By employing a computable general equilibrium (CGE) model with an embedded electricity supply sub-model, this paper reports the effects of a national ETS on the Australian energy sectors.

Using an environmentally extended MONASH model and a database containing detailed energy sectors, this paper evaluates the effects of an ETS in Australia.

Energy production is vital to the Australian economy, but the carbon tax policy introduced in July 2012 triggered substantial fear in the energy sectors.

In the absence of a global agreement to reduce emissions, Australia has adopted a carbon taxunilaterally to curb its own emissions.

The paper calls for a thorough revision of the patent laws aiming at balancing the high risk of innovation investment with a high return, and the formation of a functional patent market, channelling funds automatically into innovation activities