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Peter Karpestam and Fredrik NG Andersson
''A flexible CO2 targeting regime''
( 2011, Vol. 31 No.1 )
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.
Keywords: CO2, policy, fluctuations.
JEL: Q5 - Environmental Economics: General
E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Manuscript Received : May 19 2010 Manuscript Accepted : Jan 14 2011

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