The immediate effect of the 2012 carbon price was to increase the costs faced by most electricity generators, by an amount that varied between individual power stations depending on that station’s emissions intensity (the emissions per unit of electricity). These costs were then passed on in higher prices to consumers.
Simple economics suggests that two effects should have followed.
First, less emissions-intensive generators should have been able to increase their market share, resulting in an overall reduction in the average emissions intensity of electricity.
Second, higher prices should have led consumers to reduce their consumption, cutting the total demand for electricity. When the price was removed, both of these effects should have been reversed.
This analysis, using detailed National Electricity Market (NEM) operational data from the Australian Energy Market Operator (AEMO) finds that emissions intensity, which was increasing until shortly before June 2012, fell continuously for most of the two years to June 2014. Since then, it has increased consistently. All these changes were caused by changes in the market shares the different types of generation, just as expected.