The Australian Agricultural and Resources Sectors under the Carbon Tax: A CGE Perspective

Xianming Meng

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2014, vol. 60, issue 1, 1-22

Abstract: The agricultural and resources sectors are key contributors to the Australian economy, but the carbon tax policy introduced in July 2012 has triggered substantial fear in these sectors. By employing a computable general equilibrium (CGE) model and an environmentally-extended Social Accounting Matrix (SAM), this paper simulates the effects of the Australian carbon tax on the agricultural and resources sectors. The modelling results show that a carbon tax of $23 per tonne can cut carbon emission effectively by 70.3 megatonnes or 12% of the emission base. The impact on the macro economy is mild but significant. At macro level, it will cause a 0.57% decrease in real GDP, and a 0.84% decrease in employment. At sector level, all agricultural and resources sectors will be affected negatively but to different degrees. The brown coal sector will be hit most with 25.74% decrease in output, 52.94% decrease in employment and 89.37% decrease in profitability. Conversely, the other resources sectors are only mildly affected. The impact on the agricultural sector is comparable to that on the non-energy mineral sector.

Keywords: Australian economy; carbon tax policy (search for similar items in EconPapers)
Date: 2014
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