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The Impact of the Australian Carbon Tax on Industries and Households

Author

Listed:
  • Sam Meng

    (Dr Sam Meng (corresponding author) and Dr Judith McNeill are at the Institute for Rural Futures, University of New England, IRF, UNE, Armidale, NSW, 2351, Australia, emails: xmeng3@une.edu.au and jmcneill@une.edu.au.)

  • Mahinda Siriwardana

    (Professor Mahinda Siriwardana is at the UNE Business School, University of New England, Australia, email: asiriwar@une.edu.au)

  • Judith McNeill

    (The authors would like to acknowledge funding from the Australian Research Council under Discovery Project DP0986306.)

Abstract

With the new Australian Government and various interest groups objecting to the Australian carbon tax, public opinion about pricing carbon is divided. Some of the disagreement may be due to misunderstandings about the effects of the policy. In an effort to clarify some of the issues, this article reports the simulated effects of a carbon tax of A$23 per tonne of carbon dioxide on different economic agents, with and without a compensation policy. We employ a computable general equilibrium (CGE) model with an environmentally extended social accounting matrix (SAM). At the sectoral level, brown coal electricity, black coal electricity and the brown coal mining sectors are big losers. The effect on various employment occupations is mildly negative, ranging from −0.6 per cent to −1.7 per cent, with production and transport workers worst affected. According to household utility projections, low-income households suffer more from a carbon tax and benefit more from the proposed compensation policy. However, the commonly used equivalent variation (EV) tends to reverse this conclusion. JEL Classification: H23, H31, H32, Q52, Q54

Suggested Citation

  • Sam Meng & Mahinda Siriwardana & Judith McNeill, 2014. "The Impact of the Australian Carbon Tax on Industries and Households," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 8(1), pages 15-37, February.
    • Handle: RePEc:sae:mareco:v:8:y:2014:i:1:p:15-37
    DOI: 10.1177/0973801013506399
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    References listed on IDEAS

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    Cited by:

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    3. Maruf Rahman Maxim & Kerstin Zander, 2020. "Green Tax Reform and Employment Double Dividend in Australia Should Australia Follow Europe’s Footsteps? A CGE Analysis," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(4), pages 454-472, November.
    4. Rokicki, Bartlomiej & de Souza, Kenia Barreiro & de Santana Ribeiro, Luiz Carlos, 2023. "Modelling the Effects of the EU Emissions Trading System in Poland: A Comparison Between IO And CGE Results," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 53(2), 14.

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    More about this item

    Keywords

    Carbon Tax; CGE Modelling; Sectoral Effect; Distributional Effect;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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