Impact of carbon tax on electricity prices and behaviour

Jon Boon Wong*, Qin Zhang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)

Abstract

Internationally, there is increasing emphasis on climate change, this study contributes by examining the impact of carbon tax on wholesale electricity pricing and market behaviour. Empirical results using a natural experiment from Australia's carbon pricing mechanism (CPM) indicate that wholesale electricity costs increase between 22.1% to 68.0% across connected regions after controlling for relevant factors. The significant difference in price impacts can be attributed to the distinct fuel mix for electricity generation across states and the capacity to import renewable hydroelectricity. Market behavioural shift from coal to other energy sources during the CPM regime is reversed after the abolition of carbon tax.

Original languageEnglish
Article number102098
Pages (from-to)1-8
Number of pages8
JournalFinance Research Letters
Volume44
Early online date8 May 2021
DOIs
Publication statusPublished - Jan 2022

Keywords

  • Carbon emission policy
  • Carbon pricing
  • Carbon tax
  • Climate change
  • Electricity prices
  • Market behaviour

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