The pass-through rates of carbon costs on to electricity prices within the Australian National Electricity Market

This paper statistically investigates the interaction between a carbon price signal and wholesale electricity spot prices within the Australian National Electricity Market (NEM). While prior studies in Australia have been mainly conducted based on the theoretical and simulation methods, this paper examines the issue by employing an empirical analysis using daily data from July 2010 to October 2013. The findings reveal that carbon costs would indeed be fully passed on to wholesale electricity spot prices resulting in higher electricity prices for consumers and potential windfall profits for some generators.