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Estimating the effect of an EU-ETS type scheme in Australia using a synthetic treatment approach

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  • Anderson, Heather M.
  • Gao, Jiti
  • Turnip, Guido
  • Vahid, Farshid
  • Wei, Wei

Abstract

Experts commonly believe that Australia needs to intensify efforts to meet its 2030 emission target (OECD, 2019). A carbon policy that has been considered and was briefly implemented and repealed by the Australian government is a European Union style Emission Trading Scheme (EU-ETS). We estimate the hypothetical impact of Australia adopting an emissions trading policy in 2005, which corresponds with the establishment of the EU-ETS. We develop a synthetic treatment approach that constructs a counterfactual measure of Australian carbon emissions that makes use of the time series properties of pre-2005 and post-2005 emissions in European countries. While we find that this policy would have led to a statistically significant decrease in the Australian per-capita carbon emissions, the magnitude of this reduction would have been small and environmentally insignificant. We conclude that a more effective carbon policy rather than an EU-ETS type policy is needed to meet Australia’s emission target.

Suggested Citation

  • Anderson, Heather M. & Gao, Jiti & Turnip, Guido & Vahid, Farshid & Wei, Wei, 2023. "Estimating the effect of an EU-ETS type scheme in Australia using a synthetic treatment approach," Energy Economics, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:eneeco:v:125:y:2023:i:c:s0140988323002967
    DOI: 10.1016/j.eneco.2023.106798
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    More about this item

    Keywords

    Carbon emissions; Climate change; Common trends; Mitigation policy; Synthetic treatment;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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