Carbon pricing and electricity markets — The case of the Australian Clean Energy Bill

Paweł Maryniak, Stefan Trück, Rafał Weron*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

32 Citations (Scopus)


We examine the impact of the Clean Energy Bill on the price behavior of electricity futures contracts in the Australian National Electricity Market. First, we compute ex-ante forward risk premiums in the pre-tax period (until June 2012), then derive market-implied expectations about additional costs of the Carbon Pricing Mechanism (CPM) on generators as well as pass-through rates during the carbon tax (July 2012–June 2014) and post-tax (after July 2014) periods. Our results suggest that the observed carbon premiums became increasingly higher, once the carbon tax had been proposed and subsequently legislated in 2011. During periods where market participants could be relatively certain that the tax would be effective, we find expected carbon pass-through rates between 67% and 150%, which seem to be inversely related to emission intensities in the regional markets. Our results are also a clear indication of strong policy uncertainty with regards to the CPM and suggest that in the future a stable and long-term policy framework would be required for a carbon pricing mechanism to have its full effect.

Original languageEnglish
Pages (from-to)45-58
Number of pages14
JournalEnergy Economics
Early online date15 Jun 2018
Publication statusPublished - 1 Mar 2019


  • Carbon pass-through rates
  • Carbon premium
  • Carbon pricing mechanism
  • Carbon tax
  • Electricity spot and futures prices
  • Forward risk premium


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