Environmental and Resource Economics

, Volume 54, Issue 3, pp 313–332 | Cite as

The Environmental and Economic Impact of the Carbon Tax in Australia

Article

Abstract

To fulfil its emission reduction target pledged in the Copenhagen accord, the Australian Government has determined to introduce a carbon tax from July 1st 2012. This paper simulates the effects on the environment and on the economy of a carbon tax of A$23 per tonne of carbon dioxide proposed by the government with, and without, a compensation policy. We employ a computable general equilibrium model with an environmentally extended Social accounting matrix. According to the simulation results, the carbon tax can cut emissions effectively, but will cause a mild economic contraction. Because the price signal is intact, the proposed compensation plan has little impact on emission cuts while significantly mitigating the negative effect of a carbon tax on the economy.

Keywords

Carbon tax CGE modelling Environmental effects Macro-economy 

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Copyright information

© Springer Science+Business Media B.V. 2012

Authors and Affiliations

  1. 1.Institute of Rural Futures and UNE Business SchoolUniversity of New EnglandArmidaleAustralia
  2. 2.UNE Business SchoolUniversity of New EnglandArmidaleAustralia
  3. 3.Institute of Rural FuturesUniversity of New EnglandArmidaleAustralia

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