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The Environmental and Economic Impact of the Carbon Tax in Australia

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  • Sam Meng
  • Mahinda Siriwardana
  • Judith McNeill

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. Copyright Springer Science+Business Media B.V. 2013

Suggested Citation

  • Sam Meng & Mahinda Siriwardana & Judith McNeill, 2013. "The Environmental and Economic Impact of the Carbon Tax in Australia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(3), pages 313-332, March.
    • Handle: RePEc:kap:enreec:v:54:y:2013:i:3:p:313-332
    DOI: 10.1007/s10640-012-9600-4
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    References listed on IDEAS

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