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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
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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P29.pdf
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    More about this item

    Keywords

    CO2; policy; fluctuations.;

    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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