Working paper

The Australian energy production facing carbon pricing

15 Jul 2015

Energy production is vital to the Australian economy, but the carbon tax policy introduced in July 2012 has triggered substantial fear in the energy sectors. By employing a computable general equilibrium (CGE) model and an environmentally-extended Social Accounting Matrix (SAM), this paper simulates the effects of the Australian carbon tax on the energy sectors. The modelling results show that all energy sectors will be affected negatively but to different degrees. The brown coal sector will be hit most with a 25.74% decrease in output, a 52.94% decrease in employment and an 89.37% decrease in capital price. The coal-fired electricity generators will reduce their output by 8.57% (for black-coal) and 18.54% (for brown-coal). On the other hand, generators using oil, gas or renewable resources, will increase their output significantly. The energy sectors will contribute predominantly to emission reduction but they will have to bear the most of the total carbon tax burden.

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