Journal
ENVIRONMENTAL & RESOURCE ECONOMICS
Volume 54, Issue 3, Pages 313-332Publisher
SPRINGER
DOI: 10.1007/s10640-012-9600-4
Keywords
Carbon tax; CGE modelling; Environmental effects; Macro-economy
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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.
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