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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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    File URL: https://doi.org/10.1111/1467-8462.00134
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    Cited by:

    1. Creedy, John & Sleeman, Catherine, 2006. "Carbon taxation, prices and welfare in New Zealand," Ecological Economics, Elsevier, vol. 57(3), pages 333-345, May.

    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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