Carbon Taxation, Fuel Substitution and Welfare in Australia

John Creedy and Cameron Martin

Australian Economic Review, 2000, vol. 33, issue 1, 32-48

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.

Date: 2000
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https://doi.org/10.1111/1467-8462.00134

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Working Paper: Carbon Taxation, Fuel Substitution and Welfare in Australia (1998)
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