Advanced Search
MyIDEAS: Login to save this paper or follow this series

Carbon Pricing that Builds Consensus and Reduces Australia's Emissions: Managing Uncertainties Using a Rising Fixed Price Evolving to Emissions Trading


Author Info

  • Frank Jotzo

    (Crawford School of Public Policy, The Australian National University)


This paper identifies principles for carbon pricing that could attract a broad based and durable societal consensus in Australia. It applies these principles to a phased carbon pricing architecture as put forward by Australia's Multi-Party Committee on Climate Change, namely a government determined (fixed) carbon price transitioning to emissions trading. Linking to international carbon markets decouples AustraliaÕs domestic carbon price from its national emissions target, allowing significant net national emissions reductions with manageable transitional impacts. A fixed price in the near term can end costly delays to carbon pricing while dealing with uncertainties about AustraliaÕs target and international markets. A strategy is outlined to manage international uncertainties and to accommodate the multiple goals of domestic constituencies, while achieving efficiency and effectiveness. First, ensure the medium term carbon price is high enough to for emissions to begin to trend down in the next few years, recognising that investment decisions are shaped by current expectations about future prices. Second, set the initial price at a level that gives confidence that short run impacts will be manageable, given other transitional assistance. Third, ensure that wider policy settings do not compromise incentives for reducing emissions, and make the scheme robust in the face of competing claims for carbon revenue and lobbying efforts. For Australian carbon pricing policy, these principles suggest the carbon price may need to rise rapidly over the course of the decade, to double or more compared to starting prices that are currently in the Australian discussion. Payments of carbon pricing revenue to industry may need to be limited to create more room for income tax cuts, possibly by means of an overall cap and accelerated phase-out of industry assistance. Forestry and agricultural offsets can be supported through the scheme, but at the cost of fiscal revenue.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University in its series CCEP Working Papers with number 1104.

as in new window
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:een:ccepwp:1104

Contact details of provider:
Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 0200
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page:
More information through EDIRC

Related research


Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


No references listed on IDEAS
You can help add them by filling out this form.


Blog mentions

As found by, the blog aggregator for Economics research:
  1. How low can you go? A model for setting and increasing a carbon price
    by Frank Jotzo, Director, Centre for Climate Economics and Policy at Australian National University in The Conversation on 2011-06-03 04:31:41
  2. Crawford School Working Papers in April 2012
    by David Stern in Stochastic Trend on 2012-05-03 11:44:00
  3. CCEP Working Papers in May 2011
    by David Stern in Stochastic Trend on 2011-06-03 00:07:00
  4. CCEP Working Papers in April 2011
    by David Stern in Stochastic Trend on 2011-05-02 08:25:00
  5. Two New CCEP Papers
    by David Stern in Stochastic Trend on 2011-03-27 11:50:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Frank Jotzo, 2013. "Emissions Trading in China: Principles, Design Options and Lessons from International Practice," CCEP Working Papers, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University 1303, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:een:ccepwp:1104. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Stern).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.