The views expressed in this article are those of the authors and any errors or omissions remain the responsibility of the authors.
Delayed Carbon Policy Certainty and Electricity Prices in Australia*
Article first published online: 6 FEB 2011
© 2011 The Economic Society of Australia
Economic Papers: A journal of applied economics and policy
Volume 29, Issue 4, pages 446–465, December 2010
How to Cite
Nelson, T., Kelley, S., Orton, F. and Simshauser, P. (2010), Delayed Carbon Policy Certainty and Electricity Prices in Australia. Economic Papers: A journal of applied economics and policy, 29: 446–465. doi: 10.1111/j.1759-3441.2010.00084.x
- Issue published online: 6 FEB 2011
- Article first published online: 6 FEB 2011
- carbon tax;
- policy uncertainty;
- electricity prices
The power industry has been grappling with regulatory uncertainty in relation to carbon since late 2004 when Australian state governments committed to the introduction of an emissions trading scheme. This article estimates the additional cost to electricity users associated with the sub-optimal introduction of new power generating capacity given regulatory delays. We find the costs to be significant; under a business-as-usual electricity demand growth scenario, prices in 2020 would be about $8.60/MWh higher than necessary. We also find that costs to consumers are lower where complementary policies are introduced to encourage energy efficiency and renewable energy.