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The Economic Impact of Reducing Greenhouse Gas Emissions in WA

Listed author(s):
  • Helal Ahammad

    (Department of Economics, The University of Western Australia)

  • Kenneth W. Clements

    (Department of Economics, The University of Western Australia)

  • Ye Qiang

    (Department of Economics, The University of Western Australia)

This study analyses the general-equilibrium impacts of a number of possible allocation schemes for greenhouse gas emission permits on the Western Australian economy. It finds that emissions would fall by up to 11 percent from the base level in Western Australia. However, such environmental benefits emanate at some costs to the state economy; in terms of foregone gross state product, the costs are up to 3 percent of the base level. Indeed, the actual costs and benefits depend on the precise design of the permit allocation scheme as well as on the policies within which it operates. For example, when emission quota permits are sold to industries and no tradeable carbon credits (i.e. credits for the carbon sequestrated in Kyoto forecasts) are granted, emissions decline by about 8 percent and GSP falls by about 3 percent of the base levels. If carbon credits are tradeable, however, the environmental benefits could be increased and the GSP-cost could be reduced substantially. Also, the reduced economic activity caused by emission abatement results in a modest fall in net government revenue, despite the additional revenue from permit sales in some cases. Accordingly, government's fiscal package surrounding the emission permits would influence the emission abatement impacts on the economy. With regard to the effects on the structure of the state economy, the Oil and gas industry suffers only a slight contraction but the energy-supplying sector as a whole contracts substantially. It is therefore not surprising that the impacts on the WA economy of curbing emissions by energy and transport industries alone are quite significant when compared tot hose resulting from all industries' compliance with the abatement scheme.

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Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 01-23.

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Length: 34 pages
Date of creation: 2001
Handle: RePEc:uwa:wpaper:01-23
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  1. Warwick J. McKibbin, 1999. "An Early Action Proposal with Known Costs: A Sensible and Realistic Option for Emissions Trading in Australia," Economics and Environment Network Working Papers 9903, Australian National University, Economics and Environment Network.
  2. R.G. Gregory, 1976. "Some Implications Of The Growth Of The Mineral Sector," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 20(2), pages 71-91, 08.
  3. Jean-Marc Burniaux & John P. Martin & Giuseppe Nicoletti & Joaquim Oliveira Martins, 1992. "GREEN a Multi-Sector, Multi-Region General Equilibrium Model for Quantifying the Costs of Curbing CO2 Emissions: A Technical Manual," OECD Economics Department Working Papers 116, OECD Publishing.
  4. H. Ahammad & N. Islam, 1999. "Estimating the WA Agricultural Production System: A profit function approach," Economics Discussion / Working Papers 99-11, The University of Western Australia, Department of Economics.
  5. 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.
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