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Energy Efficiency and Fluctuations in CO2 Emissions

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  • Soojin Jo
  • Lilia Karnizova

Abstract

CO2 emissions are commonly perceived to rise and fall with aggregate output. Yet many factors, including energy-efficiency improvements, emissions coefficient variations and shifts to cleaner energy, can break the positive emissions-output relationship. To evaluate the importance of such factors, we uncover shocks that by construction reduce emissions without lowering output. These novel shocks explain a substantial fraction of emissions fluctuations. After extensively examining their impacts on macroeconomic and environmental indicators, we interpret these shocks as changes in the energy efficiency of consumer products. Our results imply that models omitting energy efficiency likely overestimate the trade-off between environmental protection and economic performance.

Suggested Citation

  • Soojin Jo & Lilia Karnizova, 2021. "Energy Efficiency and Fluctuations in CO2 Emissions," Staff Working Papers 21-47, Bank of Canada.
    • Handle: RePEc:bca:bocawp:21-47
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    More about this item

    Keywords

    Business fluctuations and cycles; Climate change; Econometric and statistical methods;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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