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Carbon Taxation, Fuel Substitution and Welfare in Australia

Author

Listed:
  • John Creedy
  • Cameron Martin

Abstract

This paper examines the potential role for fuel substitution in electricity production in reducing carbon dioxide emissions over a ten‐year time horizon. This is achieved by adding fuel substitution to output changes resulting from demand responses arising from a tax on carbon dioxide emissions. A time profile of adjustments is developed. The tax required for Australia to meet a 20 per cent reduction in emissions from 1993 levels is calculated and effects on inequality and social welfare are examined. The paper also examines the potential effect of a subsidy towards the use of low‐emission fuels, financed from the carbon tax. A subsidy produces an improvement in emissions abatement and a lower tax required to reach the emissions target.

Suggested Citation

  • John Creedy & Cameron Martin, 2000. "Carbon Taxation, Fuel Substitution and Welfare in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(1), pages 32-48, March.
    • Handle: RePEc:bla:ausecr:v:33:y:2000:i:1:p:32-48
    DOI: 10.1111/1467-8462.00134
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    Cited by:

    1. Gemechu, E.D. & Butnar, I. & Llop, M. & Castells, F., 2012. "Environmental tax on products and services based on their carbon footprint: A case study of the pulp and paper sector," Energy Policy, Elsevier, vol. 50(C), pages 336-344.
    2. Creedy, John & Sleeman, Catherine, 2006. "Carbon taxation, prices and welfare in New Zealand," Ecological Economics, Elsevier, vol. 57(3), pages 333-345, May.
    3. Tran, Trang, 2015. "The Distributional and Welfare Effects of the Australian Emissions Trading Scheme," Conference papers 332652, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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