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CArbon Taxation, Prices and Inequality in Australia

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  • Cornwell, A.
  • Creedy, J.

Abstract

from the combustion of fossil fuels, has led to proposals for non-market mechanisms such as regulation, and market mechanisms such as tradable emissions permits and carbon taxes, in order to reduce emissions. Market methods are usually preferred in terms of efficiency, and the carbon tax is deemed as being the easiest to implement and monitor. Owen (1992, p. 4)compares carbon taxes with other instruments; Pearce (1991) provides a summary of the advantages and disadvantages of a carbon tax; and Dower and Zimmerman (1992) compare the merits of carbon taxes and tradable emissions permits. A carbon tax would affect the price of fossil fuels and thus consumer prices,both directly for fuels and indirectly for manufactured goods. These price changes would alter the levels of final demands, and therefore fossil fuel use and aggregate carbon dioxide emissions. This paper investigates the orders of magnitude of a carbon tax required to reduce carbon dioxide emissions in Australia such that the Toronto target is met; this requires a reduction in emissions of 20 per cent of 1988 levels by 2005. The paper also examines the
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Suggested Citation

  • Cornwell, A. & Creedy, J., 1995. "CArbon Taxation, Prices and Inequality in Australia," Department of Economics - Working Papers Series 481, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:481
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    1. John Creedy, 1992. "Income, Inequality And The Life Cycle," Books, Edward Elgar Publishing, number 114.
    2. R.A. McDougall, 1993. "Short-Run Effects of A Carbon Tax," Centre of Policy Studies/IMPACT Centre Working Papers g-100, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. Antonia Cornwell, 1996. "Reducing Carbon Dioxide Emissions in Australia: A Minimum Disruption Approach," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(1), pages 65-81, January.
    4. Kathy Hayes & Peter Lambert & Daniel Slottje, "undated". "Evaluating Impact Effects of Tax Reforms," Discussion Papers 93/10, Department of Economics, University of York.
    5. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-948, July.
    6. Lambert, Peter J, 1993. "Evaluating Impact Effects of Tax Reforms," Journal of Economic Surveys, Wiley Blackwell, vol. 7(3), pages 205-242, September.
    7. Elizabeth Symons & John Proops & Philip Gay, 1994. "Carbon taxes, consumer demand and carbon dioxide emissions: a simulation analysis for the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 15(2), pages 19-43, May.
    8. Deaton, Angus, 1974. "A Reconsideration of the Empirical Implications of Additive Preferences," Economic Journal, Royal Economic Society, vol. 84(334), pages 338-348, June.
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    Keywords

    TAXATION; PRICES;

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