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The Environmental and Economic Impact of the Carbon Tax in Australia

  • Sam Meng

    ()

  • Mahinda Siriwardana

    ()

  • Judith McNeill

    ()

To fulfil its emission reduction target pledged in the Copenhagen accord, the Australian Government has determined to introduce a carbon tax from July 1st 2012. This paper simulates the effects on the environment and on the economy of a carbon tax of A$23 per tonne of carbon dioxide proposed by the government with, and without, a compensation policy. We employ a computable general equilibrium model with an environmentally extended Social accounting matrix. According to the simulation results, the carbon tax can cut emissions effectively, but will cause a mild economic contraction. Because the price signal is intact, the proposed compensation plan has little impact on emission cuts while significantly mitigating the negative effect of a carbon tax on the economy. Copyright Springer Science+Business Media B.V. 2013

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File URL: http://hdl.handle.net/10.1007/s10640-012-9600-4
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 54 (2013)
Issue (Month): 3 (March)
Pages: 313-332

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Handle: RePEc:kap:enreec:v:54:y:2013:i:3:p:313-332
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

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  1. Devarajan Shantayanan & Go Delfin S & Robinson Sherman & Thierfelder Karen, 2011. "Tax Policy to Reduce Carbon Emissions in a Distorted Economy: Illustrations from a South Africa CGE Model," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-24, February.
  2. Philip D. Adams & J. Mark Horridge & Brian R. Parmenter, 2000. "MMRF-GREEN: A Dynamic, Multi-Sectoral, Multi-Regional Model of Australia," Centre of Policy Studies/IMPACT Centre Working Papers op-94, Victoria University, Centre of Policy Studies/IMPACT Centre.
  3. Kirk Hamilton & Grant Cameron, 1994. "Simulating the Distributional Effects of a Canadian Carbon Tax," Canadian Public Policy, University of Toronto Press, vol. 20(4), pages 385-399, December.
  4. 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.
  5. Wiepke Wissema & Rob Dellink, . "CGE Analysis of the Impact of a Carbon Energy Tax on the Irish Economy," EcoMod2006 272100104, EcoMod.
  6. Cornwell, Antonia & Creedy, John, 1997. "Measuring the Welfare Effects of Tax Changes Using the LES: An Application to a Carbon Tax," Empirical Economics, Springer, vol. 22(4), pages 589-613.
  7. Zhongxiang Zhang, 1998. "Macro-economic and Sectoral Effects of Carbon Taxes: A General Equilibrium Analysis for China," Economic Systems Research, Taylor & Francis Journals, vol. 10(2), pages 135-159.
  8. Philip D. Adams, 2007. "Insurance against Catastrophic Climate Change: How Much Will an Emissions Trading Scheme Cost Australia?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 40(4), pages 432-452, December.
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