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Green Tax Reform and Employment Double Dividend in Australia Should Australia Follow Europe’s Footsteps? A CGE Analysis

Author

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  • Maruf Rahman Maxim

    (Maruf Rahman Maxim (corresponding author) is at the Northern Institute, Charles Darwin University, Australia)

  • Kerstin Zander

    (Kerstin Zander is at Northern Institute, Charles Darwin University, Australia.)

Abstract

Australia has one of the highest per capita carbon emissions, and its energy sector contributes significantly to the country’s carbon emissions. Renewable energy and climate change call for a shift from fossil fuels to low-carbon technologies for energy production. Policies aiming to reduce carbon emissions are perceived by many people as leading to higher living costs, but changes in energy policies can also lead to economic gains in the presence of revenue recycling. This article applies a computable general equilibrium approach to study the effect of energy tax in the Australian economy. Four different scenarios of green tax reform (GTR) are simulated to test the employment double dividend (EDD) potential. All four scenarios simulate changes in energy tax and one of four tax revenue recycling policies including (a) value added tax reduction, (b) payroll tax reduction, (c) goods and services tax (GST) reduction and (d) a mixture of all three recycling policies. The results show strong EDD potential of GST and payroll tax reduction when used along with energy tax in a revenue-neutral GTR approach. The study also presents a comparison of an optimal EDD inducive policy design between the European and Australian GTR approaches. JEL classifications: H23, C68, H21, Q48

Suggested Citation

  • Maruf Rahman Maxim & Kerstin Zander, 2020. "Green Tax Reform and Employment Double Dividend in Australia Should Australia Follow Europe’s Footsteps? A CGE Analysis," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(4), pages 454-472, November.
    • Handle: RePEc:sae:mareco:v:14:y:2020:i:4:p:454-472
    DOI: 10.1177/0973801020953310
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    More about this item

    Keywords

    Green tax reform; CGE modelling; Employment double dividend; Energy Tax;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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