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Energy Taxes and Greenhouse Gas Emissions in Australia


  • R.A. McDougall


A feature of recent policy discussion both in Australia and overseas has been a heightened interest in energy taxes and fuel taxes of various kinds. These taxes have been advocated on various grounds, notably their role in discouraging greenhouse gas emissions. At the same time, at least in Australia, greenhouse policy discussion has been redirected more towards small-scale sector-specific interventions, and away from economy-wide measures such as a carbon tax. In this context it becomes of interest to ask, how effective might an energy tax be in reducing carbon emissions? Here we use the term energy tax to mean fossil fuel taxes excluding carbon taxes. A carbon tax is levied on carbon dioxide emissions or some closely related basis, while an energy tax is levied on some other basis such as energy content. The paper presents simulation results designed to address these questions. The simulations are performed using the ORANI model of the Australian economy, in a version containing several energy-specific enhancements. These include greater detail on energy production and use in the database, and a wider range of substitution possibilities in energy production and use in the theoretical structure. The database enhancements include extensive disaggregation of the two largest parts of the energy sector, fossil fuels and electricity. The theoretical developments cover substitution between energy and capital, between different sources of energy, between different techniques of generating electricity, and between different modes of transport. We find that a broad-based energy tax would be comparable in effectiveness to a carbon tax in reducing greenhouse gas emissions. This is because like the carbon tax it would bear heavily on the cheaper fossil fuels and would induce emission abatement through fuel switching. Taxes such as a petroleum products tax which excluded the cheaper fossil fuels would be much less effective.

Suggested Citation

  • R.A. McDougall, 1993. "Energy Taxes and Greenhouse Gas Emissions in Australia," Centre of Policy Studies/IMPACT Centre Working Papers g-104, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:g-104

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    References listed on IDEAS

    1. M. Kohlhaas & K.R. Pearson, 2002. "Introduction to GEMPACK for GAMS Users," Centre of Policy Studies/IMPACT Centre Working Papers ip-79, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Mark Horridge, 2000. "ORANI-G: A General Equilibrium Model of the Australian Economy," Centre of Policy Studies/IMPACT Centre Working Papers op-93, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. Giuseppe Nicoletti & Joaquim Oliveira Martins, 1992. "Global Effects of the European Carbon Tax," OECD Economics Department Working Papers 125, OECD Publishing.
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    Cited by:

    1. Alberto Gago & Xavier Labandeira & Xiral López Otero, 2014. "A Panorama on Energy Taxes and Green Tax Reforms," Hacienda Pública Española, IEF, vol. 208(1), pages 145-190, March.
    2. Philip D. Adams & Brian R. Parmenter & George Verikios, 2014. "An Emissions Trading Scheme for Australia: National and Regional Impacts," The Economic Record, The Economic Society of Australia, vol. 90(290), pages 316-344, September.
    3. Helal Ahammad & Kenneth W. Clements & Ye Qiang, 2001. "The Economic Impact of Reducing Greenhouse Gas Emissions in WA," Economics Discussion / Working Papers 01-23, The University of Western Australia, Department of Economics.
    4. Ahammad, Helal & Clements, Kenneth W. & Ye, Qiang, 2001. "The regional economic impact of reducing greenhouse gas emissions: Western Australia," Resources Policy, Elsevier, vol. 27(4), pages 225-233, December.
    5. Sam Meng, 2014. "How may a carbon tax transform Australian electricity industry? A CGE analysis," Applied Economics, Taylor & Francis Journals, vol. 46(8), pages 796-812, March.
    6. Adams, Philip D. & Parmenter, Brian R., 2013. "Computable General Equilibrium Modeling of Environmental Issues in Australia," Handbook of Computable General Equilibrium Modeling, Elsevier.
    7. Philip Adams & Janine Dixon & Mark Horridge, 2015. "The Victoria University Regional Model (VURM): Technical Documentation, Version 1.0," Centre of Policy Studies/IMPACT Centre Working Papers g-254, Victoria University, Centre of Policy Studies/IMPACT Centre.
    8. WISSEMA Wiepke MATTHEWS Alan, "undated". "Modelling Climate Change Policy in Ireland: A CGE Approach," EcoMod2003 330700153, EcoMod.
    9. Cabalu, Helen & Koshy, Paul & Corong, Erwin & Rodriguez, U-Primo E. & Endriga, Benjamin A., 2015. "Modelling the impact of energy policies on the Philippine economy: Carbon tax, energy efficiency, and changes in the energy mix," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 222-237.
    10. Wianwiwat, Suthin & Asafu-Adjaye, John, 2013. "Is there a role for biofuels in promoting energy self sufficiency and security? A CGE analysis of biofuel policy in Thailand," Energy Policy, Elsevier, vol. 55(C), pages 543-555.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics


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