HOUSEHOLD DISTRIBUTIONAL AND REVENUE RECYCLING EFFECTS OF THE CARBON PRICE IN AUSTRALIA

Disna Sajeewani (), Mahinda Siriwardana () and Judith McNeill ()
Additional contact information
Disna Sajeewani: School of Economics, University of Wollongong, Wollongong 2522, Australia
Judith McNeill: Institute for Rural Futures, BCSS, University of New England, Armidale 2351, Australia

Climate Change Economics (CCE), 2015, vol. 06, issue 03, 1-23

Abstract: The Australian Government introduced a carbon tax from 1 July 2012. The then opposition party leader, now Prime Minister, introduced legislation to repeal the tax. Amongst the many issues being debated is that of the incidence of the tax. In this study, we explore household consumption and income changes arising from a A$23 carbon price employing a computable general equilibrium model (entitled A3E-G). The model has been calibrated using a social accounting matrix database of Australia with 10 household income groups. This carbon price generates A$6.39 billion revenue while reducing Australia's carbon emissions by 11%. The empirical evidence suggests household level impacts range from proportional to mildly progressive tax incidence. In this study, we propose four revenue recycling options to overcome any undesirable distributional effects from the carbon price. Results indicate that revenue recycling through income tax reductions and uniform lump sum transfers improves post tax income levels and welfare towards middle and high income groups. A nonuniform lump sum transferring option favors low income households. Uniform reductions in commodity tax rates are not found to be welfare improving but we find positive impacts on export competitiveness from this option.

Keywords: Australia; general equilibrium model; carbon price; household; revenue recycling; D58; D62; Q52; Q58 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010007815500128
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ccexxx:v:06:y:2015:i:03:n:s2010007815500128

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010007815500128

Access Statistics for this article

Climate Change Economics (CCE) is currently edited by Robert Mendelsohn

More articles in Climate Change Economics (CCE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().