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Energy Efficiency and Fluctuations in CO2 Emissions

Author

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  • Soojin Jo

    (Yonsei University and Bank of Canada)

  • Lilia Karnizova

    (Department of Economics, University of Ottawa)

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," Working Papers 2107E, University of Ottawa, Department of Economics.
  • Handle: RePEc:ott:wpaper:2107e
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    File URL: http://hdl.handle.net/10393/42704
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    More about this item

    Keywords

    CO2 emissions; energy efficiency; E-DSGE; sign restrictions.;
    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
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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