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The Distributional and Welfare Effects of the Australian Emissions Trading Scheme

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  • Tran, Trang

Abstract

The Labor Australian Government introduced a carbon pricing scheme that commenced with a fixed carbon price of $23 per tonne of CO2-e on 1st July 2012, then would switch to an emissions trading scheme on 1st July 2015. The objective of this scheme was to achieve the Kyoto emissions reduction target of at least 5 percent below 2000 levels by 2020. We examine the effects of a domestic emissions trading scheme on prices, distributional income and welfare of Australian households. To do this, a single country, static CGE model is employed with an environmentally-extended Social Accounting Matrix (SAM). Households are disaggregated into 20 household groups and household data is collected from the Household Expenditure Survey, 2009-2010. The results indicate that the emissions price is estimated at around $20 per tonne of CO2-e, and the permit revenue is over $10 billion. The electricity price increases the highest percentage of 13.55 percent. The consumer price index mildly increases at 0.42 percent. All households experience a reduction in income and expenditure with varying degrees. Such changes affect negatively the welfare of all household groups. To mitigate these effects, half of the permit revenue is returned to all household groups in four alternative ways. We find that an equal lump-sum transfer has positive effects on welfare of most household groups.

Suggested Citation

  • Tran, Trang, 2015. "The Distributional and Welfare Effects of the Australian Emissions Trading Scheme," Conference papers 332652, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332652
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    References listed on IDEAS

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