Working paper

A dynamic evaluation of the impacts of an Emissions Trading Scheme on the Australian economy and emissions levels

Emissions trading Greenhouse gas mitigation Climate change mitigation Technology economic aspects Carbon tax Australia
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Using an environmentally extended MONASH model and a database containing detailed energy sectors, this paper evaluates the effects of an Emissions Trading Scheme on the Australian economy and the emissions levels. The simulation results indicate that to achieve the Australian emissions reduction target in 2030, the price of carbon permits would increase from A$4.6 per tonne in 2015 through A$13.3 per tonne in 2020 to A$43.5 per tonne in 2030. The main buyer of permits would be the agricultural sector, black-coal electricity sector and brown-coal electricity sector. Compared with the business-as-usual scenario, Australia’s GDP is projected to be 0.77% lower in 2020 and 1.84% lower in 2030. The income of households and household welfares measured in terms of equivalent variations are also reduced considerably. The results also lend strong support towards the transition to renewable energy.

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