Carbon Taxation, Fuel Substitution and Welfare in Australia |
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Authors: | John Creedy,& Cameron Martin |
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Affiliation: | Department of Economics and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne,;Department of Economics, The University of Melbourne |
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Abstract: | This paper examines the potential role for fuel substitution in electricity production in reducing carbon dioxide emissions over a ten-year time horizon. This is achieved by adding fuel substitution to output changes resulting from demand responses arising from a tax on carbon dioxide emissions. A time profile of adjustments is developed. The tax required for Australia to meet a 20 per cent reduction in emissions from 1993 levels is calculated and effects on inequality and social welfare are examined. The paper also examines the potential effect of a subsidy towards the use of low-emission fuels, financed from the carbon tax. A subsidy produces an improvement in emissions abatement and a lower tax required to reach the emissions target. |
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