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GTAP Resource #4722

"A review of the economic modelling on the impacts of the Australian carbon tax"
by McNeill, Judith, Mahinda Siriwardana, Sam Meng, Duy Nong and Trang Tran

When the Australian government foreshadowed a carbon price, Australian modellers were ready. This paper outlines the history of carbon pricing policy to date in Australia and describes peer-reviewed, published studies of carbon pricing undertaken from 2007. These studies are then reviewed against some critiques of aspects of climate change modelling; a general critique of macroeconomic modelling emerging since the Global Financial Crises; and two years of real world operation of an Australian carbon tax.

The Australian modelling stands out for its focus on policy relevant questions, and its attempt to use realistic assumptions and details in the most important sectors. Much of the criticism from current anti-economic modelling sentiment is therefore not generally applicable to the carbon tax modelling. More recently, attention has also been directed towards how to achieve greater empirical validation of CGE models. Such steps would further anticipate criticism of CGE assumptions and methods.

The paper does question exactly what the baseline or base case is, in climate change mitigation modelling. In non-climate policy, the base case, against which the simulation results are compared, can be regarded unambiguously as the ‘without policy’ future. In climate mitigation modelling, when the base case does not include (or indeed cannot include, because of the profound uncertainty) the impacts of the externality, it is misleading if papers describe it as the ‘without policy’ future.

As to the findings of the Australian studies, whilst the results of differently structured models cannot be compared, there was broad agreement that the short and long run impacts of an Australian carbon price would be mild, and successful in reducing emissions. Recycling revenues is an effective means of addressing equity, competitiveness and other efficiency concerns. The real world data for the two years of operation of a carbon tax in Australia appear to confirm these conclusions.

Resource Details (Export Citation) GTAP Keywords
Category: 2015 Conference Paper
Status: Published
By/In: Presented at the 18th Annual Conference on Global Economic Analysis, Melbourne, Australia
Date: 2015
Created: McNeill, J. (4/14/2015)
Updated: McNeill, J. (4/14/2015)
Visits: 2,622
- Climate change policy
- Oceania

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