Carbon Taxation, Fuel Substitution and Welfare in Australia

Posted: 6 Nov 2000

See all articles by John Creedy

John Creedy

University of Melbourne - Department of Economics

Cameron Martin

affiliation not provided to SSRN

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.

JEL Classification: Q28, Q38

Suggested Citation

Creedy, John and Martin, Cameron, Carbon Taxation, Fuel Substitution and Welfare in Australia. Available at SSRN: https://ssrn.com/abstract=231638

John Creedy (Contact Author)

University of Melbourne - Department of Economics ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia
+61 800 666 300 (Phone)
+61 3 9347 3986 (Fax)

Cameron Martin

affiliation not provided to SSRN

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