Emissions Pricing, 'Complementary Policies' and 'Direct Action' in the Australian Electricity Supply Sector: 'Lock-in' and Investment
AbstractIn Australia, carbon emissions pricing is politically contentious. The current Labor government has implemented such a scheme, but the Liberal National Party (LNP) opposition has pledged to repeal the scheme should it be elected. This article accepts the well-established position of emissions pricing as the core and least-cost approach to reducing greenhouse gas emissions. Its main focus is on examining and rebutting some recent LNP arguments to the contrary, notably in regard to the electricity sector under Australian conditions. In so doing, the article considers the problem of locked-in carbon-intensive generating capacity, as highlighted by the IEA. As such, it focusses on use of price signals to reduce carbon intensity of electricity generation and also examines the role of passed-on price in encouraging end-use savings of electricity, including more energy-efficient end-use. Both of these mechanisms can be reinforced by well-designed complementary policies. These two examples of the price mechanisms effectiveness demonstrate longer run impacts of prices and price expectations on investment decisions. This emphasis is appropriate given the context of catastrophic climate change as a long run phenomenon, albeit one also requiring urgent mitigating action in the shorter run.
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Bibliographic InfoPaper provided by Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University in its series CCEP Working Papers with number 1304.
Date of creation: Jul 2013
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Emissions pricing; complementary policies; carbon 'lock-in'; electricity sector; Australian climate policy options;
Find related papers by JEL classification:
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- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- P46 - Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
- 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
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- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-20 (All new papers)
- NEP-ENE-2013-07-20 (Energy Economics)
- NEP-ENV-2013-07-20 (Environmental Economics)
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