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    References listed on IDEAS

    as
    1. Cavallo, Eduardo & Galindo, Arturo & Izquierdo, Alejandro & León, John Jairo, 2013. "The role of relative price volatility in the efficiency of investment allocation," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 1-18.
    2. Firat Demir, 2009. "Macroeconomic uncertainty and private investment in Argentina, Mexico and Turkey," Applied Economics Letters, Taylor & Francis Journals, vol. 16(6), pages 567-571.
    3. Cavallo, Eduardo & Galindo, Arturo & Izquierdo, Alejandro & León, John Jairo, 2013. "The role of relative price volatility in the efficiency of investment allocation," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 1-18.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Andersson, Fredrik N.G. & Karpestam, Peter, 2013. "CO2 emissions and economic activity: Short- and long-run economic determinants of scale, energy intensity and carbon intensity," Energy Policy, Elsevier, vol. 61(C), pages 1285-1294.

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    More about this item

    Keywords

    CO2; policy; fluctuations.;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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