Economics at your fingertips  

Effects of Carbon Tax on Electricity Price Volatility: Empirical Evidences from the Australian Market

Nicola Comincioli and Sergio Vergalli ()
Additional contact information
Nicola Comincioli: University of Brescia and Fondazione Eni Enrico Mattei

No 2020.02, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Among the wide variety of policy options adopted worldwide to control carbon emissions, one of the most environmentally effective and economically efficient is represented by carbon tax, that aims to recoup the damage arising from polluting production processes. In this paper, we focus on the Australian Carbon Pricing Mechanism (CPM) and on the effects that its introduction had on the electricity market. The most relevant effect is the reduction of the level of electricity price’s volatility. This effect has been investigated after having removed, from electricity data time series, the periodic behavior, through a multiple linear regression. Then, to study volatility dynamics, we fit a two-states Markov-switching model to represent a high-volatility and a low-volatility states of the world. This model highlighted that in both states the level of volatility is lower and that the persistence of the second state is increased by the presence of the CPM. This result is particularly important in investment evaluation: knowing the different dynamics of price volatility in presence of a carbon tax or not, can provide crucial information in investment decision and its timing.

Keywords: Carbon Tax; Seasonality and Volatility of Electricity Price (search for similar items in EconPapers)
JEL-codes: C51 Q41 Q48 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... oads/NDL2020-002.pdf (application/pdf)

Related works:
Working Paper: Effects of Carbon Tax on Electricity Price Volatility: Empirical Evidences from the Australian Market (2020) Downloads
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:

Access Statistics for this paper

More papers in Working Papers from Fondazione Eni Enrico Mattei Contact information at EDIRC.
Bibliographic data for series maintained by Alberto Prina Cerai ().

Page updated 2023-01-24
Handle: RePEc:fem:femwpa:2020.02