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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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Optimal Emission Prices Over the Business Cycles, Environmental and Resource Economics (2021). Lintunen, Jussi; Vilmi, Lauri

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
Vilmi Lauri / Monetary Policy and International Economy
All authors as text Lintunen, Jussi; Vilmi, Lauri 
Number of authors
Status Published
Year of publication 2021 
Date 02.08.2021 
Name of article Optimal Emission Prices Over the Business Cycles 
Name of journal Environmental and Resource Economics
Volume of issue 80 
Pages 135-167 
Abstract We prove that under the most typical circumstances optimal emission prices are procyclical, i.e., prices should be lower during recessions. The procyclicality is more likely when emissions propagate very slowly into environmental damage. A prime example of such process is CO2 emissions. We show that carbon prices should be closely linked to the fuctuations of the marginal utility of consumption, which implies relatively modest magnitude of carbon price fuctuations. Our fndings imply that climate policies should focus on setting the carbon price to the optimal growth path level and give carbon price fuctuations only a secondary role. Opposite to the carbon price, the cyclicality of optimal emissions depends on the production technology in the energy sector, and may become countercyclical in future if the technology mix becomes less fossil dependent.
Free text descriptor in Finnish päästöt; hinnat; hiilidioksidipäästöt; sosiaaliset kustannukset; suhdannevaihtelut; ilmastopolitiikka 
Free text descriptor in English Pigouvian emission price; Social cost of carbon; Cyclical properties; DSGE 
JEL-codes E32, Q54, Q58 
ISSN / e-ISSN 0924-6460 
auki Internet addresses
Additional information Available online 2 August 2021
Notes BoF DP 23/2013 
Open Access Open access -publication

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